MEETING NOTICE AND AGENDA

TransNet INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE (ITOC) The ITOC may take action on any item appearing on this agenda. Wednesday, May 13, 2009

9:30 a.m.

SANDAG 7th Floor Conference Room 401 B Street, 7th Floor San Diego, CA 92101 Staff Contact: Charles “Muggs” Stoll (619) 699-6945 mst@sandag.org

AGENDA HIGHLIGHTS

• REVIEW OF FY 08 TransNet COMPLIANCE AUDITS

• LAKE HODGES BICYCLE AND PEDESTRIAN BRIDGE STATUS REPORT

• ESTABLISHMENT OF AN ITOC SUBCOMMITTEE FOR THE IMPLEMENTATION OF THE FIRST TRIENNIAL TransNet PERFORMANCE AUDIT

SANDAG offices are accessible by public transit. Phone 1-800-COMMUTE or see www.sdcommute.com for route information.

In compliance with the Americans with Disabilities Act (ADA), SANDAG will accommodate persons who require assistance in order to participate in SANDAG meetings. If such assistance is required, please contact SANDAG at (619) 699-1900 at least 72 hours in advance of the meeting.

To request this document or related reports in an alternative format, please call (619) 699-1900, (619) 699-1904 (TTY), or fax (619) 699-1905.

Welcome to SANDAG. Members of the public may speak to the TransNet Independent Taxpayer Oversight Committee (ITOC) members on any item at the time the ITOC is considering the item. Also, members of the public are invited to address the ITOC on any issue under the agenda item entitled Public Comments/Communications/Member Comments. Speakers are limited to three minutes. The ITOC may take action on any item appearing on the agenda. This agenda and related staff reports can be accessed at www.sandag.org under Meetings on SANDAG’s Web site. Public comments regarding the agenda can be forwarded to SANDAG via the e-mail comment form also available on the Web site. E-mail comments should be received no later than noon, two working days prior to the ITOC meeting. In compliance with the Americans with Disabilities Act (ADA), SANDAG will accommodate persons who require assistance in order to participate in SANDAG meetings. If such assistance is required, please contact SANDAG at (619) 699-1900 at least 72 hours in advance of the meeting. To request this document or related reports in an alternative format, please call (619) 699-1900, (619) 699-1904 (TTY), or fax (619) 699-1905.

SANDAG offices are accessible by public transit. Phone 1-800-COMMUTE or see www.sdcommute.com for route information.

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INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE Wednesday, May 13, 2009

ITEM # RECOMMENDATION

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+1. SUMMARY OF THE APRIL 8, 2009, ITOC MEETING APPROVE A summary of the April 8, 2009, ITOC meeting has been prepared for the ITOC review

and approval.

2. PUBLIC COMMENTS/COMMUNICATIONS/MEMBER COMMENTS INFORMATION

Members of the public will have the opportunity to address the ITOC on any issue

within the jurisdiction of the Committee that is not on this agenda. Speakers are limited to three minutes each and shall reserve time by completing a “Request to Speak” form and giving it to the Clerk prior to speaking. Committee members also may provide information and announcements under this agenda item.

REPORTS (3 through 9)

+3. REQUEST BY THE CITY OF SANTEE TO EXECUTE A MEMORANDUM OF AGREEMENT (MOA) WITH SANDAG TO USE $3.95 MILLION IN SHORT-TERM DEBT THROUGH THE COMMERCIAL PAPER PROGRAM AND EXCEPTION TO RULE NO. 16 OF BOARD POLICY NO. 031 (Lauren Warrem)

RECOMMEND

The Santee City Council has approved the borrowing of $3.95 million from the

SANDAG Commercial Paper (CP) program, which will allow it to complete funding for the Forester Creek Improvement Project. The City of Santee is also requesting a one-time waiver of the repayment policy period to allow the repayment period to extend up to ten years. The ITOC is asked to recommend approval to the Transportation Committee and the Board of Directors of the attached MOA and the one-time waiver of Rule No. 16 of Board Policy No. 031.

+4. TransNet BICYCLE AND PEDESTRIAN ACCOMMODATION CONSISTENCY

FINDING – CITY OF POWAY (Chris Kluth) DISCUSSION/ POSSIBLE ACTION

Staff will provide a report that summarizes results from the City of Poway's request for a

consistency finding under the guidelines of the TransNet Routine Bicycle/Pedestrian Accommodations Policy and seek the review and potential recommendation of the ITOC for approval to the Transportation Committee.

+5. REVIEW OF FY 08 TransNet COMPLIANCE AUDITS (Lauren Warrem) INFORMATION

All recipients of TransNet funds are required to undergo an annual compliance audit.

The preliminary draft reports are ready for review for the last five recipients that had requested an extension through April 30, 2009.

ITEM # RECOMMENDATION

+6. OVERVIEW OF DEVELOPMENTS IN THE FINANCIAL MARKETS (Lauren Warrem

and Marney Cox) INFORMATION

Given the recent turbulence in the financial markets, the SANDAG Finance Director and

Chief Economist will provide an update of events that affect sales tax revenues and/or TransNet program financing plans. (This item will include a report on revised TDA and TransNet revenue estimates but it was not ready at the time of mailout and will be sent out under separate cover when completed. )

+7. LAKE HODGES BICYCLE AND PEDESTRIAN BRIDGE STATUS REPORT (Bill Prey) INFORMATION

The San Dieguito River Park Joint Powers Authority has undertaken construction of a

bicycle and pedestrian bridge over Lake Hodges, west of I-15. The bridge is scheduled to be open for use beginning May 15, 2009. Funding in the amount of $1,875,000 was provided by the TransNet Extension Ordinance for the project, which is subject to review by the Independent Taxpayer Oversight Committee (ITOC). SANDAG provided the additional $1,875,000 in funds in March of 2007 under the condition that the River Park would not come back to request additional funding. The ITOC requested that SANDAG staff take an active role in providing oversight on the project and that the River Park provide a regular status report on the progress of the project. With the pending project opening and close out of the construction contract, this report will provide the final informational update of the project to the ITOC.

+8. ESTABLISHMENT OF AN ITOC SUBCOMMITTEE FOR THE IMPLEMENTATION

OF THE FIRST TRIENNIAL TransNet PERFORMANCE AUDIT (Charles "Muggs" Stoll)

DISCUSSION

As a means to assure the recommendations of the first Triennial TransNet Performance

Audit are addressed and/or implemented, the ITOC is asked to discuss the establishment of a subcommittee to work with key project development staff on appropriate follow-up actions. Issues to be discussed include selection of the ITOC subcommittee members, appropriate project development staff to assign, and organizational strategies for assessing the recommendations.

+9. DISCUSSION OF RECENT TransNet-RELATED REPORTS PRESENTED TO THE

TRANSPORTATION COMMITTEE AND BOARD OF DIRECTORS (Charles “Muggs” Stoll)

DISCUSSION

An overview will be presented by staff regarding two TransNet-related reports

recently presented to the Transportation Committee and SANDAG Board of Directors. The first report was presented on April 10, 2009, to a joint meeting of the Transportation Committee and the Board of Directors. A follow-up report was presented to the Board of Directors on April 24, 2009. The ITOC will have an opportunity to discuss the results of the presentations and current status of the issues addressed.

10. FUTURE MEETING SCHEDULE INFORMATION

The next ITOC meeting is scheduled for Wednesday, June 10, 2009, at 9:30 a.m.

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ITEM # RECOMMENDATION11. ADJOURNMENT

+ next to an agenda item indicates an attachment

San Diego Association of Governments – TransNet Program

INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE

May 13, 2009 AGENDA ITEM NO.: 1Action Requested: APPROVE

MEETING SUMMARY OF THE APRIL 8, 2009, INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE MEETING File Number 1110200

Attendance

Committee Members: • John Meyer, ITOC Chair • Hamid Bahadori • Jesus Garcia

• Ron Gerow • Jim Ryan (late arrival)

Absent: • Valerie Harrison

• Tracy Sandoval • Kevin Cummins

Staff: • Charles “Muggs” Stoll • Gary Gallegos (late arrival)

The meeting of the TransNet Independent Taxpayer Oversight Committee (ITOC) was called to order by Chair John Meyer at 9:34 a.m.

1. APPROVAL OF MEETING SUMMARY

Action: Upon a motion by Jesus Garcia and a second by Ron Gerow, the ITOC approved the March 11, 2009, meeting summary. Hamid Bahadori abstained due to his absence from the meeting.

2. PUBLIC COMMENTS/COMMUNICATIONS/MEMBER COMMENTS

Chair Meyer welcomed Carolyn Lee, a newly appointed member of the ITOC. Ms. Lee will begin her term on the ITOC in May.

Chair Meyer stated that when the Selection Committee presented the new ITOC appointees to the Board of Directors, Chair Lori Holt Pfeiler expressed her appreciation to the current and future ITOC members for their work on the ITOC. He stated that the election of officers will occur at the May 13, 2009, meeting of the ITOC.

Chair Meyer stated that Jim Ryan would arrive late for the meeting and had expressed a desire to have this item continued until his arrival. Chair Meyer postponed other member comments until the end of the meeting.

3. TransNet TRIENNIAL PERFORMANCE AUDIT DRAFT REPORT: TRANSPORTATION COMMITTEE COMMENTS (DISCUSSION)

Charles “Muggs” Stoll, TransNet Program Manager, presented the item and stated that the ITOC is asked to discuss the TransNet Performance Audit Draft Report recommendations and proposed responses, which have been updated subsequent to the presentation of the TransNet Performance Audit Draft Report to the Transportation Committee at its March 20 and April 3, 2009, meetings.

Mr. Stoll stated that a matrix was included in the staff report. There were no new comments from the Transportation Committee from the April 3 meeting. The edits that were identified at the previous Transportation Committee meeting of March 20 are highlighted on this copy of the matrix. He stated that the edit was to include a cost-benefit analysis on certain items.

Mr. Bahadori stated that after the ITOC approved the Performance Audit Draft Report, staff presented it to the Transportation Committee for review and comments. Staff determined that due to the length of the Performance Audit Draft Report. The recommendation from the first review was incorporated into this draft. The committee members did have some discussion at the recent meeting regarding the difference between a fiscal and performance audit, which was clarified at the time. Mr. Bahadori stated that the Performance Audit Draft Report is complete and can be considered a final document to be approved by the Board of Directors. The next step for the ITOC is to appoint a subcommittee to work on the implementation strategy for the recommendations.

Chair Meyer asked whether there was any discussion concerning the ITOC members’ concerns of additional workload for the ITOC based on the recommendations.

Mr. Bahadori stated that he shared this concern with the Transportation Committee members and they acknowledged the concern.

Discussion ensued regarding whether the audit recommendations will significantly increase the workload of the ITOC; whether the Transportation Committee had the responsibility to give direction on this issue; whether the audit recommendations actually would create more actual work or just cause the ITOC to work more intelligently; how to prioritize the recommendations; the fact that some of the recommendations would increase the workload of SANDAG staff as opposed to the ITOC; whether the ITOC has a requirement to implement all the audit recommendations; and whether there may be a need for the ITOC to hire a consultant to implement any or all of the recommendations.

Discussion ensued regarding the appointment of a subcommittee to work on the implementation strategy; the subcommittee could determine which recommendations to implement and how to prioritize them; and the subcommittee could determine if a recommendation does create more workload and the subcommittee could focus the implementation strategy so that it did not create additional work. The consensus of the ITOC was to appoint a subcommittee at the May meeting.

Chair Meyer stated that he has been involved in many audits and the first thing an auditor looks at is the results of previous audits and what was recommended and actually implemented. He commented that this initial audit has been very beneficial and shows that the ITOC has performed well over the past four years.

Mr. Stoll stated that staff could include the comments by the ITOC when the Performance Audit Report is presented to the Board for approval. He stated that staff could state that while the ITOC is not opposed to any of the audit recommendations, it is concerned that the implementation of all the recommendations may significantly increase the ITOC workload. The ITOC will appoint a

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subcommittee to review the audit report and develop an implementation strategy. Mr. Stoll stated that this would put on the record for any future audits that the ITOC reviewed and considered all the audit recommendations whether they ultimately were implemented or not.

Action: This item was presented for discussion/possible action.

4. TransNet ENVIRONMENTAL MITIGATION PROGRAM: FY 2009 LAND MANAGEMENT GRANTS (DISCUSSION/POSSIBLE ACTION)

Keith Greer, Senior Regional Planner, presented the item and stated that on September 26, 2008, the Board approved a process and criteria for funding eligible land management activities under the TransNet Environmental Mitigation Program (EMP) for FY 2009. The process and criteria did not significantly change from the past three grant cycles. A total of $1.63 million was made available for land management activities related to: (1) invasive species control, (2) post-fire wildfire recovery, (3) habitat restoration, and/or (4) access and litter control. The Request for Proposals (RFP) stated that projects that are not ready to start within 12 months of submission of the application to SANDAG would not be eligible for this funding cycle.

Mr. Greer stated that a “call for projects” was issued on December 1, 2008, and 29 applications totaling over $7.1 million were received. Twenty-seven of the projects proposed activities related to one or more of the four eligible activities and two of the projects proposed scientific research that staff believes does not meet the stated eligible land management activities. The remaining 27 projects have been discussed and ranked by an ad hoc evaluation committee made up of members from the EMP Working Group (EMPWG) and outside experts.

Mr. Greer stated that the ITOC is asked to determine that the recommended grant proposals for the EMP Land Management Grants are consistent with the TransNet Program eligibility requirements as established by the Board. In addition, the application states that projects that are not ready to start within 12 months of submission of the application to SANDAG would not be eligible for this funding cycle.

Two of the projects proposing eligible activities are dependent on matching funds from state bonds which have been frozen. It is unclear when the bond funds would be unfrozen. Estimates range from six to eighteen months, but this is rapidly changing and the estimates are speculative. While matching funds were not required as part of the grant process, one of the rating criteria states “sufficient matching funds available to complete the project.” It is difficult to answer this question for grants indicating a dependence on a match from frozen state bonds coupled with the requirement that projects must be ready to start within 12 months. The ad hoc evaluation committee thought that the frozen state matching funds were too speculative for this funding cycle and will be recommending to the EMPWG that the applicants reapply next cycle when they have secured matching funds.

Mr. Greer stated that a spreadsheet was developed that shows which eligibility categories each proposed grant falls under and reviewed that spreadsheet with the ITOC. He stated that full copies of the actual applications are available on the SANDAG ftp site.

The recommendations of the ad hoc evaluation committee proposed today will be discussed at the April 14, 2009, EMPWG meeting. The Regional Planning Committee (RPC) will review them for a recommendation in May. Once the RPC recommends a list of projects, the Board will be asked to approve the list, and that action, also scheduled for May, will allow SANDAG to enter into grant agreements with the applicants receiving awards, and begin funding projects.

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Ms. Lee questioned how the projects were prioritized using the eligibility categories and whether the amount of funding requested was considered.

Mr. Greer stated that the ad hoc evaluation committee used the eligibility criteria to determine only whether the project was eligible to compete under one of the four criteria. He stated that once the project was considered eligible, the evaluation committee would consider the cost factor based on the amount of funding requested. Also, the projects are rated using ten factors that then are applied to each project and the evaluation committee prioritizes the projects for funding based on that score.

Mr. Bahadori asked whether there had been any feedback from environmental groups. He also questioned if any project did not begin within the 12-month deadline whether funds would return to the program for the next project identified on the list or for the next year’s program.

Mr. Greer stated that the jurisdictions that receive funding have been ready to go with their projects and historically have expended the funds within the required timeline. He stated that this is the first year that there has been an issue of matching funds not being available in a timely manner due to the state freeze on bond funds. He stated that if a jurisdiction did not begin its project within the parameters of the program, then that funding would be reprogrammed in the next fiscal year.

Chair Meyer questioned whether those projects not chosen for this year’s program would be automatically considered for the next cycle.

Mr. Greer stated that they would not automatically be considered. Staff notifies those jurisdictions that they will have to re-apply for the next cycle if they want their projects to compete for funding.

Chair Meyer asked whether the projects approved for funding were distributed fairly across the region.

Mr. Greer stated that the distribution of projects in previous cycles has been regionwide and the distribution is the same this year.

Mr. Garcia requested clarification regarding the California Invasive Plant Council project.

Mr. Greer stated that the project presented by the California Invasive Plant Council would create a strategic plan. The strategic plan would develop a regional framework of invasive plant distribution and impacts. The plan would target which species to control first and guide the region for immediate effective management of invasive species.

Action: Upon a motion by Mr. Gerow and a second by Mr. Bahadori, the ITOC determined that the recommended grant proposals and project list are consistent with the TransNet Program eligibility requirements as established by the Board of Directors.

5. TransNet SMART GROWTH INCENTIVE PROGRAM FY 2009 – FY 2010 FUNDING CYCLE PROJECTS (DISCUSSION/POSSIBLE ACTION)

Stephan Vance, Senior Regional Planner, presented the item and stated that the TransNet Extension Ordinance established the Smart Growth Incentive Program (SGIP) to provide a mechanism for SANDAG to encourage more coordinated land use and transportation development through the principals of smart growth as defined in the Regional Comprehensive Plan (RCP). The TransNet

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Extension Ordinance sets aside 2 percent of the annual revenues to fund planning and infrastructure projects by cities and the county.

Mr. Vance stated that the role of the ITOC is to ensure that the projects funded under the program meet the broad eligibility definition provided by the TransNet Extension Ordinance along with its other oversight responsibilities that pertain to the program as a whole.

Mr. Vance stated that SANDAG has estimated that the total funding available for the first two-year cycle of the TransNet SGIP (FY 2009 and FY 2010) will be $9.6 million. Mr. Vance stated that 43 applications were received but eight of those were found to be ineligible for the program. A total of 35 applications were considered for the funding. The applications submitted included $25.2 million for capital projects and $4.5 million for planning projects for a total request of $29.7 million. The projects were evaluated based on the established criteria developed through an extensive stakeholder involvement process and approved by the RPC. The TransNet SGIP eligibility and selection criteria was presented to the ITOC at its November 12, 2008, meeting.

Mr. Vance stated that planning and capital projects were evaluated on separate criteria that include both objective and subjective criteria. To ensure impartial scoring, the subjective criteria were scored by an independent panel consisting of SANDAG staff, planning faculty from San Diego State University and the University of California, San Diego, a member of the San Diego Council of Design Professionals, and one member each from the Cities/County Transportation Advisory Committee (CTAC) and the Regional Planning Technical Working Group (TWG). CTAC and TWG members of the panel were from Poway and Santee, jurisdictions that did not submit projects for funding. Evaluating the projects using the approved criteria resulted in two sets of scores—one for planning projects and one for capital improvement projects. Based on RPC guidelines, at least 80 percent of the funding should go toward capital improvements, and with that provision in mind the evaluation panel developed its list of recommended projects, shown in Attachment 1 of this report.

Mr. Garcia requested clarification regarding how the 80/20 split for funding was determined.

Mr. Vance stated that the RPC determined the funding split after discussion of where the focus of the program should be. The RPC gave direction that the program should focus on construction but there was still a large need for good planning of projects, especially in the first year of the program. The 80 percent for capital projects is a minimum to allow for flexibility in funding larger capital projects.

Discussion ensued regarding the 80/20 split of funding and whether the focus for future cycles should be greater for capital projects. The ITOC consensus was to discuss the funding split for the next cycle and provide its comments to the RPC.

Mr. Bahadori requested clarification regarding whether the traffic calming projects and the projects for improving pedestrian and bicycle access in local neighborhoods actually were helping with smart growth efforts. He also expressed concern that funding in future cycles of the program could be diverted for implementation of projects under the unfunded mandates of Senate Bill (SB) 375.

Mr. Vance stated that one of the threshold criteria is that all the projects must be located in a smart growth area as identified on the smart growth map and capital projects must be in the planned smart growth area. He stated that density must be appropriate for smart growth and transit, and there must be transit already on the ground or planned for that area. The traffic calming projects are mostly located in the urban core, where there is a high density and a transit need.

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Mr. Garcia asked whether bulb-outs reduced the number of lanes, and Mr. Vance stated that lanes are not reduced because in those cases there is more capacity than needed for traffic so there is capacity to meet both pedestrian needs and sufficient traffic lanes.

Mr. Vance stated that with regard to the requirements of SB 375 and what effect projects in this program would have on greenhouse gas (GHG) production is difficult to quantify.

Mr. Stoll commented that the SGIP is designed to complement SB 375 under the TransNet program.

Chair Meyer stated that transit funding is in crisis and he asked whether projects that directly benefit transit could have a higher funding priority under this program.

Mr. Vance stated that proximity to transit is already a high priority in this program as well as location in high density areas. He stated even more priority is given to projects in close proximity to rail. Transit priority already is built into the eligibility criteria and all the projects recommended for funding in this cycle have a high transit impact.

Chair Meyer stated that the criteria were developed a few years ago before the current funding crisis. He stated that the criteria should be reviewed so that transit receives the maximum benefit.

Mr. Vance stated that after this cycle is implemented staff will review the program and analyze the types of projects approved for funding and the impact to transit.

Mr. Garcia commented that the number of approved projects for capital improvements is almost equal to the number of planning projects even though capital funding is 80 percent of the program.

Mr. Vance stated that capital projects are most often more costly to construct and so fewer projects can receive funding.

Action: Upon a motion by Mr. Gerow and a second by Mr. Garcia, the ITOC determined that the projects funded under the program meet the broad eligibility definition provided by the TransNet Extension Ordinance.

6. 2008 REGIONAL TRANSPORTATION IMPROVEMENT PROGRAM: AMENDMENT NOS. 10 AND 11 (DISCUSSION/POSSIBLE ACTION)

Sookyung Kim, Financial Programming Manager, presented the item and stated that SANDAG is processing Amendment No. 10 to the 2008 RTIP as part of its quarterly amendment cycle in response to requests for changes from member agencies. SANDAG also is processing Amendment No. 11 as part of the FY 2010 Transit Capital Improvement Program. Although the majority of the projects included in Amendment No. 11 are funded with federal and local funds, there are a couple of operating subsidy projects funded with TransNet funds.

Ms. Kim stated that the ITOC is asked to review the proposed Amendment Nos. 10 and 11 focusing its review on the TransNet-funded projects and provide any comments and recommend approval of this item to the Transportation Committee. The Transportation Committee is scheduled to consider both Amendments at its April 17, 2009, meeting and Amendment No. 11 will be considered for approval by the Board of Directors at its April 24, 2009, meeting.

Ms. Kim stated that Amendment No. 10 includes changes as requested by member agencies and can be found in Attachment 1 to the staff report. Attachment 2 to the staff report provides the

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proposed changes included in Amendment No. 11 and Attachment No. 3 provides the program capacity analysis for all affected agencies. All projects meet funding requirements.

Mr. Bahadori requested clarification regarding whether the 30 percent for maintenance could carry over to the next year if not expended.

Ms. Kim stated that the 30 percent is calculated on the annual apportionment and the revenues do carry over to the next year. She stated that this issue currently is under discussion to be formalized into policy.

Mr. Stoll stated that when the policy is developed it would be considered to allow for a carryover of funds for flexibility.

Mr. Bahadori expressed his support for allowing a carryover of maintenance to ensure a maximum use of the funds but the policy would need to set some fiscal limits, as well.

Ms. Lee questioned how up to date the estimates were for each of the jurisdictions.

Ms. Kim stated that the project costs are looked at annually so the estimates should be up to date.

Ms. Kim stated that there is an added item for the agenda today due to time sensitivity of the action. Amendment No. 12 is related to the economic stimulus program funds in the American Reinvestment and Recovery Act (ARRA). She stated that the Board took action to swap ARRA funds with TransNet funds and this amendment reflects local agency projects that are ready to move forward under this swap. The amendment represents those projects that will be implemented with the swap of TransNet funds.

Mr. Bahadori expressed his support for the Amendment and stated that many local jurisdictions do not have the capability to handle the complicated federal funding reporting requirements.

Mr. Stoll commented that these projects are ready to go and this action will expedite the process and have projects completed sooner.

Action: Upon a motion by Mr. Garcia and a second by Mr. Bahadori, the ITOC found Amendment Nos. 10 through 12 in compliance with the TransNet Extension Ordinance.

7. FEDERAL ECONOMIC STIMULUS: STATUS (INFORMATION)

José Nuncio, Manager of Financial Programming and Project Control, presented the item. He stated that in accordance with the new law for ARRA funds they will be distributed under current formulas. The new process provides greater funding for San Diego County. He stated that our region will receive $131 million, of which $4 million is Transportation Enhancement (TE) funds that only can be used for enhancement (over and above standard) landscaping, as well as pedestrian facilities, bikeways, etc. Mr. Nuncio stated that under the new law 40 percent of the remaining $127 million will be allocated to the local agencies, approximately $51 million. Staff proposed various options for how to allocate these funds to local agencies and, recognizing the administrative burden of using federal funds, staff proposed a swap of ARRA funds for TransNet funds so that local agencies would not have to deal with the administrative burden.

Mr. Nuncio stated that the TE funds were allocated to one project, the Grossmont Center Trolley Station pedestrian improvements project. Staff proposed allocating the remaining funds to two major regional projects that are included in the TransNet Early Action Program (EAP). These

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projects are the State Route (SR) 76 Widening and the Interstate 805 (I-805) interchange at Carroll Canyon Road. Also, $3.9 million was allocated to a pedestrian bridge at a San Diego train station. By swapping the funds now we are making more TransNet available for other projects in the Plan of Finance (POF). Mr. Nuncio stated that focusing on fewer large regional projects reduces the burden of the federal reporting requirements.

Mr. Nuncio stated that local agencies will need to follow all TransNet requirements. In addition, the funding process bypasses the California Transportation Commission (CTC), which will streamline the funding process. He stated that SANDAG will work directly with Caltrans and the Federal Highway Administration (FHWA) to allocate funds. Mr. Nuncio commented that several other regions are following SANDAG’s lead.

Ms. Kim stated that the region will receive over $89 million in Federal Transportation Administration (FTA) funds based on current formulas. The region will distribute 70 percent to the Metropolitan Transit System (MTS) for the Blue Line Rehabilitation Project and 30 percent to the North County Transit District (NCTD) for two projects that SANDAG will implement on their behalf. Several smaller projects also will be funded.

Ms. Kim stated that the Board action this Friday approving Amendment Nos. 8 and 9 will program these projects. SANDAG will have the full amount of ARRA funds programmed at that time and will be in a position to compete for those ARRA funds that other regions were not able to program within the timeline set. She stated that our region continues to work to identify projects that will compete for that additional funding should it come available.

Mr. Stoll stated that although the region did not receive the level of funding that we identified for the economic stimulus program, we are grateful for the funding we did receive. The region has completely obligated those funds and we are in a position to be very competitive for any additional funding that comes available. He commented that the exchange of funds for TransNet will be a one-time deal and all the TransNet requirements have to be met. This simplifies the process for local projects and puts those agencies in a position to move quickly to get the projects done.

Mr. Bahadori commented that the ARRA also has several billion dollars in discretionary funds and asked whether the region was prepared to compete for those funds.

Ms. Kim stated that $8 billion of the discretionary funds were earmarked for high-speed rail and that SANDAG was working on a program to compete for the remaining $1.5 billion of discretionary funding. She stated that staff is analyzing the guidelines for the discretionary funds and identifying projects that will be very competitive.

Mr. Bahadori questioned whether the region could compete for any of the $8 billion earmarked for high-speed rail.

Mr. Stoll stated that the region is looking to compete for some of the funds for projects along the Los Angeles-San Diego-San Luis Obispo (LOSSAN) Rail Corridor and also for rail projects that tie into the border with Mexico.

Chair Meyer questioned whether any of the funds saved on the middle section of the SR 76 project could be reallocated to the eastern project of SR 76.

Discussion ensued regarding the funding shift for the SR 76 project, final funding estimates for the eastern project, and the alternatives for reprogramming funds to ensure the entire SR 76 corridor is fully funded.

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Chair Meyer commented that there is a great degree of public concern regarding the SR 76 and it is very important to stay on schedule to complete the entire corridor.

Action: This item was presented for information only.

9. QUARTERLY REPORT ON TransNet MAJOR CORRIDOR PROJECTS (INFORMATION)

Richard Chavez, Principal Engineer, presented an overview of the TransNet Major Corridor Projects in terms of project cost control and schedule adherence and the general trends that affect both cost and schedule.

Mr. Chavez stated that the open-to-traffic/open-for-service dates remain on schedule for the majority of the major congestion relief projects. He summarized the project schedule challenges and risks.

The Mid-Coast Transit Project has been delayed. It was reported to the ITOC on November 12, 2008, that Mid-Coast Transit Project would be open for service between December 2015 and June 2018. This schedule is dependent upon a number of factors, including the timing of an FTA Full Funding Grant Agreement (FFGA), the project delivery method selected, environmental challenges, and community controversy.

The Super Loop Transit Project has been delayed. MTS and the SANDAG Board’s concern over the design of the transit stops has resulted in the need to redesign bus shelters and conduct additional community outreach. In addition, design reviews by the City of San Diego are taking longer than anticipated. The revised schedule estimates construction beginning in August 2009, with service beginning in June 2010. SANDAG has identified funds for the next budget to set standards for station designs to avoid this type of delay in the future.

Chair Meyer stated that he thought the FTA required a plan for funding a project prior to applying for an FFGA and asked what staff was doing for the Mid-Coast Transit Project under the current circumstances to meet that requirement.

Mr. Chavez stated that there are line items in the TransNet Extension Ordinance that allocate operational budgets for all new TransNet transit projects.

Mr. Stoll stated that 8.1 percent of the TransNet funds collected are allocated to new transit service operations. The TransNet Extension Ordinance was very different than the original ordinance. The original TransNet did not have matching operations dollars for capital projects. The TransNet Extension Ordinance changed that in order to meet the requirements of the FFGA.

Chair Meyer asked under the current circumstances of lower-than-expected TransNet revenues how does that impact the requirements to move forward with the FFGA.

Mr. Chavez stated that financial analysis to date indicates that the operational costs for all new TransNet projects can be covered.

Mr. Chavez stated that the schedule for the release of the draft environmental document for the I-5 North Coast project has been delayed. There have been a number of challenges including the completion of the lagoon impact studies. The revised date for release is June 2009.

The I-15 Bus Rapid Transit (BRT) stations in Mid-City Transit Project have been delayed. Caltrans safety concern over the original inline station design concept has resulted in the need to investigate

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new design options. Community meetings have been held, and four new design options have been selected for further analysis. These design options were presented to the ITOC and Transportation Committee in November 2008. The release of the draft environmental document is scheduled for December 2010 when a preferred alternative will be selected. Staff will develop the project schedule for the design, right-of-way, and construction phases once a preferred alternative has been selected.

Mr. Chavez reviewed current trends and stated the average number of bidders on Caltrans projects over $5 million shows a significant increase over the previous quarter. The average number of bidders is a good indication of the level of competition for transportation project construction work. More competition usually means better bid prices. The average number of bidders is up 1.8 points to 7.8 points for the fourth quarter of 2008 compared to the third quarter of 2008, when the average number of bidders was 6.0 points. The average number of bidders is up a total of 4.6 points from a low of 3.2 points bidders experienced during the third quarter of 2006.

Mr. Chavez stated that future reports would incorporate some of the Performance Audit recommendations such as tracking revenues.

Mr. Garcia stated that construction costs in the latest two quarters were increasing and asked if staff expected that trend to continue.

Mr. Chavez stated that he still expects costs can decrease, and SANDAG should see good prices and lower bids for projects.

Mr. Bahadori asked whether engineer’s estimates were dropping with the increase in the number of bidders.

Mr. Chavez stated that costs are coming in up to 35 percent below the engineer’s estimate and he is working closely with the engineers to revise their estimates to be more in line with costs.

Chair Meyer commented that the cost of aggregate is still pushing construction costs higher.

Mr. Bahadori stated that higher prices caused by lack of aggregate are not only a problem for our region but the lack of aggregate is affecting construction costs nationwide.

Mr. Stoll stated that as the ITOC moves forward with an implementation strategy for the Performance Audit, many of the recommendations will be addressed in this quarterly report. Staff will work with the subcommittee, once appointed, on the best method to include information on revenue projections on the ITOC agenda, as well.

Action: This item was presented for information only.

10. REGIONAL TRANSPORTATION CONGESTION IMPROVEMENT PROGRAM – ANNUAL SUBMITTAL OF FUNDING PROGRAMS BY JURISDICTIONS (ACCEPT)

Mr. Stoll presented the item and stated that the TransNet Extension Ordinance required that all jurisdictions within San Diego County initially submit funding programs by April 1, 2008, in accordance with the provisions of the Regional Transportation Congestion Improvement Program (RTCIP). These funding programs were received by all jurisdictions, approved by the Board of Directors in April 2008, and were in place by July 1, 2008. The TransNet Extension Ordinance further requires that the funding programs are submitted to the ITOC for review by April 1 of each subsequent year. Mr. Stoll stated that copies of the annual funding program submittals by all

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19 jurisdictions were included with the staff report. All jurisdictions have certified in their correspondence that their RTCIP funding programs are still in place and include the necessary components to fulfill the TransNet Extension Ordinance requirements. This will be verified as part of the fiscal audit process for FY 2008/2009.

Mr. Stoll stated that the TransNet Extension Ordinance requires a minimum annual adjustment of 2 percent and the new RTCIP fee per residential property is $2,040. He stated that staff has informed the jurisdiction of the increased fee and none have objected. He stated that in future years, staff will take action earlier to inform the jurisdictions of the adjustment so they will have plenty of time to take action to meet the requirements.

Mr. Stoll stated that staff is reviewing the audit requirements for the RTCIP and the fiscal audit to coordinate reporting requirements and bring the dates for reporting in line with each other.

Chair Meyer requested clarification on the process to make that change.

Mr. Stoll stated that a two-thirds vote of the Board can amend the requirements in the RTCIP attachment to the TransNet Extension Ordinance. Any change to the actual TransNet Extension Ordinance would take voter approval. Staff will be reviewing the issue and will present a report and recommendation to the ITOC and the Board at a later date.

Mr. Bahadori asked whether the local jurisdictions accepted the 2 percent fee increase.

Mr. Stoll stated that none of them have objected but did comment on the impact in the current economic climate. Every jurisdiction submitted documentation that the program is in place and several already have taken action to adopt the fee increase. Those that have not taken action have indicated they would by the July 1, 2009, deadline. Mr. Stoll stated that SANDAG will respond to the jurisdictions in writing that the confirmation letters were received and acknowledge that their programs are in place.

Action: Upon a motion by Mr. Bahadori and a second by Mr. Gerow, the ITOC accepted the funding program submittals in accordance with the TransNet Extension Ordinance.

8. OVERVIEW OF DEVELOPMENTS IN THE FINANCIAL MARKETS (INFORMATION)

Renée Wasmund, Finance Director, presented the item. She reviewed the current debt program and its performance. She stated that SANDAG continues its current strategy and has concluded the renegotiation of the J.P. Morgan liquidity facility. Also, SANDAG has closed its swap transaction. She stated SANDAG received a total of three bids and closed at 107.4 basis points, which equates to over $6 million in savings.

Mr. Bahadori asked when SANGAG would realize those savings.

Ms. Wasmund stated that the new program would begin at the conclusion of the current 10-year program, so we would begin to realize those savings in 2018.

Mr. Bahadori asked whether SANDAG had coordinated publicity for this very positive action.

Ms. Wasmund stated that SANDAG issued press releases on both actions and both were reported on in various publications.

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Mr. Gallegos commented that SANDAG has been working very aggressively to send press releases on this action. In addition, to enter this swap agreement SANDAG had to reaffirm its credit rating, and it was reaffirmed at Triple A. He stated that SANDAG also has received a great deal of positive press regarding the actions taken for the economic stimulus program.

Action: This item was presented for information only.

2. COMMUNICATIONS/MEMBER COMMENTS (CONTINUED)

Upon the arrival of Mr. Ryan, Item 2 Member Comments was continued.

Chair Meyer stated that members had indicated a desire to address the upcoming transit public hearing and the potential use of TransNet funds for transit operations.

Mr. Bahadori commented that the cuts to transit funding are statewide and transit is in crisis. He commented that when funding decisions are made due to political expediency, those decisions are most often regretted over the long-term. Mr. Bahadori expressed his opposition to allocating TransNet funds for transit operations and stated that any decision to do so would negatively impact the future POF and programmed projects in TransNet and the potential new sales tax measure for funding of Quality of Life measures in the region. He commented that any diversion of TransNet funds would violate the promise made to voters and their trust in SANDAG.

Mr. Gallegos, in order to provide the context for why the issue was added to the agenda for the joint meeting of the Transportation Committee and the Board of Directors, stated that the state has significantly cut funding sources for transit and sales tax receipts are down. The combination of both factors has created a severe budget shortfall for both transit operators. The members of the Transportation Committee expressed a concern that cuts in service and increases in fares would have a significant negative impact to transit, and many members felt that TransNet has available funding that could be used to meet this shortfall. Mr. Gallegos stated that the joint meeting would be the first step in what would be a very lengthy process. The idea is to start the discussion to determine the level of support for the proposal.

Mr. Bahadori stated that the principle of sales tax measures is that they are supplemental funds and that is why there is such a high level of maintenance of effort. He commented that there is a perception that TransNet is a slush fund that can be used for many purposes other than what was presented to the public. Mr. Bahadori stated that if that concept is how SANDAG wanted TransNet to be utilized, this should have been presented to the voters up front.

Mr. Ryan expressed his opposition to the proposal and stated that TransNet was not approved by the voters to be used in this manner. The public would not have supported the measure if that were the case. He stated that the ITOC simply cannot support this proposal.

Mr. Gallegos commented that from a staff perspective it is important to note that both sides of an issue must be presented.

Mr. Bahadori stated that there were several people at the last Transportation Committee meeting that spoke in support of moving the TransNet funds, but that is not the majority. He stated that the ITOC needs to be very proactive and convey its concerns regarding this issue to the members of the Transportation Committee and Board. He stated that the ITOC members need to attend the meeting to express opposition to the action.

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Chair Meyer stated that his experience is with transit and working with funding issues. He stated that his concern is that we are spending funds for capital improvements for a transit system that may no longer be there because of service cuts. Chair Meyer stated that as a member of ITOC he cannot support the proposal and the ITOC must protect the TransNet funds to ensure they are utilized for TransNet only.

Mr. Stoll stated that because this issue was not on the agenda, the ITOC could not take action. He stated that the ITOC members could individually attend the Transportation Committee meeting and express their personal opinions regarding the proposal. Mr. Stoll stated that when the issue was raised at the Transportation Committee it was requested that the item be placed on an agenda so that a full discussion could take place regarding funding sources and solutions for transit, one of which could be TransNet. If the Board does decide that TransNet should be considered as a potential funding source it would require input from the ITOC and a first and second reading to amend the TransNet Extension Ordinance.

Ms. Lee questioned if the staff presentation will include pros and cons of using TransNet funds and what the impact to the POF would be over the short- and long-term.

Mr. Gallegos stated that the staff objective is to provide information on both sides of an issue in an impartial manner and to fully brief the Board on all impacts of any action so that the Board has complete information to consider and make decisions.

Mr. Bahadori expressed his concerns that after staff presentation the only public opinion that will be expressed will be from individuals that support the action. He stated that there needs to be a large presence from the public that can speak against the action and express the negative impacts to TransNet.

Mr. Garcia stated that the ITOC should place this item on its May agenda for discussion and action in order to take an official position. The process to make any changes to the TransNet Extension Ordinance is lengthy and the action taken at the May meeting would still be very proactive.

Mr. Ryan stated that there will be several members from the San Diego County Taxpayers Association and the construction industry present at the meeting Friday to state their opposition to the action.

Mr. Gallegos commented that there is a great degree of flexibility built into the TransNet Extension Ordinance so that the Board has the ability to make funding decisions. The TransNet Extension Ordinance was developed with that flexibility in mind and also with accountability. The TransNet Extension Ordinance calls for the program to be reviewed after each 10-year period to hold the Board accountable in how they program and expend TransNet funds.

Mr. Bahadori stated that the Board already has taken action to borrow TransNet funds but there was always a clear understanding that the funds would be re-paid. This proposal does not provide any guarantee that the funds would be paid back.

11. FUTURE MEETING SCHEDULE

The next ITOC meeting is scheduled for Wednesday, May 13, 2009, at 9:30 a.m.

12. ADJOURNMENT

Chair Meyer adjourned the meeting at 12:45 p.m.

San Diego Association of Governments – TransNet Program

INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE

May 13, 2009 AGENDA ITEM NO.: 3

Action Requested: RECOMMEND

MEMORANDUM OF AGREEMENT BETWEEN SANDAG AND THE CITY OF SANTEE REGARDING TransNet EXTENSION ORDINANCE COMMERCIAL PAPER PROGRAM AND REQUEST FOR AN EXCEPTION TO RULE NO. 16 OF BOARD POLICY NO. 031 File Number 1110200

Introduction

In accordance with Rule No. 16 of Board Policy No. 031, “TransNet Ordinance and Expenditure Plan Rules,” local jurisdictions may access the SANDAG Commercial Paper (CP) program to advance local TransNet eligible projects with a repayment period of up to five years. Local jurisdictions must document their understanding of the requirements for using the TransNet CP program in an executed Memorandum of Agreement (MOA). The City of Santee has requested access to TransNet CP to cover the shortfall in funding for the Forester Creek Improvements Project.

Recommendation

The Independent Taxpayer Oversight Committee (ITOC) is asked to review and recommend approval of the proposed MOA and an exception to Rule No. 16 of Board Policy No. 031 to increase the repayment period from five years to ten years to the Transportation Committee, contingent upon the Transportation Committee approving 2008 Regional Transportation Improvement Program (RTIP) Amendment No. 12 at its May 15, 2009, meeting.

Discussion

The Forester Creek Improvements Project is a regionally significant project that included both TransNet Highway and Surface Transportation Program (STP) funding. This project included construction of the Olive Lane and Mission Gorge Road bridges over the flood control channel and was open to traffic in August 2007. At its September 28, 2005, meeting, the Santee City Council approved a resolution awarding the contract for the Forester Creek Improvements Project (Attachment 2). A funding shortfall was discussed in the Council Report and it was noted that SANDAG agreed to provide interim funding of $4.5 million through the TransNet CP program, once it was needed. Should there be no alternative funding source available, the City would then use its TransNet local funds as the permanent funding source.

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The City of Santee (City) has determined that it cannot adequately address the gap funding needs for the Forester Creek Improvements Project and has pursued numerous options to cover the gap, originally at $4.5 million. The City has temporarily borrowed from various City funds to cover the shortfall while pursuing funding options and was able to locate funding for $550,000 of the shortfall, thereby reducing the gap to $3.95 million. At its meeting on April 22, 2009, the Santee City Council approved the request to borrow against its annual TransNet Extension revenue for this purpose (Attachment 3). On May 15, 2009, the Transportation Committee will be asked to approve the 2008 Regional Transportation Improvement Program Amendment No. 12, which will include the Forester Creek Improvements Project. Rule No. 16 of Board Policy No. 031 requires repayment of the principal amount of CP to be completed within five years of the agency’s receipt of the proceeds. The City has requested an exception to the five-year repayment period in an effort to continue with other approved local projects. Based on the capacity analysis (Attachment 4), it was determined that a ten-year repayment period would allow the City to meet its annual CP obligations and receive enough TransNet funds to continue with other Local Street Improvement projects. This Rule includes an option to roll the outstanding CP amount into a long-term bond issue during the repayment period. It is the intent of the City to take the option and include any outstanding CP in the next long-term bond issue. Attachments: 1. MOA between SANDAG and the City of Santee

2. Santee City Council Agenda Item No. 6A 3. Santee City Council Agenda Item No. 2B 4. City of Santee Capacity Analysis

Key Staff Contact: Lisa Kondrat-Dauphin, (619) 699-1942, lko@sandag.org

MEMORANDUM OF AGREEMENT BETWEEN SAN DIEGO ASSOCIATION OF GOVERNMENTS, ACTING AS THE

SAN DIEGO COUNTY REGIONAL TRANSPORTATION COMMISSION, AND THE CITY OF SANTEE

REGARDING DEBT FINANCING THROUGH THE TransNet PROGRAM

THIS MEMORANDUM OF AGREEMENT (“MOA”) is made and entered into effective as of this _____ day of _____________, 2009, by and between the San Diego Association of Governments, acting as the San Diego County Regional Transportation Commission (“SANDAG”), and the City of Santee (City).

RECITALS The following recitals are a substantive part of this Agreement:

WHEREAS, SANDAG serves as the San Diego County Regional Transportation Commission, and in that role is responsible for the administration of programs under the TransNet Extension Ordinance (Proposition A, November 2004), which sets forth permitted uses for revenues from a ½-cent transactions and use tax in San Diego County (TransNet Extension Program); and

WHEREAS, in order to accelerate the implementation of TransNet tax-funded projects,

SANDAG has established a commercial paper program for a short-term debt financing program to provide advanced funding for eligible projects under the TransNet Extension program; and

WHEREAS, SANDAG Board Policy No. 31, Rule No. 16, requires that an agency receiving

proceeds from the TransNet commercial paper program shall be responsible for its proportionate share of the ongoing interest and related administrative costs from the date the proceeds are received until the principal amount of the loan is fully repaid; and

WHEREAS, the City wishes to borrow Three Million, Nine Hundred Fifty Thousand Dollars

($3,950,000) from the TransNet Extension program for the Forester Creek project; and

WHEREAS, the parties wish to memorialize their agreement in this MOA to carry out the purposes set forth above;

AGREEMENT

NOW THEREFORE, in consideration of the mutual promises set forth herein, the parties agree as follows:

SANDAG AGREES: 1. To lend City Three Million, Nine Hundred Fifty Thousand Dollars ($3,950,000) through debt

financing for the Forester Creek project from the TransNet Extension Program subject to

Attachment 1

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certain conditions set forth below and SANDAG Board Policies concerning TransNet Extension Program loans.

2. SANDAG will transfer the funds to the City within 30 days following execution of this MOA.

CITY AGREES: 1. The governing body of City at its April 22, 2009, meeting approved the request to borrow

Three Million, Nine Hundred Fifty Thousand Dollars ($3,950,000) through debt financing using SANDAG’s commercial paper program for Forester Creek project.

2. The City agrees to use the funding provided under this MOA solely for the Forester Creek project.

3. The City will pay its proportionate share of the annual interest and administrative costs from the date the proceeds are received until the principal amount of the loan is fully repaid.

4. Repayment of the principal amount shall commence within three years of the receipt of the proceeds and shall be completed within ten years. Repayment of the proceeds will be accomplished by rolling the outstanding amount into a long-term bond issued during the ten-year repayment period if the opportunity for the conversion exists and is agreed to by SANDAG. In such case, the City would be responsible for its proportionate share of the bond issuance costs and annual debt service costs.

5. The repayment of debt, in all cases, is the first priority on the use of the City’s annual TransNet revenues. The City agrees not to subordinate SANDAG’s lien on the TransNet revenues to any other claim upon these funds. The amounts to be deducted and the terms of repayment (if appropriate) are estimated and set forth in the Repayment Schedule, which is Attachment A hereto.

6. The City agrees to indemnify, hold harmless, and defend SANDAG, the San Diego County Regional Transportation Commission, and all officers and employees thereof against all causes of action or claims related to projects financed through funding provided under this MOA.

THE PARTIES MUTUALLY AGREE: 1. That all obligations of SANDAG under the terms of this MOA are subject to the appropriation

of the required resources by SANDAG and the approval of the SANDAG Board of Directors.

2. Any notice required or permitted under this MOA may be personally served on the other party, by the party giving notice, or may be served by certified mail, return receipt requested, to the following addresses:

For SANDAG For City of Santee 401 B Street, Suite 800 10601 Magnolia Ave. San Diego, CA 92101 Santee, CA 92071 Attn: Director of Finance Attn: Tim McDermott

3. That unless it is amended by the parties in writing, this MOA shall terminate on June 30, 2019, or on such earlier or later date as the parties may agree to in writing.

4. The indemnification provisions of this MOA shall survive termination of the MOA.

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5. This MOA shall be interpreted in accordance with the laws of the State of California. If any action is brought to interpret or enforce any term of this MOA, the action shall be brought in a state or federal court situated in the County of San Diego, State of California.

6. All terms, conditions, and provisions hereof shall inure to and shall bind each of the parties hereto, and each of their respective heirs, executors, administrators, successors, and assigns.

7. For purposes of this MOA, the relationship of the parties is that of independent entities and not as agents of each other or as joint venturers or partners. The parties shall maintain sole and exclusive control over their personnel, agents, consultants, and operations.

8. No alteration or variation of the terms of this MOA shall be valid unless made in writing and signed by the parties hereto, and no oral understanding or agreement not incorporated herein shall be binding on any of the parties hereto.

9. Nothing in the provisions of this MOA is intended to create duties or obligations to or rights in third parties to this MOA or affect the legal liability of the parties to this MOA to third parties.

10. This MOA may be executed in any number of identical counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument when each party has signed one such counterpart.

11. This MOA may be executed and delivered by facsimile signature, and a facsimile signature shall be treated as an original.

IN WITNESS WHEREOF, the Parties hereto have executed this MOA effective on the day and year first above written.

SAN DIEGO ASSOCIATION OF GOVERNMENTS CITY OF SANTEE

GARY L. GALLEGOS Executive Director

KEITH TILL City Manager

APPROVED AS TO SUFFICIENCY OF FORM AND LEGALITY:

APPROVED AS TO SUFFICIENCY OF FORM AND LEGALITY:

Office of General Counsel Legal Counsel

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Attachment 2

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Attachment 3

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sgr

Typewritten Text

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Attachment 310 Year Scenario

Santee $3.95M Commercial Paper Capacity Analysis

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Beginning Balance (est) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Estimated Allocations2 1,204,479 1,245,463 1,287,879 1,355,647 1,426,415 1,426,415 1,426,415 1,426,415 1,426,415 1,426,415 CP Proceeds 3,950,000 - - - - - - - - - CP Principal Repayment - - - (564,286) (564,286) (564,286) (564,286) (564,286) (564,286) (564,286) CP Interest/Other Fees (177,750) (177,750) (177,750) (166,112) (140,719) (115,326) (89,933) (64,540) (39,147) (13,754) CP Disbursement (3,950,000) - - - - - - - - - RTIP programmed projects1 (1,026,729) (1,067,713) (1,110,129) (625,250) (721,410) (746,803) (772,196) (797,589) (822,982) (848,375) Ending Balance -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Notes:1. Assumes other project expenditures from the TransNet Extension program will fully utilize available balance after D/S obligation.2. Estimated revenues based on January 2009 projections for the next 5 years, updated on an annual basis.3. Years 6 through 10 (FY15 through FY19) are not part of the 5 year projection, therefore Estimated Allocations for year 5 (FY13) are used.

Attachment 4

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San Diego Association of Governments – TransNet Program

INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE

May 13, 2009 AGENDA ITEM NO.: 4

Action Requested: DISCUSSION / POSSIBLE ACTION

TransNet BICYCLE AND PEDESTRIAN ACCOMMODATION CONSISTENCY FINDING – CITY OF POWAY File Number 3000800 Staff will provide a report that summarizes results from the City of Poway's request for a consistency finding under the guidelines of the TransNet Routine Bicycle/Pedestrian Accommodations Policy and seek the review and potential recommendation of the ITOC for approval to the Transportation Committee. Attachment: 1. Draft Transportation Committee Report for the May 15, 2009, Meeting

San Diego Association of Governments

TRANSPORTATION COMMITTEE May 15, 2009

AGENDA ITEM NO.: xAction Requested: APPROVE

TransNet ROUTINE ACCOMMODATION EXCLUSIONS – CITY OF POWAY File Number 3000800

Introduction

On February 22, 2008, the Board of Directors adopted Board Policy No. 031, TransNet Ordinance and Expenditure Plan Rules, Rule 21: Accommodation of Bicyclists and Pedestrians (Attachment 1), commonly referred to as the “TransNet Routine Accommodation Policy (TransNet Policy).” The TransNet Policy requires that agencies make adequate provisions for bicycle and pedestrian travel on all new roadway construction and reconstruction projects that utilize TransNet funds. The TransNet Policy permits an exclusion from these requirements if an agency can show that the required accommodations will add disproportionate cost relative to the value of their use. The TransNet Policy specifies the process for seeking an exclusion, which requires the agency requesting the exclusion to include a notice of the decision in the public hearing required for the preparation of the Regional Transportation Improvement Process (RTIP). The decision then is subject to review and comment by the Bicycle and Pedestrian Working Group (BPWG) and the TransNet Independent Taxpayers Oversight Committee (ITOC), before the Transportation Committee ultimately makes a finding that the decision is consistent with the provisions of the TransNet Ordinance.

Recommendation

The Transportation Committee is asked to make a consistency finding that the proposal from the City of Poway for exclusion from Board Policy No. 031, TransNet Ordinance and Expenditure Plan Rules, Rule #21: Accommodation of Bicyclists and Pedestrians for Poway Road (RTIP Project POW5).

The City of Poway is seeking exclusion from the TransNet Policy for one pavement overlay project. This report summarizes the requested exception. On February 18, 2009 the SANDAG Bicycle-Pedestrian Working Group (BPWG) reviewed the proposed exceptions and provided comments and recommended approval of the request. The Independent Taxpayers Oversight Committee (ITOC) is scheduled to review the proposed exceptions at their meeting of May 13, 2009 for consistency with Board Policy 031, Rule 21 guidelines. The ITOC recommendation will be reported to the Transportation Committee.

Discussion

The following section of the report summarizes the specific project, the City of Poway’s justification for exclusion from the TransNet Policy, and comments provided by the BPWG.

The City of Poway is requesting an exemption from Condition E-4 of Section 4 of the TransNet Ordinance to exclude sidewalks and bike lanes along Poway Road between Espola Road and SR 67 (RTIP Project POW5). This project is currently funded by TransNet revenues for Fiscal Year 2010.

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The project has no existing curb and gutter and no adjacent pedestrian-oriented land uses. Therefore, sidewalks are not required in accordance with the TransNet Policy. Bike lanes will not be provided as part of this project due to insufficient pavement width and restricted right-of-way. Through the ordinance, the exception is allowed here as is it does not require the project to accommodate bike lanes if additional right-of-way would be required.

The BPWG asked if travel lanes could be narrowed enough to allow for the inclusion of bike lanes. City of Poway staff responded that due to the mountainous conditions and prevailing speed of 54 mph the lanes widths could not be reduced beyond 12 feet. The BPWG agreed with this, but asked that “Share the Road” signs (MUTCD W16-1) be installed as there are a significant number of bicyclists who use this section of roadway. The City of Poway agreed to do this as part of the project improvements.

BOB LEITER Director of Land Use and Transportation Planning

Attachments: 1. Board Policy 031, Rule 21: Accommodation of Bicyclists and Pedestrians 2. City of Poway Request Letter

Key Staff Contact: Chris Kluth, (619) 699-1952, ckl@sandag.org

BOARD POLICY NO. 031 TRANSNET ORDINANCE AND EXPENDITURE PLAN RULES The following rules have been adopted and amended by the SANDAG Board of Directors in its role as the San Diego County Regional Transportation Commission (RTC). The purpose of these rules is to implement the provisions of the original TransNet Ordinance (87-1) and the TransNet Extension Ordinance (04-01).

Rule #1: Procedure for Distribution of Revenues for Transportation Services for Seniors and the Disabled

Adoption Date: February 26, 1988 (Resolution RC88-2)

Amendment: Repealed at November 18, 2005, Board Meeting. This rule was superseded by Rule No. 11.

Rule #2: Loan of Funds for Privately Funded Projects

Adoption Date: April 22, 1988 (Resolution RC88-5)

Amendment: Amended at November 18, 2005, Board Meeting.

Text: The Commission may approve a loan of sales tax funds to a city or county from its formula-based share of Local Street and Road funds to finance a project which is prohibited from receiving funding under Section 9 of Commission Ordinance 87-1 or Section 8 of Ordinance 04-01 if the following terms and conditions are met.

1. A finding is made by the Commission that absent private sector funding, the project would be an eligible street and road project.

2. The City or County agrees to enter into an agreement to repay the loan plus interest (at a rate determined by the Commission) prior to the termination of the sales tax in accordance with Section 3 of Commission Ordinance 87-1 or Section 3 of Ordinance 04-01.

3. That the City or County agrees to guarantee repayment of the loan if private developer funding is determined to be inadequate to repay the loan prior to termination of the sales tax.

Rule # 3: Reimbursement of Local Funds to Advance Approved Projects

Adoption Date: May 27, 1988 (Resolution RC88-6)

Amendment: Amended at November 18, 2005, Board Meeting.

Text: A city or county may advance improvements on a project(s) which is included in the approved transportation sales tax Program of Projects with local agency funds (other than private developer funds as set forth in Section 9 of Ordinance 87-1 or

Attachment 1

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Section 8 of Ordinance 04-01) prior to sales tax funds being available and receive reimbursement including interest from sales tax funds if it is determined by the Commission that the following terms and conditions are met.

1. The project(s) is included in the approved transportation sales tax Program of Projects, and no other financing technique is found to be more desirable or cost effective to utilize in order to advance the improvement.

2. The city or county shall be reimbursed for the local funds expended as soon as sales tax funds become available, or on a schedule agreed to between the local agency and the Commission.

3. That no more than 30 percent of the funds will be used for maintenance projects if the funds are borrowed from TransNet revenues pursuant to Section 2(C)(1) of Ordinance 04-01.

Rule #4: SR 78 Corridor Reserve Fund Allocation Policies

Adoption Date: Originally Adopted May 26, 1989 (Resolution R-89-82)

Wording changed December 14, 1990 (Resolution RC91-10)

Amendment: Amended at November 18, 2005, Board Meeting.

Text: For purposes of allocating funds under Section 2(a)(3) in Ordinance 87-1: 1. Only those projects designated as "funded" on the SR 78 Corridor

project list approved on December 13, 1990 by the SR 78 Corridor Policy Committee are eligible to receive SR 78 Corridor Reserve Funds.

2. The list of SR 78 Corridor projects and their priority and funding eligibility may be revised by a majority vote of the SR 78 Corridor Policy Committee and the approval of the Board of Directors.

3. The basic contribution for a non-Caltrans project on the SR 78 Corridor Reserve funded list is 50 percent of the estimated right-of-way, engineering, and construction costs. However, the total amount of Corridor Reserve Funds designated for projects within one jurisdiction may be allocated to vary from the basic 50 percent for any given project as long as the cumulative total for programmed projects at any point in time does not exceed 50 percent.

4. The basic contribution for a Caltrans project on the SR 78 Corridor Reserve funded list is 100 percent of the estimated right-of-way, engineering, and construction costs.

5. Contributions from the SR 78 Corridor Reserve Fund to any one jurisdiction cannot exceed 50 percent (100 percent for Caltrans) of the project cost estimates shown on the approved funded list of December 13, 1990. If actual project costs are less than estimated, a maximum contribution of 50 percent (100 percent for Caltrans) of the new costs shall be in effect.

Attachment 1

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6. A project that for any reason is removed from the funded list can only be replaced by the next highest ranked unfunded project (or projects), regardless of jurisdiction and only if the funded list of projects does not exceed the total Corridor Reserve dollars available. As with other funded projects, Corridor Reserve funds can only be used to improve the replacement project(s) to minimal four-lane standards (six lanes at freeway interchanges).

Added June 22, 1990 (Resolution RC90-40):

7. SR 78 Corridor Reserve funds for right-of-way will not be encumbered until a project has environmental clearance and the first 25 percent of the total value of the right-of-way is acquired. When a total of 75 percent of the right-of-way has been acquired, the construction funds will be encumbered at the request of the agency.

Added December 14, 1990 (Resolution RC91-10):

8. All agencies submitting projects from the SR 78 Corridor Funded Project List for programming are encouraged to pursue matching funds from the state's SB 300 program.

Added February 22, 1991 (Resolution RC91-13):

9. Any new source of state highway funds for the San Diego region should be considered for allocation to the TransNet SR 78 Corridor Reserve to offset local funds which were used for projects which are normally the responsibility of the State, such as freeway-freeway interchange improvements and ramp metering systems.

Rule # 5: Use of Local Street and Road TransNet Funds for the Development of Trans-portation Demand Management Programs

Adoption Date: August 25, 1989 (Resolution RC90-23)

Amendment: Amended at November 18, 2005, Board Meeting.

Text: The development and implementation of a Transportation Demand Management Program shall be an eligible use of Local Street and Road funds pursuant to Section 19(E) of Ordinance 87-1 and Section 21(c) of Ordinance 04-01. Transportation Demand Management shall mean a comprehensive set of strategies designed to influence travel behavior with respect to mode, time, frequency, route, or distance in order to improve the efficiency and effectiveness of local streets and roads. Principal strategy measures involve, but are not limited to, ridesharing, alternative work hours, and parking management.

Rule # 6: Fund Accounting and Interest Allocation

Adoption Date: March 23, 1990 (Resolution RC90-35)

Amendment: Amended at November 18, 2005, Board Meeting.

Text: For the purposes of determining compliance with Section 12 of Ordinance 87-1 and Section 13 of Ordinance 04-01, each agency shall maintain a separate fund (fund

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accounting) for TransNet revenues, if possible. Where the creation of a separate fund is not possible due to accounting methodology used by the agency, an alternative approach to maintaining separate accountability for TransNet revenue and expenditures must be developed and submitted to the Commission staff for concurrence. Interest earned on TransNet revenues received by the agency must be allocated to the TransNet fund and used only for projects approved by the Commission in the Program of Projects. For accounting purposes, the interest earnings shall be considered to be expended first. Further, the Ordinances allow the agencies to retain any unused TransNet funds. Interest accrued should be applied to each active project that carries an outstanding balance. The agency can determine the method of the interest distribution to be validated by the audit.

Rule # 7: Program of Projects Approval Process and Amendments

Adoption Date: March 23, 1990 (Resolution RC90-35)

Amendments: Amended at November 18, 2005, December 15, 2006, and December 21, 2007, September 26, 2008, Board Meetings.

Text: Each local agency shall develop a five-year list of projects to be funded with TransNet revenues under Section 2D of Ordinance 87-1 and Section 4D of Ordinance 04-01 in accordance with the Regional Transportation Improvement Program (RTIP) update schedule. All projects a local agency wishes to include in its Program of Projects (POP) must be consistent with the long-range Regional Transportation Plan and approved by the Commission for inclusion in the RTIP. A local agency’s projects shall not receive Commission approval until the Commission receives a resolution from the local agency that documents that the local agency held a noticed public meeting with an agenda item that clearly identified the proposed list of projects prior to approval by the local agency’s legislative body of the projects. The language that must be included in the resolution and the deadlines for submission shall be prescribed by the Commission. The resolution shall contain the provisions set forth in Rule #15.

A POP amendment shall be initiated when a local agency desires to revise the

approved POP, which includes but is not limited to, adding a new project, deleting an existing project, revising the project scope, or otherwise changing the TransNet funds programmed. A TransNet POP amendment must be consistent with the requirements outlined in the RTIP. Projects proposed in the amendment must first be approved by the governing body of the local agency within the preceding 12 months. The local agency shall initiate the amendment process by holding a noticed public meeting with an agenda item that clearly identifies the proposed project amendments and submitting a resolution using the language and deadlines prescribed by the Commission as documentation of governing body approval. The amendment must be approved by the Commission prior to the expenditure of funds on the new or amended projects.

Rule # 8: Determination of New Transit Services

Adoption Date: March 23, 1990 (Resolution RC90-35)

Amendment: Amended at November 18, 2005, Board Meeting.

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Text: For the purpose of determining compliance with Section 4(B)(2)(c) of Ordinance 87-1, the level of service provided in FY 1988 shall be considered at the base level of service in existence prior to the availability of TransNet revenues which must be maintained through other funding sources. Compliance with the “new” service requirement shall be determined using the following procedure:

1. Determine the number of vehicle service miles operated during the fiscal year using TransNet revenues for any given operator by dividing the TransNet revenues for operations by the total systemwide operating cost for that operator and multiplying the total vehicle service miles operated by the quotient.

2. Subtract the number of miles determined in Step 1 from the total system vehicle service miles operated during the year.

3. If the adjusted number of miles from Step 2 is greater than or equal to the FY 1988 base level, then the compliance test is met.

4. The attached table of base statistics from FY 1988 (Attachment 1) will be used to determine compliance. These figures reflect all publicly funded operators within the MTDB (MTS) and North County Transit District (NCTD) service areas (Articles 4, 4.5, and 8) because TransNet revenues could potentially be used by the operators to fund service improvements on any of these systems.

Rule # 9: Use of TransNet Revenue for Bus Purchases

Adoption Date: March 23, 1990 (Resolution RC90-35)

Amendment: Amended at November 18, 2005, Board Meeting.

Text: TransNet revenues may be used to support the purchase of buses required to operate new services funded with TransNet revenues. The number of buses which can be purchased with TransNet revenues shall be determined using the following procedures.

1. Determine the number of annual new vehicle service miles service being operated in accordance with Rule Number 8 – Determination of New Transit Services.

2. Divide the number of new miles of service by the systemwide average annual vehicle services miles per bus for a given operator to determine the equivalent number of buses required to operate the new service. Round up to the nearest whole number of bus equivalents.

The TransNet revenues used for bus purchases shall come out of the revenues

available under Section 4(B)(2)(c) of Ordinance 87-1. The use of TransNet revenues for bus purchases shall be used to the maximum extent possible as matching funds for available state and federal capital funds. If, at some point in the future, the number of buses purchased with TransNet revenues cannot be justified based on the number of new miles being operated with TransNet revenues, then a pro-rated reimbursement to the TransNet fund will be required based on the remaining useful life of the vehicles. TransNet revenues may not be used to support the

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purchase of replacement buses for the “existing” (FY 1988) level of service. Any buses purchases with TransNet revenues will remain under the ownership of MTDB (MTS) or NCTD and be made available to the operator chosen to operate the new services.

Rule #10: Use of TransNet Revenues to Replace Reduced State and Federal Operating Support

Adoption Date: March 23, 1990 (Resolution RC90-35)

Amendment: Amended at November 18, 2005, Board Meeting.

Text: For purposes of determining compliance with Section 4(B)(2)(c) of Ordinance 87-1, the maximum amount of TransNet funds that MTDB (MTS) or NCTD are eligible to use to replace federal funds in a given year is equal to the FY 1987 base year levels of federal and state operating support ($6,113,307 for MTS and $2,511,816 for NCTD) less the amount of state and federal operating support available in that year. The priority on the use of funds under this section is to provide new service improvements. MTS and NCTD are encouraged to use other available revenues, such as Transportation Development Act (TDA) funds, to offset reductions in state and federal funds, if possible, and to use TransNet funds under these sections for new service improvements.

Rule #11: Use of TransNet Revenues for Transportation Services for Seniors and the Disabled

Adoption Date: March 23, 1990 (Resolution RC90-35)

Amendment: Amended at the November 18, 2005, and December 21, 2007, Board Meetings

Text: The funds made available under Section 4(B)(1) of Ordinance 87-1 or Section 4(c)(1) of Ordinance 04-01 for improved transportation services for seniors and the disabled shall be used to augment the revenues made available under the Transportation Development Act (TDA) Article 4.5 program for the same purposes. These TransNet funds shall be allocated to eligible service providers using the fund distribution formula approved by the SANDAG Board of Directors for use in distributing the TDA Article 4.5 funds. For accounting purposes, following the expenditure of fare revenues and other local and other local operating revenues, the interest earnings on the TransNet and TDA funds shall be considered to be spent first, followed by the TDA funds, then the TransNet funds.

Rule #12: Use of TransNet Revenues for Accessibility Improvements

Adoption Date: March 23, 1990 (Resolution RC90-35)

Text: In the development of TransNet-funded local street and road projects, local jurisdictions may include, within the street right-of-way, improvements to enhance accessibility to the transportation system, including, but not limited to, accessibility improvements to bus stop areas.

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Rule #13: Investments

Adoption Date: July 27, 1990 (Resolution RC91-2)

Amendment: Repealed at November 18, 2005, Board Meeting. This rule has been superseded by the Annual Investment Policy Update (see Resolution No. 2006-06 approved at the September 23, 2005, SANDAG Board of Directors meeting).

Rule #14: Capital Equipment Acquisition Loans to SANDAG

Adoption Date: November 16, 1990 (Resolution RC91-6)

Text: The loan of unused administrative allocations from TransNet funds to SANDAG for the purpose of acquiring office and computer equipment is authorized when lower cost financing is not available. The repayment schedule shall be based upon funding authorized in the SANDAG-approved budget and will include interest at a rate equal to the interest earning rate of the San Diego County Pooled Money Fund.

Rule #15: Local Agency Hold Harmless Agreements

Adoption Date: October 25, 1992 (Resolution RC92-7)

Text: Each local agency shall be required to hold harmless and defend the Commission against challenges related to local TransNet projects. This rule is to be implemented by requiring that each local agency agree in its resolution approving its projects for TransNet funding to hold the Commission harmless.

Rule #16: Repayment of Commercial Paper Program Proceeds

Adoption Date: September 23, 2005

Amendment: Amended at November 18, 2005, Board Meeting.

Text: Each agency receiving proceeds from the TransNet Commercial Paper Program shall be responsible for its proportionate share of the ongoing interest and related administrative costs from the date the proceeds are received until the principal amount of the loan is fully repaid. Repayment of the principal amount shall commence within three years of the agency’s receipt of the proceeds and shall be completed within five years of the agency’s receipt of the proceeds. Repayment of the proceeds may be accomplished by rolling the outstanding amount into a long-term bond issue during the five-year repayment period. In such cases, the agency would then be responsible for its proportionate share of the bond issuance costs and annual debt service costs. The repayment of debt, in all cases, is the first priority on the use of the agency’s share of annual TransNet revenues.

Rule #17: Fiscal and Compliance Audits

Adoption Date: November 18, 2005

Amendment: Amended at September 26, 2008, Board Meeting.

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Text: I. Fiscal and Compliance Audit Procedures

The fiscal and compliance audit is an essential tool to determine that TransNet funds are being used for the intended purposes. The Commission has the fiduciary responsibility to ensure that the public funds are used in accordance with the TransNet Ordinance and Expenditure Plans (87-01 and 04-01).

Pursuant to the TransNet Extension Ordinance (04-01), the Independent Taxpayer Oversight Committee (ITOC) is responsible for the conduct of an annual fiscal audit and compliance audit of all TransNet-funded activities beginning with the FY 2009 audit. In order to complete the audits in a timely manner, the following estimated audit schedule is set forth:

July/August: ITOC designee meets with the auditors to review the audits required for the year and provide all necessary documentation/information for the auditors to begin work.A. September to November: Auditors schedule site visits. Recipient agencies must be ready and available to meet with the auditors and provide requested financial schedules and other information necessary for the completion of the audit.B. November/December: Auditors issue preliminary draft reports to both SANDAG and the agencies. The agencies must be available to review and comment on the draft report in a timely manner. All outstanding issues should be resolved within four weeks. C. February: Auditors issue the draft audits to ITOC.

D. March: Auditors issue final reports

E. April: ITOC presents initial finding(s) of the audit and its recommendations to the Transportation Committee.

F. June: June: ITOC presents an annual report to the SANDAG Board with the results of the annual audit and its process.

SANDAG Responsibility: SANDAG will provide all information necessary to complete the audit.

Agency Responsibility: All agencies must be ready for the site visit, provide requested information, and review and comment on the draft reports in a timely manner.

If the auditor is unable to complete the audit because an agency was not ready or did not provide the required information or reviews in a timely manner, then the agency will be deemed in noncompliance of the Ordinance. SANDAG will withhold future TransNet payments (except for required debt service payments) until the audit is completed.

II. Ordinance Requirements

Section 4(C)(5) of the TransNet Extension Ordinance contains the fiscal and compliance audit requirements applicable beginning in FY 2009.

Section 8 of the Ordinance contains the Maintenance of Effort requirements for the local agencies.

III. Exceptions

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SANDAG acknowledges the existence of unforeseen circumstances which may prevent an audit from completion. Should situations warrant an extension, the agencies must submit a written request for an extension to be reviewed by ITOC and considered by the SANDAG Transportation Committee, including an explanation of the situation and specific timelines for completion of the audit.

IV. Audit Adjustments

Specific Project Funding/Discretionary Programs

This section applies to funding allocated for the specified projects under the Highway and Transit Programs under Ordinance 87-1, including funding allocated for bicycle facility improvements. Under the TransNet Extension (Ordinance 04-01), this section applies to the Major Corridor funding – Section 4(A) and (B) and the four discretionary programs: (1) Transit Senior program – Section 4(C)(2); (2) Local Environmental Mitigation program – Section 4(D)(2); (3) Local Smart Growth Incentive program – Section 4(D)(3); and (4) Bicycle, Pedestrian, and Neighborhood Safety Program – Section 2(E).

After the projects are completed and there are funds remaining, the agency is required to return the money back to the program. After the fiscal audit determines that the project has been completed, SANDAG will transmit a letter to the agency to return the funds to the Commission. The agency must remit the balance within 60 days of the letter. Should an agency fail to respond in a timely manner, all future TransNet payments (including funds from the other programs) to that agency will be suspended until the funds are returned.

Local Street and Road Formula Program (Section 4(C) of Ordinance 87-1 and Section 4(D)(1) of Ordinance 04-01) and Transit Funding (Section 4(B) of Ordinance 87-1 and Sections 4(C)(1), 4(C)(3), and 4(C)(4) of Ordinance 04-01).

The audit identifies the status of each project funded with TransNet funds – i.e., completed projects, projects that have negative balances, inactive projects, and ongoing projects. The agencies are responsible to work with the auditors to make proper adjustments as follows:

Completed projects: once a project is identified as completed and there are TransNet funds remaining with that project, the agency is required to transfer the balance to another TransNet-eligible project (any project included in the approved Program of Projects). The audit should make note to which project the funds will be transferred. Completed projects should no longer show in the following year’s audit.

Projects with negative balances: if a project ending balance is negative, then a footnote should be provided detailing the subsequent year’s intended action.

Inactive projects: if a project has had no activity over a period of two audits, the agency must either close out the project or note when the project will be completed. These projects should no longer show in the following year’s audit. Any remaining TransNet funds must be transferred to another TransNet-eligible project.

Transfer of funds: any transfer of TransNet funds from one project to another requires the local agency to provide documentation that its governing body consents to the transfer proposed prior to or concurrent with the final issuance of the fiscal year audit. Such documentation shall consist of a signed staff report or resolution. Transfers that require an amendment to the RTIP must follow the amendment process outlined in Rule # 7.

IV. Local Agency Balance Limitations

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Based on the audit, an agency that maintains a balance of more than 30 percent of its annual apportionment (after debt service payments) must use the remaining balance to fund projects. SANDAG will defer payment until the unused balances fall below the 30 percent threshold.

VI. Annual Fiscal Audit Report to the Board

Pursuant to the TransNet Extension Ordinance, beginning with the FY 2009 audits, ITOC is responsible for the annual fiscal and compliance audit of all TransNet-funded activities.

Rule #18:

Adoption Date: June 23, 2006

Amended: December 21, 2007

Text: As specified in Section 2(C)(1) of the Ordinance 04-01, at least 70 percent of the revenues provided for local street and road purposes should be used for congestion relief purposes and no more than 30 percent for maintenance purposes. Grade separation projects are identified in Section 2(C)(1) of Ordinance 04-01 as projects that qualify as congestion relief projects. Attachment 2 provides a set of guidelines to be used in the implementation of this 30 percent maintenance limitation beginning with the 2006 Regional Transportation Improvement Program (RTIP) update. These guidelines apply to the programming of all available local TransNet funding (annual formula funds and prior year carry-over balances) beginning with July 1, 2008 (Fiscal Year 2008-09).

Rule #19: Conflict of Interest for ITOC Representatives

Adoption Date: December 15, 2006

Text: The Board intends to make every effort to ensure the representatives selected to serve on the Independent Taxpayers Oversight Committee (ITOC) are free from any bias that would interfere with objective decision making by the ITOC. The Conflict of Interest section of the “Statement of Understanding Regarding the Implementation of the Independent Taxpayer Oversight Committee for the TransNet Program,” which is part of the TransNet Extension Ordinance, states in part: “ITOC members shall not have direct commercial interest or employment with any public or private entity, which receives TransNet sales tax funds authorized by this Ordinance.” The Board interprets this language to impose the same level of restrictions on the ITOC representatives as those that apply to SANDAG Board members pursuant to California state law found at Government Code sections 87100 et seq. and 1090 et seq.

Rule #20: Selection Procedures for ITOC Representatives

Adoption Date: December 21, 2007

Text: The “Statement of Understanding Regarding the Implementation of the Independent Taxpayer Oversight Committee for the TransNet Program,” which is part of the TransNet Extension Ordinance, Section 3 under the heading “Membership and Selection Process” of that document states that a Selection

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Committee shall be established to select the ITOC members from the list of qualified candidates recommended by the technical screening committee. The Selection Committee is to consist of two members of the County of San Diego Board of Supervisors; the Mayor of the City of San Diego; and a mayor from each of the four subregions. It is the mayors from each of the subregions that are to select from among themselves to sit on the Selection Committee, not the representatives who sit on the Board who may or may not be a mayor. The members of the Selection Committee who are mayors from the subregions shall serve for a period of two years or until the designee no longer holds the office of mayor. At the end of this term, the mayors from the affected subregion(s) shall either inform the Clerk of the SANDAG Board that the same representative is being redesignated or identify the new mayor who they have selected to represent their subregion on the Selection Committee.

Rule #21: Accommodation of Bicyclists and Pedestrians

Adoption Date: February 22, 2008

Text: Adequate provisions for bicycle and pedestrian travel is determined within the context of the roadway type, its existing and planned surrounding land uses, existing bicycle and pedestrian plans, and current or planned public transit service. When addressing the access needs dictated by land use, the responsible agency must consider demand created by current and expected land uses (as determined by the local general plan) within the useful life of the TransNet project. The table Appropriate Bicycle and Pedestrian Accommodation Measures provides a guide to appropriate accommodation measures for each transportation facility type and land use context. In the table, “urban” means within the urbanized area as defined by U.S. Census Bureau.

Appropriate Bicycle and Pedestrian Accommodation Measures1 Context/Facility Type Bicycle Measures Pedestrian Measures

Urban Highway • Required facility type will be based on the recommendations for any regional bikeway corridors in urban highway alignments developed through the 2007 Regional Bicycle Plan. Pending completion of this plan, appropriate bicycle accommodation will be developed on a project by project basis by local and regional authorities in consultation with appropriate stakeholders.

• Freeways and freeway interchanges may not eliminate existing bikeways or preclude planned bikeways on local streets and roads.

• Continuous sidewalks and marked crosswalks through freeway interchanges where sidewalks exist or are planned on the intersecting roadway.

• Where new freeway construction severs existing pedestrian access, grade separated pedestrian crossings with no more than 0.3 mile between crossings.

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Appropriate Bicycle and Pedestrian Accommodation Measures1 Context/Facility Type Bicycle Measures Pedestrian Measures

Transit Project • Bicycle lockers and racks at stations sufficient to meet normal expected demand

• Bicycle access to all transit vehicles except those providing exclusive paratransit service to the disabled as required by the Americans with Disabilities Act.

• Transit priority measures on roadways may not prevent bicycle access.

• Direct sidewalk connections between station platforms and adjacent roadway sidewalks

• Pedestrian crossings where a new transit way severs existing pedestrian access with no more than 0.3 miles between crossings.

Major Urban Street • Class 2 bike lanes. • Continuous sidewalks or pathways2, both sides of the street with marked crosswalks at traffic controlled intersections.

• ADA compliant bus stop landings for existing and planned transit service

Urban Collector Street (design speed >35 mph)

• Class 2 bike lanes • Continuous sidewalks or pathways2, both sides of the street with marked crosswalks at traffic controlled intersections.

• ADA compliant bus stop landings for existing and planned transit service

Urban Collector Street (design speed ≤ 35 mph)

• Shared roadway. Where planned average daily motor vehicle traffic exceeds 6,500, the outside travel lane should be at least 14 feet wide.

• Continuous sidewalks or pathways2 both sides of the street

• ADA compliant bus stop landings for existing and planned transit service

Urban Local Street • Shared roadway • Continuous sidewalks or pathways2 both sides of the street

• ADA compliant bus stop landings for existing and planned transit service

Rural Highway • Minimum 8-foot paved shoulder • ADA compliant bus stop landings for existing bus stops.

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Appropriate Bicycle and Pedestrian Accommodation Measures1 Context/Facility Type Bicycle Measures Pedestrian Measures

Rural Collector Road • Minimum 8-foot paved shoulder • Not required with no fronting uses

• Paved or graded walkway consistent with community character on streets with fronting uses.

• ADA compliant bus stop landings for existing bus stops.

Rural Local Road

• Minimum 6-foot paved shoulder • Not required with 85th percentile speeds ≤ 25 mph

• Paved or graded walkway consistent with community character on streets with fronting uses and 85th percentile speeds > 25 mph.

• ADA compliant bus stop landings for existing bus stops.

1. Application of these accommodation measures is subject to sound planning and engineering judgment to ensure the facility is reasonable and appropriate within the land use and transportation context of the overall project.

2. Unpaved pathways of decomposed granite or other suitable material that are set back from the roadway where feasible would be considered appropriate only on roads serving areas that are rural in nature.

Where a local jurisdiction has a bicycle or pedestrian master plan adopted by the city council or Board of Supervisors and approved by SANDAG, the local agency may use that plan to determine the appropriate means of accommodating bicyclists and pedestrians in a given project and at a minimum provide the facilities called for in the plan. These plans must be updated and approved no less than every five years to qualify as a means of satisfying this provision.

Best Available Standards. All bicycle facilities must be designed to the standards established in the California Highway Design Manual, Chapter 1000. Bicycle parking facilities should conform to the guidelines established in the Regional Bicycle Plan adopted by SANDAG. Shared roadways on collector streets should have a curb lane or curb lane plus shoulder that measures at least 14 feet. Where parallel parking is in place, consideration should be given to installing the shared lane pavement marker. All sidewalks must be designed consistent with the design standards established in the AASHTO Guide for the Planning, Design, and Operation of Pedestrian Facilities, the Department of State Architect’s California Access Compliance Reference Manual, and the U.S. Department of Transportations ADA Accessibility Guidelines for Buildings and Facilities (ADAAG). Consistency with the design recommendations in SANDAG’s Planning and Designing for Pedestrians is encouraged

Bicycle and Pedestrian Accommodation in Reconstruction Projects. Street and road reconstruction is the time to re-evaluate the function of a road and its context, and to reallocate

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the right-of-way if appropriate to meet the needs of bicyclists and pedestrians. An agency is not required to acquire additional right of way to improve bicycle and pedestrian access. However, the agency should consider reduced motor vehicle lanes and lane widths, and reduced median widths as a means of providing the appropriate bicycle or pedestrian facility. While such an evaluation is recommended for reconstruction projects of any size, compliance with these guidelines is required for “major” reconstruction projects meeting the definitions established under Rule 18 of SANDAG Board Policy No. 031 regarding the guidelines for implementing the “70/30” requirement.

When Provisions for Bicyclists and Pedestrians Accommodation May Be Excluded. Section 4(E)(3) is based on the premise that pedestrians and bicyclists need safe and convenient access to the same destinations as other users of the public right of way. Consequently, those portions of the transportation network where pedestrians and bicyclists need not be accommodated are the exception, and the decision not to provide for them in a construction or major reconstruction project must be made by the responsible agency for good cause such as severe topographic or biological constraints. Any impacts on the roadway’s motor vehicle capacity that result from providing for pedestrian and bicycle access would not, in themselves, justify excluding bicycle and pedestrian facilities. However, these impacts and their mitigation costs should be considered in determining if the cost of providing the facilities is disproportionate to the probable use.

This provision only requires an agency to provide appropriate bicycle or pedestrian facilities that are within the construction or reconstruction area of the project. Consideration of the provision of sidewalks as part of major rehabilitation roadway projects involving only new pavement overlays of 1-inch thickness or greater (see Rule 18 under Board Policy 031) on streets where sidewalks do not currently exist would only be required if curb, gutter, and related drainage facilities were already in place.

The cost of providing for bicycle and pedestrian access can vary significantly relative to the overall project cost. For this reason, specifying a proportional or absolute limit on spending for bicycle or pedestrian improvements relative to probable use would not allow the kind of discretion necessary to make a significant investment in facilities when necessary, or to withhold an investment when the benefits are marginal. Therefore, the decision to exclude accommodations for bicyclist and pedestrians must be a policy-level decision made by the Board or city council based on the body of information about context, cost, and probable use available at the time. Such a decision must be made in the public hearing required by Section 5(A) of the Ordinance.

Pedestrian Access. Sidewalks or other walkways may be excluded from a project when it can be demonstrated that there are no uses (including bus stops) that would create demand for pedestrian access. In making this determination, the agency must consider the potential for future demand within the useful life of the project. Access to and from public transit, including crossing improvements, also must be considered and accommodated where there is existing or planned transit service.

Bicycle Access. A new project or major reconstruction project may not include the expected bikeway treatment when a suitable parallel route with the appropriate accommodations exists that would require no more than ¼-mile total out of direction travel.

Procedures for Excluding Accommodations for Pedestrians and Bicyclists from Projects. When an agency determines not to include bicycle or pedestrian accommodations in a project because the cost of doing so would be excessively disproportionate to the need or probable use, the agency must include a notice of that decision in the notice of the public hearing required by

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Sections 5(A) and Section 6 of the Ordinance. In submitting the project to SANDAG for inclusion in the TransNet Program of Projects as part of the Regional Transportation Improvement Program (RTIP) process, the agency must notify SANDAG that bicycle and/or pedestrian facilities, as described in Table 1 or in its bicycle or pedestrian master plan, will not be included in the project along with written justification for that decision. The decision and justification is subject to review and comment by SANDAG through the Bicycle-Pedestrian Working Group, which would forward its comments to the SANDAG Transportation Committee. The Independent Taxpayer Oversight Committee also would review and comment on such projects as part of its role in the RTIP process. The Transportation Committee in approving the TransNet Program of Projects must make a finding that the local decision not to provide bicycle or pedestrian facilities is consistent with the provisions of this Ordinance prior to approving the project for funding under the TransNet Program. If this consistency finding is not made, the agency would have the opportunity to revise its fund programming request for consideration in a future RTIP amendment.

Effective Implementation. This rule will be effective for projects added to the TransNet Program of Projects subsequent to their adoption by the SANDAG Board of Directors. Within three years of their adoption, the rule will be re-evaluated by SANDAG to ensure they are effectively encouraging provision of a balance transportation network without imposing an excessive cost burden on projects funded under the program.

Rule #22: TransNet Extension Ordinance Maintenance of Effort (MOE) base level implementation guidelines

Adoption Date: March 28, 2008

Text: Section 8 of the Extension Ordinance provides guidelines regarding the MOE base level calculation and implementation.

Section 8 of the Extension Ordinance states the intended purpose of the MOE requirement is to ensure that revenues provided from TransNet be used to augment, not supplant, existing local revenue. Some flexibility in accounting for spikes in expenditures would be consistent with the intent of ensuring that the local agencies do not supplant local funds with TransNet funds. Therefore, one-time expenditures that were a result of “banking” general fund monies and subsequently expending those funds during the base period Fiscal Years 2001 – 2003 may be isolated and removed so that the MOE is representative of a normal annual spending level, subject to review by the ITOC and approval by the Board of Directors.

In addition, the language in Section 8 of the Extension Ordinance states the MOE will be determined on the basis of “discretionary funds expended for street and road purposes…as was reported in the State Controller’s Annual Report of Financial Transactions for Streets and Roads.” The Extension Ordinance also states “the MOE also shall apply to any local agency discretionary funds being used for the other purposes specified under Section 4.” Based on this language, the MOE levels are to be established separately for each category in Section 4 of the Ordinance: major highway and transit congestion relief projects; transit programs to support seniors and disabled persons; specialized transportation services for seniors; monthly transit passes for seniors, disabled, and youth riders; transit operations; local streets and roads; habitat-related mitigation costs of local transportation projects; and the smart growth incentive program. The annual

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audits of the MOE expenditure requirement will report the expenditures for each of these separate categories.

Adopted: February, April, and May 1988; August 1989; March, July, and November 1990; October 1992; September and

November 2005

Amended:June and December 1990; February 1991; November 2005; December 2006; December 2007; February 2008;

March 2008; September 2008

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Attachment 1 FY 1988 Base Year Statistics

(for use in TransNet Ordinance Rule #8) Metropolitan Transit Development Board (MTS) Area

Vehicle

Fund Source Operator/Service Service Miles

Article 4.0 Chula Vista Transit 559,734 National City Transit 276,303 County Transit System:

Suburban Service Rural Bus Poway Fixed Route

646,904 170,953 313,425

San Diego Transit 10,473,323 San Diego Trolley 1,033,084 Strand Express Agency 400,738 Total 13,874,464 Article 8 County Transit System:

Express Bus

189,276

Total 189,276 Article 4.0 Dial-A-Ride El Cajon Express 308,331 La Mesa Dial-A-Ride 251,516 Lemon Grove Dial-A-Ride 62,090 County Transit System:

Poway Dial-A-Ride Poway Airporter Spring Valley Dial-A-Ride

23,030 103,925 73,298

San Diego Transit DART 309,370 Total 1,131,560 Article 4.5 Chula Vista Handytrans 128,807 County Transit System – WHEELS 219,906 National City Wheels 15,159 Poway Call-A-Ride 60,156 San Diego Dial-A-Ride 1,149,541 Total 1,573,623 MTDB (MTS) Area Total 16,768,923

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North County Transit District

Vehicle Fund Source Operator/Service

Service Miles

Article 4.0 NCTD Fixed Route 7,651,408 NCTD FAST 126,744 Total 7,778,152 Article 4.5 NCTD Lifeline 386,680 Total 386,680 NSDCTDB (NCTD) Area Total 8,164,832 REGIONAL TOTAL 24,933,755

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TransNet Local Street and Road Program TransNet Ordinance and Expenditure Plan Implementation Guidelines

June 23, 2006 The TransNet Ordinance requires that at least 70 percent of the revenues provided for local street and road purposes should be used to fund direct expenditures for facilities contributing to congestion relief. No more than 30 percent of these funds should be used for local street and road maintenance purposes. The required multi-year Regional Transportation Improvement Program (RTIP) project lists submitted by local agencies that are found to be out of compliance with this requirement will not be approved. Local agencies may request an exception to this requirement and must provide justification for such a request as part of its project list submittal. The following table categorizes and lists the more typical types of facilities that are considered to contribute to congestion relief. For other facilities not listed, it must be demonstrated that congestion relief can be obtained before the project can be considered part of the 70 percent Congestion Relief category. Maintenance costs of items listed in the 70 percent Congestion Relief category are eligible under the 30 percent category. Facilities that are not considered to contribute to congestion relief (Items 28-30) are eligible under the 30 percent category. Congestion Relief(At least 70%)

Maintenance and Non-Congestion Relief(No more than 30%)

New or Expanded Facilities

New roadways and bridges Roadway and bridge widening Roadway widening for bike lanes Lane removal for bike lanes Major Rehabilitation and Reconstruction

Pavement overlay (less than 1 inch) Roadway rehabilitation (grinding and overlay, or new structural pavement, or new overlay 1-inch thick or greater)

Pot hole repair, chip seal, fog seal, crack seal (except when part of roadway rehabilitation project)

Roadway realignment Roadway realignment that does not increase roadway capacity

Bridge retrofit or replacement Bridge replacement for aesthetic purposes Roadway drainage improvements for the purpose of improving capacity-impeding conditions such as significant and frequent roadway flooding

Minor drainage improvements not part of a congestion relief project

New sidewalk or sidewalk widening Traffic Operations

Median installation for safety improvement or left- turn movement

Stand alone landscaping project of an existing median

New traffic signal, passive permissive left turn (PPLT) installation, signal removal for congestion relief reasons, traffic signal upgrades, intersection lighting

Traffic signal replacement, bulb replacement, hardware, software, inductive loop repair

Traffic signal coordination Traffic signal interconnection Centrally controlled traffic signal optimization system

Traffic surveillance or detection system (video)

Attachment 2Attachment 1

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Congestion Relief(At least 70%)

Maintenance and Non-Congestion Relief(No more than 30%)

Traffic data collection system for performance monitoring purposes (in pavement detection, radar)

Smart Growth-Related Infrastructure* Traffic calming measures Pedestrian ramps Pedestrian traffic signal activation Pedestrian crossings/overcrossings Buffer area between sidewalk and street Pedestrian roadway lighting Light bulb replacement Transit Facilities New bus stops Bus stop enhancements Bus-only lanes Bus-only lanes that do not provide

congestion relief Queue jumper lanes for buses Traffic signal priority measures for buses Transit operational costs for shuttle and circulator routes

Non-Congestion Relief Erosion control (unless required as part of a

congestion relief project) Landscaping (unless required as part of a

congestion relief project) Roadway signing and delineation (unless it is

a congestion relief project) Note: Staff costs for congestion relief project development (environmental, preliminary engineering, design, right-of-way acquisition, and construction management) are eligible expenditures under the 70 percent category. Staff costs for transportation infrastructure maintenance or traffic operations efforts are eligible under the 30 percent category. Costs for general TransNet fund administration and transportation planning are eligible up to 1 percent of annual revenues. *To receive credit for providing congestion relief under the 70 percent category, smart growth-related infrastructure must be provided in one of the existing or planned (not potential) seven Regional Comprehensive Plan smart growth land use type characteristic areas: Metropolitan Center, Urban Center, Town Center, Community Center, Transit Corridor, Special Use Center, or Rural Community. Smart growth-related infrastructure built outside of one of the seven types of characteristic areas is eligible under the 30 percent category.

Attachment 1

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San Diego Association of Governments – TransNet Program

INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE

May 13, 2009 AGENDA ITEM NO.: 5

Action Requested: INFORMATION

REVIEW OF FY 08 TransNet COMPLIANCE AUDITS File Number 1110200

Introduction

The San Diego Transportation Improvement Program Ordinance and Expenditure Plans (Ordinances 87-1 and 04-01) specify certain requirements for the recipients of TransNet funds, including a requirement for an annual fiscal and compliance audit of each recipient of TransNet funds.

SANDAG currently is responsible for the annual TransNet fiscal and compliance audits through FY 2008; however, the TransNet Extension Ordinance assigned this responsibility to the Independent Taxpayer Oversight Committee (ITOC), beginning with the FY 2009 audits. These annual audits will form the basis for the ITOC Annual Fiscal Audit Report to the Board of Directors.

SANDAG Board Policy No. 031, “TransNet Ordinance and Expenditure Plan Policies,” contains several rules specifically dealing with administration of the TransNet Program. Within Board Policy No. 031, TransNet Rule No. 17 addresses the fiscal and compliance audit procedures.

This report summarizes the results of the draft audits that included an extension through April 30, 2009, for the Cities of Oceanside, San Diego, San Marcos, and Solana Beach, and the County of San Diego.

Discussion

Audit Results

The current TransNet program, which continued through FY 2008, provides funding for highway, transit, local streets and roads, and bicycle and pedestrian projects. The TransNet Extension Ordinance provides funding through FY 2048 for major corridors, transit (new rail operations, ongoing operations, and senior and disabled programs), local streets and roads, environmental mitigation, bicycle, pedestrian, and neighborhood safety projects, and the Smart Growth Incentive Program. Recipients of TransNet Extension Early Action Project funds during FY 2008 were Caltrans, North County Transit District, the City of San Diego, and SANDAG for major corridor projects and environmental mitigation program projects.

SANDAG contracts with an independent auditing firm to conduct an annual audit, in the form of Agreed-Upon Procedures (AUP), of all recipients of TransNet funds. The purpose of the AUP is to determine compliance with the TransNet Ordinances, as well as compliance with Board Policy No. 031, specifically Rule No. 17, “Fiscal and Compliance Audits” (Attachment 1). The AUP process is to be completed during the fiscal year following the end of the fiscal year being audited, so that the results will be known prior to programming and allocation decisions for the subsequent fiscal year.

The firm of Caporicci & Larson is currently engaged to perform the TransNet AUP through the FY 2009 audits. At the November 12, 2008, meeting, the ITOC agreed to continue using the firm of Caporicci & Larson through the end of its engagement period (which would include the FY 2009 audits), at which time a competitive process will be conducted for auditing services.

At its March 11, 2009, meeting, the ITOC was presented with the draft audits for the Metropolitan Transit System, North County Transit District, and the Cities of Carlsbad, Chula Vista, Coronado, Del Mar, El Cajon, Encinitas, Escondido, Imperial Beach, La Mesa, Lemon Grove, National City, Poway, Santee, and Vista. At the same meeting, the ITOC recommended to the Transportation Committee and an extension request for the Cities of Oceanside, San Diego, San Marcos, and Solana Beach, and the County of San Diego through April 30, 2009. The Transportation Committee approved the extension requests at its meeting on March 20, 2009.

Maintenance of Effort Requirement

The completed audits verified that those subject to this requirement met the Maintenance of Effort (MOE) compliance test. According to Section 8 (87-1) of the TransNet Ordinance,

Any local agency which does not meet its MOE requirement in any given year shall have its funding under Section 4(C) reduced in the following year by the amount by which the agency did not meet its required MOE level. Any local street and road revenues not allocated pursuant to the MOE requirement shall be redistributed to the remaining eligible agencies according to the formula described in Section 4(C)(2).

Attachment 2 contains a listing with the results of the MOE requirement for those jurisdictions subject to this requirement.

The City of Oceanside located additional expenditures that were not included in its FY 2008 Annual Street Report. These additional expenditures will be included in the FY 2009 Annual Street Report as a revision to the prior year and the revision will be confirmed during the FY 2009 annual compliance audit. Without these additional expenditures, the City would not have met the FY 2008 MOE requirement.

Compliance with Board Policy No. 031

Rule No. 17 of Board Policy No. 031 states that “an agency that maintains a balance of more than 30 percent of its annual apportionment (after debt service payments) must use the remaining balance to fund projects. SANDAG will defer payment until the unused balances fall below the 30 percent threshold.” The purpose of this rule is to encourage recipients to complete ongoing projects in a timely manner. FY 2008 is the third year Rule No. 17 has been in effect. Of the five completed audits presented today, one was in compliance and four had a balance of more than

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30 percent of their annual apportionment as of June 30, 2008. Inquiries were made as to the reasons for the balance and as to what the plans were for completing the projects and thereby spending down the balance. Responses are included in the individual reports. Attachment 3 contains a listing of all the jurisdictions showing whether or not they are in compliance with this rule. Payments are being deferred to those jurisdictions not in compliance until such time that they certify to SANDAG that they are in compliance.

Attachments: 1. SANDAG Board Policy No. 031, Rule No. 17 2. Maintenance of Effort Schedule 3. Compliance With 30 Percent Fund Balance Limitation 4. Draft AUP Audit Reports Key Staff Contact: Lauren Warrem, (619) 699-6931, lwa@sandag.org

Attachment 1

BOARD POLICY NO. 031 TransNet ORDINANCE AND EXPENDITURE PLAN RULES The following rules have been adopted and amended by the SANDAG Board of Directors in its role as the San Diego County Regional Transportation Commission (RTC). The purpose of these rules is to implement the provisions of the original TransNet Ordinance (87-1) and the TransNet Extension Ordinance (04-01).

Rule #17: Fiscal and Compliance Audits

Adoption Date: November 18, 2005

Amendment: Amended at September 2008 Board Meeting.

Text: I. Fiscal and Compliance Audit Procedures

The fiscal and compliance audit is an essential tool to determine that TransNet funds are being used for the intended purposes. The Commission has the fiduciary responsibility to ensure that the public funds are used in accordance with the TransNet Ordinance and Expenditure Plans (87-01 and 04-01).

Pursuant to the TransNet Extension Ordinance (04-01), the Independent Taxpayer Oversight Committee (ITOC) is responsible for the conduct of an annual fiscal audit and compliance of audit of all TransNet-funded activities beginning with the FY 2009 audit. In order to complete the audits in a timely manner, the following estimated audit schedule is set forth:

A. July/August: ITOC designee meets with the auditors to review the audits required for the year and provide all necessary documentation/information for the auditors to begin work.

B. September to November: Auditors schedule site visits. Recipient agencies must be ready and available to meet with the auditors and provide requested financial schedules and other information necessary for the completion of the audit.

C. November/December: Auditors issue preliminary draft reports to both SANDAG and the agencies. The agencies must be available to review and comment on the draft report in a timely manner. All outstanding issues should be resolved within four weeks.

D. February: Auditors issue the draft audits to ITOC.

E. March Auditors issue final reports

F. April: ITOC presents initial finding(s) of the audit and its recommendations to the Transportation Committee.

G. ITOC presents an annual report to the SANDAG Board with the results of the annual audit and its process.

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SANDAG Responsibility: SANDAG will provide all information necessary to complete the audit.

Agency Responsibility: All agencies must be ready for the site visit, provide requested information, and review and comment on the draft reports in a timely manner.

If the auditor is unable to complete the audit because an agency was not ready or did not provide the required information or reviews in a timely manner, then the agency will be deemed in noncompliance of the Ordinance. SANDAG will withhold future TransNet payments (except for required debt service payments) until the audit is completed.

II Ordinance Requirements

Section 4(C)(5) of the TransNet Extension Ordinance contains the fiscal and compliance audit requirements applicable beginning in fiscal year 2009.

Section 8 of the Ordinances contains the Maintenance of Effort requirements for the local agencies.

III. Exceptions

SANDAG acknowledges the existence of unforeseen circumstances which may prevent an audit from completion. Should situations warrant an extension, the agencies must submit a written request for an extension to be reviewed by ITOC and considered by the SANDAG Transportation Committee, including an explanation of the situation and specific timelines for completion of the audit.

IV. Audit Adjustments

Specific Project Funding/Discretionary Programs

This section applies to funding allocated for the specified projects under the Highway and Transit Programs under Ordinance 87-1, including funding allocated for bicycle facility improvements. Under the TransNet Extension (Ordinance 04-01), this section applies to the Major Corridor funding – Section 4(A) and (B) and the four discretionary programs: (1) Transit Senior program – Section 4(C)(2); (2) Local Environmental Mitigation program – Section 4(D)(2); (3) Local Smart Growth Incentive program – Section 4(D)(3); and (4) Bicycle, Pedestrian, and Neighborhood Safety Program – Section 2(E).

After the projects are completed and there are funds remaining, the agency is required to return the money back to the program. After the fiscal audit determines that the project has been completed, SANDAG will transmit a letter to the agency to return the funds to the Commission. The agency must remit the balance within 60 days of the letter. Should an agency fail to respond in a timely manner, all future TransNet payments (including funds from the other programs) to that agency will be suspended until the funds are returned.

Local Street and Road Formula Program (Section 4(C) of Ordinance 87-1 and Section 4(D)(1) of Ordinance 04-01) and Transit Funding (Section 4(B) of Ordinance 87-1 and Sections 4(C)(1), 4(C)(3), and 4(C)(4) of Ordinance 04-01).

The audit identifies the status of each project funded with TransNet funds – i.e., completed projects, projects that have negative balances, inactive projects, and ongoing projects. The agencies are responsible to work with the auditors to make proper adjustments as follows:

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Completed projects: once a project is identified as completed and there are TransNet funds remaining with that project, the agency is required to transfer the balance to another TransNet-eligible project (any project included in the approved Program of Projects). The audit should make note to which project the funds will be transferred. Completed projects should no longer show in the following year’s audit.

Projects with negative balances: if a project ending balance is negative, then a footnote should be provided detailing the subsequent year’s intended action.

Inactive projects: if a project has had no activity over a period of two audits, the agency must either close out the project or note when the project will be completed. These projects should no longer show in the following year’s audit. Any remaining TransNet funds must be transferred to another TransNet-eligible project.

Transfer of funds: any transfer of TransNet funds from one project to another requires the local agency to provide documentation that its governing body consents to the transfer proposed prior to or concurrent with the final issuance of the fiscal year audit. Such documentation shall consist of a signed staff report or resolution. Transfers that require an amendment to the RTIP must follow the amendment process outlined in Rule #. 7.

V. Local Agency Balance Limitations

Based on the audit, an agency that maintains a balance of more than 30 percent of its annual apportionment (after debt service payments) must use the remaining balance to fund projects. SANDAG will defer payment until the unused balances fall below the 30 percent threshold.

VI. Annual Fiscal Audit Report to the Board

Pursuant to the TransNet Extension Ordinance, beginning with the FY 2009 audits, ITOC is responsible for the annual fiscal and compliance audit of all TransNet-funded activities

Attachment 2

Compliance With Maintenance of Effort (MOE) Requirement

Met the FY 2008

MOE Requirement?

MOE Base Excess Amount

Met the FY 2007 MOE

Requirement?

Met the FY 2006 MOE

Requirement?

Streets and Roads

Carlsbad Yes 893,159 7,494,961 Yes Yes

Chula Vista Yes 1,456,329 5,770,376 Yes Yes

Coronado Yes 189,718 735,670 Yes Yes

Del Mar Yes 143,870 915,970 Yes Yes

El Cajon Yes 1,146,252 953,627 Yes Yes

Encinitas* N/A N/A N/A N/A N/A

Escondido Yes 1,265,568 6,217,825 Yes Yes

Imperial Beach** N/A N/A N/A N/A N/A

La Mesa Yes 1,065,696 2,220,873 Yes Yes

Lemon Grove** N/A N/A N/A N/A N/A

National City Yes 1,358,656 756,913 Yes Yes

Oceanside Yes 1,190,391 85,554 Yes Yes

Poway** N/A N/A N/A N/A N/A

San Diego City See Below See Below See Below See Below See Below

San Marcos Yes 1,038,145 4,096,664 Yes Yes

Santee Yes 351,431 354,252 Yes Yes

Solana Beach* N/A N/A N/A N/A N/A

Vista Yes 736,635 1,574,574 Yes Yes

San Diego County** N/A N/A N/A N/A N/A * Incorporated in 1986 (after MOE base requirement)

**TransNet I had a $0 MOE base

Met the FY 2008

MOE Requirement?

MOE Base Excess Amount

Met the FY 2007 MOE

Requirement?

Met the FY 2006 MOE

Requirement?

City of San Diego

Streets and Roads Yes 15,385,486 9,117,291 Yes Yes

Dial-A-Ride Program Yes 150,918 0 Yes Yes

Transit Pass Subsidies Yes 278,077 616,145 Yes Yes

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Attachment 3

Compliance With 30 Percent Fund Balance Limitation

Exceed the

FY 2008 30% Rule?

30% Base Excess Amount

Exceed the FY 2007

30% Rule?

Exceed the FY 2006

30% Rule?

Streets and Roads

Carlsbad Yes 809,109 2,848,609 Yes Yes

Chula Vista Yes 1,558,285 14,777,753 Yes Yes

Coronado Yes 193,678 220,206 No Yes

Del Mar No 61,738 N/A No Yes

El Cajon Yes 615,052 1,357,153 Yes Yes

Encinitas Yes 506,711 466,792 Yes Yes

Escondido Yes 1,036,360 7,111,416 Yes Yes

Imperial Beach Yes 215,347 620,940 Yes Yes

La Mesa No 380,225 N/A Yes Yes

Lemon Grove Yes 212,225 1,191,499 Yes Yes

National City Yes 103,648 3,555,774 Yes Yes

Oceanside* Yes 1,354,770 10,699,954 Yes Yes

Poway No 383,321 N/A Yes Yes

San Diego City* Yes 9,014,806 14,873,365 Yes Yes

San Marcos* Yes 588,824 513,158 Yes No

Santee No 316,737 N/A No Yes

Solana Beach* Yes 133,559 1,074,085 Yes Yes

Vista No 452,254 N/A Yes Yes

San Diego County* No 3,665,373 N/A Yes Yes

Transit

Metropolitan Transit System Yes 7,344,154 4,033,080 Yes Yes

North County Transit District No 5,257,833 N/A No Yes * Draft reports presented to ITOC on 5/13/09

Yes = Not in compliance

No = In Compliance

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City of Solana Beach

Solana Beach, California

TransNet Fund

Independent Accountants’ Report On Applying Agreed-Upon Procedures For the year ended June 30, 2008

Attachment 4

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City of Solana Beach TransNet Fund Table of Contents

Page

Independent Accountants’ Report ...................................................................................................................1 Exhibits:

A. Schedule of Status of Funds by Project ................................................................................................. 6

B. Schedule of Assets, Liabilities and Fund Balance ................................................................................ 7 C. Schedule of Revenues, Expenditures and Changes in Fund Balance ...............................................8 D. Schedule of Findings and Recommendations ......................................................................................9

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INDEPENDENT ACCOUNTANTS’ REPORT ON APPLYING AGREED-UPON PROCEDURES

To the Board of Directors of the San Diego Association of Governments San Diego, California At the request of the San Diego Association of Governments (SANDAG), we have performed certain agreed-upon procedures applied to the City of Solana Beach, California (City) enumerated below in this report. These procedures, which were agreed to by SANDAG, were performed solely to assist SANDAG and the City in evaluating the compliance with the TransNet Ordinances for the fiscal year ended June 30, 2008. This engagement was to apply agreed-upon procedures, which were performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of SANDAG. Consequently, we make no representations regarding the sufficiency of the procedures described herein either for the purpose for which the report has been requested or any other purpose. The sufficiency of the procedures is solely the responsibility of the specific users of the report. Procedures Performed:

A. Reviewed the 1987 Proposition A: San Diego Transportation Improvement Plan (TransNet Ordinance and Expenditure Plan), the 2004 Proposition A (TransNet Extension Ordinance and Expenditure Plan), and SANDAG Board Policy No. 031: TransNet Ordinance and Expenditure Plan Rules compliance requirements (SANDAG Board Policy No. 031).

Findings: No findings were noted.

B. Obtained from SANDAG the approved Regional Transportation Improvement Program

(RTIP) for the fiscal year. Findings: No findings were noted.

C. Inquired of the City’s management and determined that the City maintains a separate fund for TransNet revenues.

Findings: No findings were noted.

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To the Board of Directors of the San Diego Association of Governments San Diego, California

2

D. For the TransNet Fund, obtained from the City a detailed general ledger and a schedule of

assets, liabilities, and fund balance for the fiscal year. Agreed the schedule of assets, liabilities, and fund balance to the general ledger.

a. Identified the amount of cash and investments at the end of the fiscal year. b. Identified amounts due from other funds at the end of the fiscal year. c. Identified and provided an explanation of any other receivable amounts owed to the

City. d. Identified and provided an explanation for deferred revenue at the end of the fiscal

year. e. Identified and provided an explanation for any amounts owed by the City. f. Identified the amount of fund balance at the end of the fiscal year. g. Identified and provided an explanation of any restatements to the prior year financial

statements. Findings: No findings were noted.

E. For the TransNet Fund, obtained from the City an operating statement for the fiscal year. Agreed the operating statement’s revenues and expenditures to the general ledger. Findings: No findings were noted.

F. Obtained from the City the Schedule of Status Funds by Project (Schedule). The Schedule included a beginning balance, funds received, expenditures, interest income, adjustments, and an ending balance by MPO ID.

a. Reviewed the Schedule and determined that projects were properly classified and reported by the TransNet program (i.e., original TransNet vs. TransNet Extension; streets and roads vs. highway; etc.). Reviewed the beginning balance from the prior year or provided a footnote of any restatements.

Findings: No findings were noted.

b. Identified the total TransNet revenues for the fiscal year. i. Reviewed the total funds received per the Schedule and agreed to the TransNet

operating statement. Provided a reconciliation on the Schedule, if necessary. ii. Obtained from SANDAG a listing of TransNet payments from SANDAG to the

City by TransNet program and compared to the TransNet revenues recorded by the City.

Findings: No findings were noted.

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To the Board of Directors of the San Diego Association of Governments San Diego, California

3

c. Identified the interest income for the fiscal year.

i. Reviewed the interest income amount per the Schedule and agreed to the TransNet operating statement. Provided a reconciliation to the Schedule, if necessary.

ii. Reviewed the interest distribution methodology.

Findings: No findings were noted.

d. Identified the total TransNet expenditures for the fiscal year. i. Reviewed the total project expenditures per the Schedule and agreed to the

TransNet operating statement. Provided a reconciliation on the Schedule, if necessary.

ii. Selected individual expenditures of at least 25% of the total dollar amount of expenditures from the general ledger and obtained supporting documentation (i.e., invoice and copy of check or EFT wire).

iii. For the expenditures selected, identified the MPO ID that the expenditures were charged against and determined the MPO ID was included in the RTIP and the expenditure was an eligible cost per the TransNet and TransNet Extension Ordinance and Expenditure Plan requirements.

Findings: No findings were noted.

e. Reviewed that any amounts reflected in the “adjustments” column are explained in the

form of a footnote and that the adjustments are consistent with SANDAG Board Policy No. 031, Rule #17, Section IV.

Findings: No findings were noted.

f. Obtained a list of completed projects reported by TransNet program from the City.

Reviewed that the remaining TransNet funds for completed projects were transferred to another TransNet-eligible project in the RTIP and completed projects from the previous year were no longer shown in the current year Schedule.

Findings: No findings were noted.

g. If a project ending balance is negative, an explanation in the form of a footnote to the

Schedule was provided of the subsequent year’s intended action. Findings: No findings were noted.

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To the Board of Directors of the San Diego Association of Governments San Diego, California

4

h. Reviewed inactive projects which have had no activity over the past two years, other

than interest earnings, were closed out or provided a footnote of the status of the project and when the project will be completed.

Findings: No findings were noted.

i. Obtained a signed staff report or resolution from the City’s governing body consenting

to the transfer of TransNet funds from one project to another. Reviewed transfers that require an amendment to the RTIP follow the amendment process outlined in Rule #7 of SANDAG Board Policy No. 031.

Findings: No findings were noted.

G. Reviewed that ending fund balance on the Schedule is not more than 30% of the City’s current

year allocation (net of debt service payments). Findings: In accordance with SANDAG Board Policy No. 031, Rule #17, Section V, an

agency that maintains a balance of more than 30% of their annual apportionment (after debt service) must use the remaining balance to fund projects.

During the fiscal year 2008, the City exceeded the 30% rule as detailed below:

Annual apportionment 445,197$ 30%

Street and road project status balance threshold 133,559

Street and road project status balance 1,207,644

Excess street and road project status balance over threshold. 1,074,085$

H. If applicable, obtained a schedule showing the beginning balance of debt, additions, repayments, and the ending balance. Agreed to long-term debt information for the City as provided by SANDAG. Findings: No debt service commitment existed; therefore, Procedure H did not apply.

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To the Board of Directors of the San Diego Association of Governments San Diego, California

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I. Reviewed the maintenance of effort (MOE) requirement for cities and county:

a. Obtained the current MOE requirements for the City from SANDAG. b. Obtained Schedule 3 of the Annual Street Report from the City. Report the amount of

discretionary funds expended for local streets and roads, less the MOE base amount from the MOE audits calculated as of June 30, 1985, which totaled the excess of the discretionary expenditures over the MOE base.

Findings: The MOE requirement for the TransNet Ordinance was implemented for the

member agencies incorporated in or before 1985. The City incorporated in 1986; therefore, Procedure I did not apply.

J. Reviewed prior year audit findings and recommendations and determined if they were adequately addressed. Findings: In 2007, the City exceeded the 30% rule and in 2008 the same finding existed.

Therefore, the finding on the 30% rule and the specific recommendation were not adequately addressed by the City.

K. Proposed current year findings as a result of performing the above-agreed upon procedures. Included the City’s response to address the finding.

Findings: See Exhibit D.

We were not engaged to, and did not perform an examination, the objective of which would be the expression of an opinion on the City’s compliance assertion on its utilization of TransNet funds administered by SANDAG. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the use of the specified users listed above and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes.

San Diego, California April 8, 2009

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City of Solana BeachTransNet FundSchedule of Status of Funds by ProjectFor the year ended June 30, 2008

Project Project

MPO CIP Status Funds Interest Project City Status

ID Number Project Name July 1, 2007 Received Income Expenditures Adjustments June 30, 2008

Streets and Roads:

SB 01 Lomas Santa Fe / I-5 Interchange 1,461,452$ 141,000$ 29,659$ (1,202,087)$ (169,424)$ 260,600$ (b)

ISTEA 991,980 - 20,132 - (1,012,112) - (a)

9380 Eden Gardens Master Plan #9380 - - - - 46,400 46,400 (b)

9457 Cliff St/Cedros Drn Improv #9457 - - - (85,136) 85,136 - (b)

SB 05 9351 Highway 101 rehabilitation #9351 (1,064) 304,000 - (278,571) - 24,365 (c)

SB 06 9534 CRT Rail Trail at Cliff Street #9534 - - - (519) 120,000 119,481 (a/b)

SB 07 9386 Highway 101 Streetscaping #9386 - - - (173,202) 930,000 756,798 (a)

Total streets and roads 2,452,368$ 445,000$ 49,791$ (1,739,515)$ -$ 1,207,644$

Comprised of:

Fund balance 1,207,644$

Notes:(a)

(b)

( c ) Highway 101 rehabilitation was completed in FY 08. City will transfer the remaining TransNet funds to another TransNet- eligible project in FY 09.

Exhibit A

ISTEA is complete and remaining funds have been reprogrammed to a new project in the RTIP. The City has ISTEA as unallocated reserves and has taken budget actions to reflect this. This project does not have an MPO ID. There was an RTIP amendment to this on March 26, 2008.

The City Council will be presenting a resolution on April 8, 2009 approving the transfer of $169,424 from Lomas Santa Fe/ I-5 Interchange project to the following projects: CRT Rail Trail at Cliff Street (SB 06), Eden Gardens Master Plan, and Cliff Street/Cedros Drainage.

616

City of Solana Beach Exhibit BTransNet FundSchedule of Assets, Liabilities and Fund BalanceJune 30, 2008

ASSETS

Cash and investments 1,274,294$ Interest receivable 591

Total assets 1,274,885$

LIABILITIES AND FUND BALANCE

Liabilities:Accounts payable 66,645$ Due to General Fund 596

Total liabilities 67,241

Fund Balance: Unreserved, undesignated 1,207,644

Total liabilities and fund balance 1,274,885$

-$ 1,207,644$ -$ -$

717

City of Solana Beach Exhibit CTransNet FundSchedule of Revenues, Expenditures and Changes in Fund BalanceFor the year ended June 30, 2008

REVENUES:

TransNet 445,000$ Interest 49,791

Total revenues 494,791

EXPENDITURES:

Construction and development 1,739,515

Total expenditures 1,739,515

REVENUES OVER (UNDER) EXPENDITURES (1,244,724)

FUND BALANCE:

Beginning of year 2,452,368

End of year 1,207,644$

818

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City of Solana Beach Exhibit D TransNet Fund Schedule of Findings and Recommendations For the year ended June 30, 2008 Finding 2008-1

In accordance with SANDAG Board Policy No. 031, Rule #17, Section V, an agency that maintains a balance of more than 30% of their annual apportionment (after debt service) must use the remaining balance to fund projects.

During fiscal year 2008, the City exceeded the 30% rule as detailed below:

Annual apportionment 445,197$ 30%

Street and road project status balance threshold 133,559

Street and road project status balance 1,207,644

Excess street and road project status balance over threshold 1,074,085$

In addition, in 2007 the City also exceeded the 30% rule. Therefore, the finding on the 30% rule and the specific recommendation were not adequately addressed by the City. Effect SANDAG will defer further future allocations until the unused balance falls below the 30% threshold. Recommendation We recommend that the City use the remaining balance before requesting future funding from SANDAG. Management’s Response  The City has reduced the FY 2007 excess fund balance (over 30% of apportionment) from $2,313,472 to $1,207,644 in FY 2008. The City will expend approximately $150,000 of this balance on the CRT at Cliff Street Project (SB 06) and the Eden Gardens Master Plan Project. The City will expend approximately $1,000,000 on the Highway 101 Project in the next 24 months. The City has deferred allocation of funding until needed in order to reduce the excess fund balance.

19

City of San Marcos

San Marcos, California

TransNet Fund

Independent Accountants’ Report On Applying Agreed-Upon Procedures For the year ended June 30, 2008

20

City of San Marcos TransNet Fund Table of Contents

Page

Independent Accountants’ Report ...................................................................................................................1 Exhibits:

A. Schedule of Status of Funds by Project ................................................................................................. 6

B. Schedule of Assets, Liabilities and Fund Balance ................................................................................ 7 C. Schedule of Revenues, Expenditures and Changes in Fund Balance ...............................................8 D. Schedule of Findings and Recommendations ......................................................................................9

21

INDEPENDENT ACCOUNTANTS’ REPORT ON APPLYING AGREED-UPON PROCEDURES

To the Board of Directors of the San Diego Association of Governments San Diego, California At the request of the San Diego Association of Governments (SANDAG), we have performed certain agreed-upon procedures applied to the City of San Marcos, California (City) enumerated below in this report. These procedures, which were agreed to by SANDAG, were performed solely to assist SANDAG and the City in evaluating the compliance with the TransNet Ordinances for the fiscal year ended June 30, 2008. This engagement was to apply agreed-upon procedures, which were performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of SANDAG. Consequently, we make no representations regarding the sufficiency of the procedures described herein either for the purpose for which the report has been requested or any other purpose. The sufficiency of the procedures is solely the responsibility of the specific users of the report. Procedures Performed:

A. Reviewed the 1987 Proposition A: San Diego Transportation Improvement Plan (TransNet Ordinance and Expenditure Plan), the 2004 Proposition A (TransNet Extension Ordinance and Expenditure Plan), and SANDAG Board Policy No. 031: TransNet Ordinance and Expenditure Plan Rules compliance requirements (SANDAG Board Policy No. 031).

Findings: No findings were noted.

B. Obtained from SANDAG the approved Regional Transportation Improvement Program

(RTIP) for the fiscal year. Findings: No findings were noted.

C. Inquired of the City’s management and determined that the City maintains a separate fund for TransNet revenues.

Findings: No findings were noted.

22

To the Board of Directors of the San Diego Association of Governments San Diego, California

2

D. For the TransNet Fund, obtained from the City a detailed general ledger and a schedule of

assets, liabilities, and fund balance for the fiscal year. Agreed the schedule of assets, liabilities, and fund balance to the general ledger.

a. Identified the amount of cash and investments at the end of the fiscal year. b. Identified amounts due from other funds at the end of the fiscal year. c. Identified and provided an explanation of any other receivable amounts owed to the

City. d. Identified and provided an explanation for deferred revenue at the end of the fiscal

year. e. Identified and provided an explanation for any amounts owed by the City. f. Identified the amount of fund balance at the end of the fiscal year. g. Identified and provided an explanation of any restatements to the prior year financial

statements. Findings: No findings were noted.

E. For the TransNet Fund, obtained from the City an operating statement for the fiscal year. Agreed the operating statement’s revenues and expenditures to the general ledger. Findings: No findings were noted.

F. Obtained from the City the Schedule of Status of Funds by Project (Schedule). The Schedule included a beginning balance, funds received, expenditures, interest income, adjustments, and an ending balance by MPO ID.

a. Reviewed the Schedule and determined that projects were properly classified and reported by the TransNet program (i.e., original TransNet vs. TransNet Extension; streets and roads vs. highway; etc.). Reviewed the beginning balance from the prior year or provided a footnote of any restatements.

Findings: No findings were noted.

b. Identified the total TransNet revenues for the fiscal year. i. Reviewed the total funds received per the Schedule and agreed to the TransNet

operating statement. Provided a reconciliation on the Schedule, if necessary. ii. Obtained from SANDAG a listing of TransNet payments from SANDAG to the

City by TransNet program and compared to the TransNet revenues recorded by the City.

Findings: No findings were noted.

23

To the Board of Directors of the San Diego Association of Governments San Diego, California

3

c. Identified the interest income for the fiscal year.

i. Reviewed the interest income amount per the Schedule and agreed to the TransNet operating statement. Provided a reconciliation to the Schedule, if necessary.

ii. Reviewed the interest distribution methodology.

Findings: No findings were noted.

d. Identified the total TransNet expenditures for the fiscal year. i. Reviewed the total project expenditures per the Schedule and agreed to the

TransNet operating statement. Provided a reconciliation on the Schedule, if necessary.

ii. Selected individual expenditures of at least 25% of the total dollar amount of expenditures from the general ledger and obtained supporting documentation (i.e., invoice and copy of check or EFT wire).

iii. For the expenditures selected, identified the MPO ID that the expenditures were charged against and determined the MPO ID was included in the RTIP and the expenditure was an eligible cost per the TransNet and TransNet Extension Ordinance and Expenditure Plan requirements.

Findings: No findings were noted.

e. Reviewed that any amounts reflected in the “adjustments” column are explained in the

form of a footnote and that the adjustments are consistent with SANDAG Board Policy No. 031, Rule #17, Section IV.

Findings: No findings were noted.

f. Obtained a list of completed projects reported by TransNet program from the City.

Reviewed that the remaining TransNet funds for completed projects were transferred to another TransNet-eligible project in the RTIP and completed projects from the previous year were no longer shown in the current year Schedule.

Findings: No findings were noted.

g. If a project ending balance is negative, an explanation in the form of a footnote to the

Schedule was provided of the subsequent year’s intended action. Findings: No findings were noted.

24

To the Board of Directors of the San Diego Association of Governments San Diego, California

4

h. Reviewed inactive projects which have had no activity over the past two years, other

than interest earnings, were closed out or provided a footnote of the status of the project and when the project will be completed.

Findings: No findings were noted.

i. Obtained a signed staff report or resolution from the City’s governing body consenting

to the transfer of TransNet funds from one project to another. Reviewed transfers that require an amendment to the RTIP follow the amendment process outlined in Rule #7 of SANDAG Board Policy No. 031.

Findings: No findings were noted.

G. Reviewed that ending fund balance on the Schedule is not more than 30% of the City’s current

year allocation (net of debt service payments). Findings: In accordance with SANDAG Board Policy No. 031, Rule #17, Section V, an

agency that maintains a balance of more than 30% of their annual apportionment (after debt service) must use the remaining balance to fund projects.

During the fiscal year 2008, the City exceeded the 30% rule as detailed below:

Annual apportionment 1,962,746$ 30%

Street and road project status balance threshold 588,824

Street and road project status balance 1,101,982

Excess street and road project status balanceover threshold 513,158$

H. If applicable, obtained a schedule showing the beginning balance of debt, additions, repayments, and the ending balance. Agreed to long-term debt information for the City as provided by SANDAG. Findings: No debt service commitment existed; therefore, Procedure H did not apply.

25

To the Board of Directors of the San Diego Association of Governments San Diego, California

5

I. Reviewed the maintenance of effort (MOE) requirement for cities and county:

a. Obtained the current MOE requirements for the City from SANDAG. b. Obtained Schedule 3 of the Annual Street Report from the City. Report the amount of

discretionary funds expended for local streets and roads, less the MOE base amount from the MOE audits calculated as of June 30, 1985, which totaled the excess of the discretionary expenditures over the MOE base.

Current year local discretionary expenditures on streets and roads 5,134,809$

Less: Maintenance of Effort Base 1,038,145

Excess of current year local discretionary expenditures over MOE Base 4,096,664$

Findings: No findings were noted.

J. Reviewed prior year audit findings and recommendations and determined if they were adequately addressed. Findings: In 2007, the City exceeded the 30% rule and in 2008 the same finding existed.

Therefore, the finding on the 30% rule and the specific recommendation were not adequately addressed by the City.

K. Proposed current year findings as a result of performing the above-agreed upon procedures. Included the City’s response to address the finding.

Findings: See Exhibit D.

We were not engaged to, and did not perform an examination, the objective of which would be the expression of an opinion on the City’s compliance assertion on its utilization of TransNet funds administered by SANDAG. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the use of the specified users listed above and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes.

San Diego, California April 13, 2009

26

City of San Marcos TransNet FundSchedule of Status of Funds by ProjectFor the year ended June 30, 2008

Project Project

MPO Status Funds Interest Project City Status

ID Project Name July 1, 2007 Received Income Expenditures Adjustments June 30, 2008

Highway

SM22 S. Santa Fe Road/RSF to Bosstick Blvd. 395,275$ -$ 11,710$ (406,985)$ -$ -$

Total highway 395,275 - 11,710 (406,985) - -

Streets and Roads

Melrose to Camino del Arroyo 178,257 9,145 187,402 (a)

SM09 S. Santa Fe Rd/RSF to Bosstick Blvd 19,950 - 1,024 (20,974) - -

SM23 Barham Drive Widening 1,000,282 - 51,317 (137,019) - 914,580

Total streets & roads 1,198,489 - 61,486 (157,993) - 1,101,982

Total highway and streets & roads 1,593,764 - 73,196 (564,978) - 1,101,982

Bikes and Pedestrian

SM21 Bike Lanes: Barnham Drive - Highway 78

Eastbound Off ramp to Woodland Parkway 10,682 - 317 (10,999) - (b)

V01 Bike Path/Rail Trail phase II 128,990 - 3,423 - - 132,413

Total bikes and pedestrian 139,672 - 3,740 - (10,999) 132,413

Total 1,733,436$ -$ 76,936$ (564,978)$ (10,999)$ 1,234,395$

Comprised of:

Deferred revenue 132,413$

Fund balance 1,101,982

1,234,395$

Notes:

(a) Remaining balance will be transferred to SM30 (SM Blvd Street Improvement Project) through a March 24, 2009 City Resolution.

(b) The balance was transferred back to the Traffic Safety Fund in fiscal year 2008.

Exhibit A

627

City of San Marcos Exhibit BTransNet FundSchedule of Assets, Liabilities and Fund BalanceJune 30, 2008

ASSETS

Cash 1,296,891$ Interest receivable 7,057

Total assets 1,303,948$

LIABILITIES ANDFUND BALANCE

Liabilities:Accounts payable 68,010$ Due to SANDAG 1,543 Deferred revenue 132,413

Total liabilities 201,966

Fund Balance:Unreserved 1,101,982

Total fund balance 1,101,982

Total liabilities and fund balance 1,303,948$

1,101,982

728

City of San Marcos Exhibit CTransNet FundSchedule of Revenues, Expenditures and Changes in Fund BalanceFor the year ended June 30, 2008

REVENUES:

Interest 73,513$

Total revenues 73,513

EXPENDITURES:

Construction and maintenance 564,978

Total expenditures 564,978

REVENUES OVER (UNDER) EXPENDITURES (491,465)

OTHER FINANCING USES:

Returned of funds to Traffic Safety fund (10,999)

Total other financing uses (10,999)

Net change in fund balance (502,464)

FUND BALANCE:

Beginning of year 1,604,446

End of year 1,101,982$

829

9

City of San Marcos Exhibit D TransNet Fund Schedule of Findings and Recommendations For the year ended June 30, 2008 Finding 2008-1

In accordance with SANDAG Board Policy No. 031, Rule #17, Section V, an agency that maintains a balance of more than 30% of their annual apportionment (after debt service) must use the remaining balance to fund projects.

During fiscal year 2008, the City exceeded the 30% rule as detailed below:

Annual apportionment 1,962,746$

30%

Street and road project status balance threshold 588,824

Street and road project status balance 1,101,982

Excess street and road project status balance over threshold 513,158$

In addition, in 2007 the City also exceeded the 30% rule. Therefore, the finding on the 30% rule and the specific recommendation were not adequately addressed by the City. Effect SANDAG will defer further future allocations until the unused balance falls below the 30% threshold. Recommendation We recommend that the City use the remaining balance before requesting future funding from SANDAG. Management’s Response Of the $1,101,982 fund balance at June 30, 2008, $914,579 is for the Barham Drive Widening Project (SM23). The TransNet funds were drawn in fiscal year 2006/07 based on the original estimated construction schedule which was subsequently delayed due to a number of outstanding issues in both the environmental and construction areas. Construction began in late fiscal year 2007/08, and as of February 2009, all of the TransNet funds for this project have been expended.

30

City of SanDiego

San Diego, California

TransNet and TransNet Extension Funds

Independent Accountants’ Report On Applying Agreed-Upon Procedures For the year ended June 30, 2008

31

City of San Diego TransNet and TransNet Extension Funds Table of Contents

Page

Independent Accountants’ Report ...................................................................................................................1 Exhibits:

A. Schedule of Status of Funds by Project ................................................................................................. 6

B. Schedule of Long-Term Debt ................................................................................................................ 14 C. Schedule of Assets, Liabilities and Fund Balances ............................................................................ 15 D. Schedule of Revenues, Expenditures and Changes in Fund Balances ........................................... 16 E. Schedule of Findings and Recommendations .................................................................................... 17

32

INDEPENDENT ACCOUNTANTS’ REPORT ON APPLYING AGREED-UPON PROCEDURES

To the Board of Directors of the San Diego Association of Governments San Diego, California At the request of the San Diego Association of Governments (SANDAG), we have performed certain agreed-upon procedures applied to the City of San Diego, California (City) enumerated below in this report. These procedures, which were agreed to by SANDAG, were performed solely to assist SANDAG and the City in evaluating the compliance with the TransNet Ordinances and the TrasNet Extension Ordinances for the fiscal year ended June 30, 2008. This engagement was to apply agreed-upon procedures, which were performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of SANDAG. Consequently, we make no representations regarding the sufficiency of the procedures described herein either for the purpose for which the report has been requested or any other purpose. The sufficiency of the procedures is solely the responsibility of the specific users of the report. Procedures Performed:

A. Reviewed the 1987 Proposition A: San Diego Transportation Improvement Plan (TransNet Ordinance and Expenditure Plan), the 2004 Proposition A (TransNet Extension Ordinance and Expenditure Plan), and SANDAG Board Policy No. 031: TransNet Ordinance and Expenditure Plan Rules compliance requirements (SANDAG Board Policy No. 031).

Findings: No findings were noted.

B. Obtained from SANDAG the approved Regional Transportation Improvement Program (RTIP)

for the fiscal year. Findings: No findings were noted.

C. Inquired of the City’s management and determined that the City maintains a separate fund for TransNet revenues.

Findings: No findings were noted.

33

To the Board of Directors of the San Diego Association of Governments San Diego, California

2

D. For the TransNet Fund, obtained from the City a detailed general ledger and a schedule of assets,

liabilities, and fund balance for the fiscal year. Agreed the schedule of assets, liabilities, and fund balance to the general ledger.

a. Identified the amount of cash and investments at the end of the fiscal year. b. Identified amounts due from other funds at the end of the fiscal year. c. Identified and provided an explanation of any other receivable amounts owed to the City. d. Identified and provided an explanation for deferred revenue at the end of the fiscal year. e. Identified and provided an explanation for any amounts owed by the City. f. Identified the amount of fund balance at the end of the fiscal year. g. Identified and provided an explanation of any restatements to the prior year financial

statements. Findings: No findings were noted.

E. For the TransNet Fund, obtained from the City an operating statement for the fiscal year. Agreed the operating statement’s revenues and expenditures to the general ledger. Findings: No findings were noted.

F. Obtained from the City the Schedule of Status of Funds by Project (Schedule). The Schedule included a beginning balance, funds received, expenditures, interest income, adjustments, and an ending balance by MPO ID.

a. Reviewed the Schedule and determined that projects were properly classified and reported by the TransNet program (i.e., original TransNet vs. TransNet Extension; streets and roads vs. highway; etc.). Reviewed the beginning balance from the prior year or provided a footnote of any restatements.

Findings: No findings were noted.

b. Identified the total TransNet revenues for the fiscal year. i. Reviewed the total funds received per the Schedule and agreed to the TransNet

operating statement. Provided a reconciliation on the Schedule, if necessary. ii. Obtained from SANDAG a listing of TransNet payments from SANDAG to the

City by TransNet program and compared to the TransNet revenues recorded by the City.

Findings: No findings were noted.

c. Identified the interest income for the fiscal year.

i. Reviewed the interest income amount per the Schedule and agreed to the TransNet operating statement. Provided a reconciliation to the Schedule, if necessary.

ii. Reviewed the interest distribution methodology.

Findings: No findings were noted.

34

To the Board of Directors of the San Diego Association of Governments San Diego, California

3

d. Identified the total TransNet expenditures for the fiscal year.

i. Reviewed the total project expenditures per the Schedule and agreed to the TransNet operating statement. Provided a reconciliation on the Schedule, if necessary.

ii. Selected individual expenditures of at least 25% of the total dollar amount of expenditures from the general ledger and obtained supporting documentation (i.e., invoice and copy of check or EFT wire).

iii. For the expenditures selected, identified the MPO ID that the expenditures were charged against and determined the MPO ID was included in the RTIP and the expenditure was an eligible cost per the TransNet and TransNet Extension Ordinance and Expenditure Plan requirements.

Findings: No findings were noted.

e. Reviewed that any amounts reflected in the “adjustments” column are explained in the

form of a footnote and that the adjustments are consistent with SANDAG Board Policy No. 031, Rule #17, Section IV.

Findings: No findings were noted.

f. Obtained a list of completed projects reported by TransNet program from the City.

Reviewed that the remaining TransNet funds for completed projects were transferred to another TransNet-eligible project in the RTIP and completed projects from the previous year were no longer shown in the current year Schedule.

Findings: No findings were noted.

g. If a project ending balance is negative, an explanation in the form of a footnote to the

Schedule was provided of the subsequent year’s intended action. Findings: No findings were noted.

h. Reviewed inactive projects which have had no activity over the past two years, other than

interest earnings, were closed out or provided a footnote of the status of the project and when the project will be completed.

Findings: No findings were noted.

i. Obtained a signed staff report or resolution from the City’s governing body consenting to

the transfer of TransNet funds from one project to another. Reviewed transfers that require an amendment to the RTIP follow the amendment process outlined in Rule #7 of SANDAG Board Policy No. 031.

Findings: No findings were noted.

35

To the Board of Directors of the San Diego Association of Governments San Diego, California

4

G. Reviewed that ending fund balance on the Schedule is not more than 30% of the City’s current

year allocation (net of debt service payments). Findings: In accordance with SANDAG Board Policy No. 031, Rule #17, Section V, an agency

that maintains a balance of more than 30% of their annual apportionment (after debt service) must use the remaining balance to fund projects.

During the fiscal year 2008, the City exceeded the 30% rule as detailed below:

Annual apportionment 30,049,354$ 30%

Street and road project status balance threshold 9,014,806

Street and road project status balance 23,888,171

Excess street and road project status balanceover threshold 14,873,365$

H. If applicable, obtained a schedule showing the beginning balance of debt, additions, repayments, and the ending balance. Agreed to long-term debt information for the City as provided by SANDAG. Findings: No findings were noted. See Exhibit B for the Schedule.

I. Reviewed the maintenance of effort (MOE) requirement for cities and county:

a. Obtained the current MOE requirements for the City from SANDAG. b. Obtained Schedule 3 of the Annual Street Report from the City. Report the amount of

discretionary funds expended for local streets and roads, less the MOE base amount from the MOE audits calculated as of June 30, 1985, which totaled the excess of the discretionary expenditures over the MOE base.

Local Streets and Dial-A-Ride Transit Pass

Roads Program Subsidies Total

Current year local discretionaryexpenditures on streets and roads 24,502,777$ 150,918$ 894,222$ 25,547,917$

Less: Maintenance of Effort Base 15,385,486 150,918 278,077 15,814,481$ Excess of current year local discretionary

expenditures over MOE Base 9,117,291$ -$ 616,145$ 9,733,436$

Findings: No findings were noted.

36

To the Board of Directors of the San Diego Association of Governments San Diego, California

5

J. Reviewed prior year audit findings and recommendations and determined if they were

adequately addressed. Findings: In 2007, the City exceeded the 30% rule and in 2008 the same finding existed.

Therefore, the finding on the 30% rule and the specific recommendation were not adequately addressed by the City.

K. Proposed current year findings as a result of performing the above-agreed upon procedures. Included the City’s response to address the finding.

Findings: See Exhibit E.

We were not engaged to, and did not perform an examination, the objective of which would be the expression of an opinion on the City’s compliance assertion on its utilization of TransNet and TransNet Extension funds administered by SANDAG. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the use of the specified users listed above and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes.

San Diego, California March 31, 2009

37

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18

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Y 20

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June

5, 2

009

to th

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45

City of San Diego Exhibit BTransNet and TransNet Extension FundsSchedule of Long-Term DebtJune 30, 2008

Bonds - SANDAG

Principal balance at June 30, 2007 810,854$

Principal Payments (810,854)

Balance at June 30, 2008 -$

Commercial Paper - SANDAG

Principal balance at June 30, 2007 851,661$

Principal Payments (851,661)

Balance at June 30, 2008 -$

Proceeds resulting from bond issuances were subsequently distributed to various cities and agencies based onagreements with SANDAG. Annual debt service payments on city/agency balances related to these bond issuances forboth principal and interest are recovered by SANDAG through reductions in TransNet allocations that would otherwisebe available for payment to the City. Further information specific to total general long term debt associated withTransNet related bond issuances can be found in the SANDAG basic financial statements.

The City recognizes the repayment for the total of both principal and interest within the TransNet Fund as an increase inTransNet revenues and an offsetting expenditure of equal amount for Debt Service. In fiscal year 2008, the principal andinterest combined of $819,538 was withheld by SANDAG. The interest rate varies but is equal to SANDAG's interest rateon the various bond issued that provided the advanced funding.

In addition to financing from original bond issuances, financing for TransNet related projects is made available throughthe issuance of commercial paper notes issued by SANDAG. Subsequent repayment of proceeds related to commercialpaper issued by SANDAG is collected in future periods in equal quarterly amounts amortized over the remaining life ofthe original bonds through reduction in future TransNet allocations.

The following is a summary of the changes in the amount payable to SANDAG under this agreement:

The commercial paper activity for the year ended June 30, 2008, was as follows:

1446

City of San Diego Exhibit CTransNet and TransNet Extension FundsSchedule of Assets, Liabilities and Fund BalancesJune 30, 2008

ASSETS TransNetCurrent assets: TransNet Extension Total

Cash and investments 25,142,369$ 3,425,731$ 28,568,100$ Accounts receivable 1,835 - 1,835 Interest receivable 161,833 23,648 185,481

Total assets 25,306,037$ 3,449,379$ 28,755,416$

LIABILITIES AND FUND BALANCE

Current Liabilities:Accounts payable 838,293$ -$ 838,293$ Deferred revenue 1,898,990 - 1,898,990

Total liabilities 2,737,283 - 2,737,283

Fund Balance 22,568,754 3,449,379 26,018,133

Total liabilities and fund balance 25,306,037$ 3,449,379$ 28,755,416$

TA-TL&FBFBBS-FBIS - FBBS-FBSS #REF!

DRBS-DRSS188,156 is reclass to recognize Walkable Communities

1547

City of San Diego Exhibit DTransNet and TransNet Extension FundsSchedule of Revenues, Expenditures and Changes in Fund BalancesFor the year ended June 30, 2008

TransNet

REVENUES: TransNet Extension Total

TransNet /TransNet Extension 30,813,069$ 3,774,000$ 34,587,069$ Interest 1,504,995 149,881 1,654,876 Other 14,840 - 14,840 Reimbursements - Facilities Benefit Assessments (FBA) 1,046,500 - 1,046,500

Total revenues 33,379,404 3,923,881 37,303,285

EXPENDITURES:

Bikeway 972,525 - 972,525 Streets and roads -

TransNet 24,674,236 - 24,674,236 Non-TransNet (Fund deficit covered by 'Other Revenues') 8,246,143 - 8,246,143

Highways 268,131 - 268,131 Major Corridors - 474,502 474,502 Debt service: -

Principal 1,662,515 - 1,662,515 Interest (22,277) - (22,277)

Total expenditures 35,801,273 474,502 36,275,775

REVENUES OVER (UNDER) EXPENDITURES (2,421,869) 3,449,379 1,027,510

OTHER FINANCING USES:Returned of funds (Walkable Communities) to SANDAG (2,227) - (2,227)

Total other financing uses (2,227) - (2,227)

Net change in fund balances (2,424,096) 3,449,379 1,025,283

FUND BALANCE:

Beginning of year 24,992,850 - 24,992,850

End of year 22,568,754$ 3,449,379$ 26,018,133$

1648

17

City of San Diego Exhibit E TransNet and TransNet Extension Funds Schedule of Findings and Recommendations For the year ended June 30, 2008 Finding 2008-1

In accordance with SANDAG Board Policy No. 031, Rule #17, Section V, an agency that maintains a balance of more than 30% of their annual apportionment (after debt service) must use the remaining balance to fund projects.

During fiscal year 2008, the City exceeded the 30% rule as detailed below:

Annual apportionment 30,049,354$ 30%

Street and road project status balance threshold 9,014,806

Street and road project status balance 23,888,171

Excess street and road project status balanceover threshold. 14,873,365$

In addition, in 2007 the City also exceeded the 30% rule. Therefore, the finding on the 30% rule and the specific recommendation were not adequately addressed by the City. Effect SANDAG will defer further future allocations until the unused balance falls below the 30% threshold. Recommendation We recommend that the City use the remaining balance before requesting future funding from SANDAG. Management’s Response The City budgets TransNet estimated revenue into projects based on anticipated schedule of encumbrances available for the contractual obligation as opposed to being on the basis of cash expenditures. CIP Projects are multi-year in nature and are not confined to fiscal years. Full funding must be available prior to contractual obligations. TransNet funded projects are not typically phase funded for obligations funded in a future fiscal year; therefore, projects’ funding may be required to be carried forward annually. Additionally, many times projects are budgeted to rely on more funding sources than just TransNet (such as grant sources, Federal, State, and other local funds). Delays in obtaining some of the other sources of cash for completing their funding caused some delay in encumbering some of the TransNet despite expectations on the schedules for obtaining those sources of funding. Some projects experienced delays from environmental document approvals and/or rescoping of projects due to environmental or community issues. Delay due to property acquisition was a factor for one project. The City continues to execute projects as anticipated in the RTIP. Several delayed projects are able to move forward with receipt of aforementioned complementary funding sources (such as Prop 1b, and local bond money) enabling a couple of large projects to be encumbered soon. Additionally, a large payment to CALTRANS will be due in summer of ’09.

49

County of San Diego

California

TransNet Fund

Independent Accountants’ Report On Applying Agreed-Upon Procedures For the year ended June 30, 2008

50

County of San Diego TransNet Fund Table of Contents

Page

Independent Accountants’ Report ...................................................................................................................1 Exhibits:

A. Schedule of Status of Funds by Project ................................................................................................. 6

B. Schedule of Long-Term Debt .................................................................................................................. 9

51

INDEPENDENT ACCOUNTANTS’ REPORT ON APPLYING AGREED-UPON PROCEDURES

To the Board of Directors of the San Diego Association of Governments San Diego, California At the request of the San Diego Association of Governments (SANDAG), we have performed certain agreed-upon procedures applied to the County of San Diego, California (County) enumerated below in this report. These procedures, which were agreed to by SANDAG, were performed solely to assist SANDAG and the County in evaluating the compliance with the TransNet Ordinances for the fiscal year ended June 30, 2008. This engagement was to apply agreed-upon procedures, which were performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of SANDAG. Consequently, we make no representations regarding the sufficiency of the procedures described herein either for the purpose for which the report has been requested or any other purpose. The sufficiency of the procedures is solely the responsibility of the specific users of the report. Procedures Performed:

A. Reviewed the 1987 Proposition A: San Diego Transportation Improvement Plan (TransNet Ordinance and Expenditure Plan), the 2004 Proposition A (TransNet Extension Ordinance and Expenditure Plan), and SANDAG Board Policy No. 031: TransNet Ordinance and Expenditure Plan Rules compliance requirements (SANDAG Board Policy No. 031).

Findings: No findings were noted.

B. Obtained from SANDAG the approved Regional Transportation Improvement Program

(RTIP) for the fiscal year. Findings: No findings were noted.

C. Inquired of the County’s management and determined that the County maintains a separate fund for TransNet revenues.

Findings: No findings were noted.

52

To the Board of Directors of the San Diego Association of Governments San Diego, California

2

D. For the TransNet Fund, obtained from the County a detailed general ledger and a

schedule of assets, liabilities, and fund balance for the fiscal year. Agreed the schedule of assets, liabilities, and fund balance to the general ledger.

a. Identified the amount of cash and investments at the end of the fiscal year. b. Identified amounts due from other funds at the end of the fiscal year. c. Identified and provided an explanation of any other receivable amounts owed to

the County. d. Identified and provided an explanation for deferred revenue at the end of the

fiscal year. e. Identified and provided an explanation for any amounts owed by the County. f. Identified the amount of fund balance at the end of the fiscal year. g. Identified and provided an explanation of any restatements to the prior year

financial statements. Findings: No findings were noted.

E. For the TransNet Fund, obtained from the County an operating statement for the fiscal year. Agreed the operating statement’s revenues and expenditures to the general ledger. Findings: No findings were noted.

F. Obtained from the County the Schedule of Status of Funds by Project (Schedule). The Schedule included a beginning balance, funds received, expenditures, interest income, adjustments, and an ending balance by MPO ID.

a. Reviewed the Schedule and determined that projects were properly classified and reported by TransNet program (i.e., original TransNet vs. TransNet Extension; streets and roads vs. highway; etc). Reviewed the beginning balance from the prior year or provided a footnote of any restatements.

Findings: No findings were noted.

b. Identified the total TransNet revenues for the fiscal year. i. Reviewed the total funds received per the Schedule and agreed to the

TransNet operating statement. Provided a reconciliation on the Schedule, if necessary.

ii. Obtained from SANDAG a listing of TransNet payments from SANDAG to the County by TransNet program and compared to the TransNet revenues recorded by the County.

Findings: No findings were noted.

53

To the Board of Directors of the San Diego Association of Governments San Diego, California

3

c. Identified the interest income for the fiscal year.

i. Reviewed the interest income amount per the Schedule and agreed to the TransNet operating statement. Provided a reconciliation to the Schedule, if necessary.

ii. Reviewed the interest distribution methodology.

Findings: No findings were noted.

d. Identified the total TransNet expenditures for the fiscal year. i. Reviewed the total project expenditures per the Schedule and agreed to

the TransNet operating statement. Provided a reconciliation on the Schedule, if necessary.

ii. Selected individual expenditures of at least 25% of the total dollar amount of expenditures from the general ledger and obtained supporting documentation (i.e., invoice and copy of check or EFT wire).

iii. For the expenditures selected, identified the MPO ID that the expenditures were charged against and determined the MPO ID was included in the RTIP and the expenditure was an eligible cost per the TransNet and TransNet Extension Ordinance and Expenditure Plan requirements.

Findings: No findings were noted.

e. Reviewed that any amounts reflected in the “adjustments” column are explained

in the form of a footnote and that the adjustments are consistent with SANDAG Board Policy No. 031, Rule #17, Section IV.

Findings: No findings were noted.

f. Obtained a list of completed projects reported by TransNet program from the

County. Reviewed that the remaining TransNet funds for completed projects were transferred to another TransNet-eligible project in the RTIP and completed projects from the previous year were no longer shown in the current year Schedule.

Findings: No findings were noted.

g. If a project ending balance was negative, an explanation in the form of a footnote

to the Schedule was provided of the subsequent year’s intended action. Findings: No findings were noted.

54

To the Board of Directors of the San Diego Association of Governments San Diego, California

4

h. Reviewed inactive projects which have had no activity over the past two years,

other than interest earnings, were closed out or provided a footnote of the status of the project and when the project will be completed.

Findings: No findings were noted.

i. Obtained a signed staff report or resolution from the County’s governing body

consenting to the transfer of TransNet funds from one project to another. Reviewed transfers that require an amendment to the RTIP follow the amendment process outlined in Rule #7 of SANDAG Board Policy No. 031.

Findings: No findings were noted.

G. Reviewed that ending fund balance on the Schedule is not more than 30% of the

County’s current year allocation (net of debt service payments). Findings: No findings were noted.

H. If applicable, obtained a schedule showing the beginning balance of debt, additions, repayments, and the ending balance. Agreed to long-term debt information for the County as provided by SANDAG. Findings: No findings were noted. See Exhibit B for the Schedule.

I. Reviewed the maintenance of effort (MOE) requirement for cities and county:

a. Obtained the current MOE requirements for the County from SANDAG. Findings: Based on the result of an examination conducted by an independent

Certified Public Accounting firm, it was determined that no discretionary funding was deposited into the County’s Road Fund in the fiscal year ended June 30, 1985 and the MOE calculation resulted in zero net discretionary expenditures. The firm recommended that the County’s MOE was zero. The report concluded that without an MOE, the County need not be examined again for this purpose. Therefore, Procedure I did not apply.

55

To the Board of Directors of the San Diego Association of Governments San Diego, California

5

J. Reviewed prior year audit findings and recommendations and determined if they were

adequately addressed. Findings: During fiscal year 2008, the County reduced its fund balance below 30%

of their annual apportionment (after debt service). Therefore, no findings were noted.

K. Proposed current year findings as a result of performing the above agreed-upon procedures. Included the County’s response to address the finding.

Findings: As a result of performing the above agreed-upon procedures, there were

no findings noted. Therefore, Procedure K did not apply.

We were not engaged to, and did not perform an examination, the objective of which would be the expression of an opinion on the County’s compliance assertion on its utilization of TransNet funds administered by SANDAG. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the use of the specified users listed above and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes.

San Diego, California April 10, 2009

56

County of San DiegoTransNet FundSchedule of Status of Funds by ProjectFor the year ended June 30, 2008

Project Project Status Funds Interest Project County Project Status

MPO ID Number Project Name July 1, 2007 Received Income Expenditures Adjustments June 30, 2008 Note

Highways:

CNTY 14 1003303 South Santa Fe $ 9,199,356 $ - $ 558,831 $ (345,431) $ - 9,412,756$

Total highway 9,199,356 - 558,831 (345,431) - 9,412,756

SR 78 Corridor Highway Funds:

CNTY 143C5110

SDC - 02 Vista Cl to Woodland

(S. Santa Fe N.) 83,053 - 2,942 (85,923) - 72

CNTY 143C0017

SDC - 03 Woodland to Smilax

(S. Santa Fe S.) 3,742,426 - 225,089 (101,681) - 3,865,834

Total SR 78 Corridor Hwy Funds 3,825,479 - 228,031 (187,604) - 3,865,906

Total all highway funds 13,024,835 - 786,862 (533,035) - 13,278,662

Streets and roads:

CNTY 05 1005416 Channel Rd/San Diego River - - - (555) - (555) (g)

CNTY 06 1003112 Los Coches II 935,869 - 1,035 (42,224) (894,680) - (b)

CNTY 08 1003121 Mission - Ammo to Pepper 2,251,023 - 8,107 (37,902) (2,221,228) - (c)

CNTY 10 1003285 Riverside Dr. 5,542 - 161 (4,263) (1,440) - (d)

CNTY 14 1003303 S. Santa Fe 2,887,681 - 75,705 (2,293,714) - 669,672

CNTY 14A 1010123 S. Santa Fe - South 1,266 33,000 1,625 - - 35,891

CNTY 17 1003307 SR 54/94 Phase II & III 1,804,310 - 18,585 (1,854,152) - (31,257) (g)

CNTY 18 1003308 SR 56 577,032 - 25,554 (393,479) - 209,107

CNTY 19 1003327 Valley Center Road 2,693,058 6,805,000 141,248 (13,923,708) 3,311,632 (972,770) (e)

CNTY 21 1003030 Bradley Avenue 95,851 5,000 2,345 (181,732) - (78,536) (g)

CNTY 23 1003328 Valley Center Casino 211,303 - 612 (17,631) (194,284) - (f)

CNTY 24 1003046 Cole Grade – HS 394,618 - 23,994 - - 418,612

CNTY 25 1007353 East Mission Road 647,749 200,000 13,861 (1,599,621) - (738,011) (g)

CNTY 26 1003276 Ramona Drive 164,038 - 5,242 (109,804) - 59,476

CNTY 26 1003260 Olive Vista Drive 2,268,642 - 87,756 (255,113) - 2,101,285

CNTY 26 1003099 Julian Ave 1,172,317 - 25,469 (1,564,825) - (367,039)

CNTY 26 1007354 Valley Ctr. Rd. Median 1,702,162 - 73,877 (226,086) - 1,549,953

Subtotal CNTY 26 5,307,159 - 192,344 (2,155,828) - 3,343,675

CNTY 33 1009578 Via De La Santa 82,174 - 3,216 (48,764) - 36,626

CNTY 34 1009589 Dye Rd Extension 233,312 - 14,186 - - 247,498

CNTY 35 1009591 Ramona St Extension 124,421 - 2,612 (216,529) - (89,496) (g)

CNTY 36 1009592 San Vicente Rd South I 322,297 - 24,410 (101,508) 320,256 565,455 (a)

CNTY 37 1009593 San Vicente Rd South II 316,102 - 11,290 (7,136) (320,256) - (a)

CNTY 39 1010404 Bear Valley Parkway - 6,000 365 - - 6,365

Total streets and roads 18,890,767 7,049,000 561,255 (22,878,746) - 3,622,276

Total highways and streets and roads 31,915,602 7,049,000 1,348,117 (23,411,781) - 16,900,938

(Continued)

Exhibit A

657

County of San DiegoTransNet FundSchedule of Status of Funds by Project, ContinuedFor the year ended June 30, 2008

Project Project Status Funds Interest Project County Project Status

MPO ID Number Project Name July 1, 2007 Received Income Expenditures Adjustments June 30, 2008 Note

31,915,602$ 7,049,000$ 1,348,117$ (23,411,781)$ -$ 16,900,938$

Bikes and pedestrian:

CNTY 32 Bicycle Lane - Sweetwater 187 85,000 - (85,000) (187) - (h)

CNTY 28 1003266 Bicycle Lane - Plaza Bonita - 220,000 - (220,000) - - (i)

Bicycle Lane - Ramona Street 25 - - - (25) - (h)

Bicycle Lane - Mission Rd. E. 1 - - - (1) - (h)

Total bikes and pedestrian 213 305,000 - (305,000) (213) -

TransNet annual apportionment set aside

for SANDAG debt service obligations - 2,393,537 - (2,393,537) - -

Total 31,915,815$ 9,747,537$ 1,348,117$ (26,110,318)$ (213)$ 16,900,938$

Composed of:

Fund balance $ 16,900,938

(Continued)

Exhibit A

Total forwarded from previous page

758

County of San DiegoTransNet FundSchedule of Status of Funds by Project, ContinuedFor the year ended June 30, 2008

Notes:

h) These projects were closed in prior year (FY06-07) and the remaining balance was returned to SANDAG.

i) This project was completed in FY07/08 and should not incur any additional expenditures.

g) Active projects resulted in negative ending balances. To ensure the County complied with SANDAG's 30% rule under SANDAG Policy No. 031, Rule #17, additional funding was not requested during FY07/08. Funds will be requested during FY 08/09.

c) Project complete. Remaining funds under CNTY08 Miss-Ammo/Pep $2,221,228) transferred to CNTY19 Valley Center North.

f) Project complete. Remaining funds under CNTY23 Valley Center Casino ($194,284) transferred to CNTY19 Valley Center North.

Exhibit A

a) CNTY 37 San Vicente South II was combined with CNTY36 San Vicente South I as part of SANDAG's 2006 RTIP - Amendment No. 9 Agenda Item No. 07-11-14 dated November 30, 2007.

e) Per 2008 RTIP adoption, transferred funds from CNTY06 Los Coches II ($894,680), CNTY08 Miss-Ammo/Pep ($2,221,228), CNTY10 Riverside Dr. ($1,440), and CNTY23 Valley Center Casino ($194,284). Total amount transferred is ($3,311,632). RTIP adoption was approved on July 25, 2008, Item #14.

b) Project complete. Remaining funds under CNTY06 Los Coches II ($894,680) transferred to CNTY19 Valley Center North.

d) Project complete. Remaining funds under CNTY10 Riverside Dr. ($1,440) transferred to CNTY19 Valley Center North.

859

9

County of San Diego Exhibit B TransNet Fund Schedule of Long-Term Debt For the year ended June 30, 2008 Pursuant to State law, SANDAG has established a debt financing program consisting of long-term bonds and commercial paper to provide funding for eligible projects under the TransNet program. In this regard, the SANDAG Commission has pledged TransNet sales and use tax for the payment of annual debt service costs to be incurred. Under the terms of the various debt agreements neither the faith and credit nor the taxing power of the County, the State of California or any political subdivision or public agency thereof, other than the Commission to the extent of the pledge of revenues, is pledged to the payment of principal of or interest on the debt. Details concerning SANDAG debt issuances are discussed in SANDAG’s audited financial statements, which can be obtained directly from SANDAG upon request. In addition to the above, various Memorandums of Understanding (MOU) were entered into by SANDAG and its participating agencies with respect to project funding provided by debt proceeds. In accordance with these MOUs, annual TransNet sales tax allocations for participating agencies are offset by amounts proportionate to debt proceeds received to pay all debt service costs incurred including principal, interest, debt issuance and administration costs. Such offsets are reported as TransNet annual apportionment set aside for SANDAG debt service obligations in the TransNet Schedule of Revenues, Expenditures and Changes in Fund Balance.

60

10

County of San Diego Exhibit B TransNet Fund Schedule of Long-Term Debt, Continued For the year ended June 30, 2008 The County’s TransNet Fund’s allocation offset is presented below:

TransNet annual apportionment set aside for SANDAG debt service obligations

SANDAG Debt Issuance

Original County

TransNet Project

Proceeds

Balance Outstanding July 1, 2007

2008 Repayments

2008 Issuance

2008 TransNet annual

apportionment set aside for

SANDAG debt service

obligations

Balance Outstanding

June 30, 2008

Estimated Remaining

Interest Outstanding

June 30, 2008

1994 Series A - Prior to 1994 Bond Reserve Adjustment $ 5,373,500 $ 415,298 $ 0 $ 0 $ 0 $ 0 $ 0 Less: 1994 Series A - 1994 Bond Reserve Adjustment 0 (189,210) 0 0 0 0 0 1994 Series A - As Adjusted 0 226,088 0 0 226,088 0 0 1996 Series A 0 0 0 0 0 0 0 Commercial Paper issued to partially defease the 1996 Series A Bonds

17,252,202

1,567,591 0 0 1,567,591 0 0 Commercial Paper issued related to Early Action Program (Total Authorized: $22.6 million) 16,600,000 22,600,000 (22,600,000) 0 0 0 0

2008 Bond 0 0 0 22,600,000 0 22,600,000 $ 37,592,098 Totals Before Debt Administrative Costs and Interest 39,225,702 24,393,679 (22,600,000) 22,600,000 1,793,679 22,600,000 37,592,098

Debt Administrative Costs and Interest 0 0 0

0 599,858 0 0

Totals $ 39,225,702 $ 24,393,679 $ (22,600,000)

$22,600,000 $ 2,393,537 $ 22,600,000 $ 37,592,098

61

City of Oceanside

Oceanside, California

TransNet Fund

Independent Accountants’ Report On Applying Agreed-Upon Procedures For the year ended June 30, 2008

62

City of Oceanside TransNet Fund Table of Contents

Page

Independent Accountants’ Report ...................................................................................................................1 Exhibits:

A. Schedule of Status of Funds by Project ................................................................................................. 6

B. Schedule of Assets, Liabilities and Fund Balance ................................................................................ 8 C. Schedule of Revenues, Expenditures and Changes in Fund Balance ...............................................9 D. Schedule of Findings and Recommendations .................................................................................... 10

63

INDEPENDENT ACCOUNTANTS’ REPORT ON APPLYING AGREED-UPON PROCEDURES

To the Board of Directors of the San Diego Association of Governments San Diego, California At the request of the San Diego Association of Governments (SANDAG), we have performed certain agreed-upon procedures applied to the City of Oceanside, California (City) enumerated below in this report. These procedures, which were agreed to by SANDAG, were performed solely to assist SANDAG and the City in evaluating the compliance with the TransNet Ordinances for the fiscal year ended June 30, 2008. This engagement was to apply agreed-upon procedures, which were performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of SANDAG. Consequently, we make no representations regarding the sufficiency of the procedures described herein either for the purpose for which the report has been requested or any other purpose. The sufficiency of the procedures is solely the responsibility of the specific users of the report. Procedures Performed:

A. Reviewed the 1987 Proposition A: San Diego Transportation Improvement Plan (TransNet Ordinance and Expenditure Plan), the 2004 Proposition A (TransNet Extension Ordinance and Expenditure Plan), and SANDAG Board Policy No. 031: TransNet Ordinance and Expenditure Plan Rules compliance requirements (SANDAG Board Policy No. 031).

Findings: No findings were noted.

B. Obtained from SANDAG the approved Regional Transportation Improvement Program (RTIP)

for the fiscal year. Findings: No findings were noted.

C. Inquired of the City’s management and determined that the City maintains a separate fund for TransNet revenues.

Findings: No findings were noted.

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To the Board of Directors of the San Diego Association of Governments San Diego, California

2

D. For the TransNet Fund, obtained from the City a detailed general ledger and a schedule of assets,

liabilities, and fund balance for the fiscal year. Agreed the schedule of assets, liabilities, and fund balance to the general ledger.

a. Identified the amount of cash and investments at the end of the fiscal year. b. Identified amounts due from other funds at the end of the fiscal year. c. Identified and provided an explanation of any other receivable amounts owed to the City. d. Identified and provided an explanation for deferred revenue at the end of the fiscal year. e. Identified and provided an explanation for any amounts owed by the City. f. Identified the amount of fund balance at the end of the fiscal year. g. Identified and provided an explanation of any restatements to the prior year financial

statements. Findings: No findings were noted.

E. For the TransNet Fund, obtained from the City an operating statement for the fiscal year. Agreed the operating statement’s revenues and expenditures to the general ledger. Findings: No findings were noted.

F. Obtained from the City the Schedule of Status of Funds by Project (Schedule). The Schedule included a beginning balance, funds received, expenditures, interest income, adjustments, and an ending balance by MPO ID.

a. Reviewed the Schedule and determined that projects were properly classified and reported by the TransNet program (i.e., original TransNet vs. TransNet Extension; streets and roads vs. highway; etc.). Reviewed the beginning balance from the prior year or provided a footnote of any restatements.

Findings: No findings were noted.

b. Identified the total TransNet revenues for the fiscal year. i. Reviewed the total funds received per the Schedule and agreed to the TransNet

operating statement. Provided a reconciliation on the Schedule, if necessary. ii. Obtained from SANDAG a listing of TransNet payments from SANDAG to the

City by TransNet program and compared to the TransNet revenues recorded by the City.

Findings: No findings were noted.

c. Identified the interest income for the fiscal year.

i. Reviewed the interest income amount per the Schedule and agreed to the TransNet operating statement. Provided a reconciliation to the Schedule, if necessary.

ii. Reviewed the interest distribution methodology.

Findings: No findings were noted.

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To the Board of Directors of the San Diego Association of Governments San Diego, California

3

d. Identified the total TransNet expenditures for the fiscal year.

i. Reviewed the total project expenditures per the Schedule and agreed to the TransNet operating statement. Provided a reconciliation on the Schedule, if necessary.

ii. Selected individual expenditures of at least 25% of the total dollar amount of expenditures from the general ledger and obtained supporting documentation (i.e., invoice and copy of check or EFT wire).

iii. For the expenditures selected, identified the MPO ID that the expenditures were charged against and determined the MPO ID was included in the RTIP and the expenditure was an eligible cost per the TransNet and TransNet Extension Ordinance and Expenditure Plan requirements.

Findings: No findings were noted.

e. Reviewed that any amounts reflected in the “adjustments” column are explained in the

form of a footnote and that the adjustments are consistent with SANDAG Board Policy No. 031, Rule #17, Section IV.

Findings: No findings were noted.

f. Obtained a list of completed projects reported by TransNet program from the City.

Reviewed that the remaining TransNet funds for completed projects were transferred to another TransNet-eligible project in the RTIP and completed projects from the previous year were no longer shown in the current year Schedule.

Findings: No findings were noted.

g. If a project ending balance is negative, an explanation in the form of a footnote to the

Schedule was provided of the subsequent year’s intended action. Findings: No findings were noted.

h. Reviewed inactive projects which have had no activity over the past two years, other than

interest earnings, were closed out or provided a footnote of the status of the project and when the project will be completed.

Findings: No findings were noted.

i. Obtained a signed staff report or resolution from the City’s governing body consenting to

the transfer of TransNet funds from one project to another. Reviewed transfers that require an amendment to the RTIP follow the amendment process outlined in Rule #7 of SANDAG Board Policy No. 031.

Findings: No findings were noted.

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To the Board of Directors of the San Diego Association of Governments San Diego, California

4

G. Reviewed that ending fund balance on the Schedule is not more than 30% of the City’s current

year allocation (net of debt service payments). Findings: In accordance with SANDAG Board Policy No. 031, Rule #17, Section V, an agency

that maintains a balance of more than 30% of their annual apportionment (after debt service) must use the remaining balance to fund projects.

During the fiscal year 2008, the City exceeded the 30% rule as detailed below:

Annual apportionment 4,515,899$ 30%

Street and road project status balance threshold 1,354,770

Street and road project status balance 12,054,724

Excess street and road project status balanceover threshold 10,699,954$

H. If applicable, obtained a schedule showing the beginning balance of debt, additions, repayments, and the ending balance. Agreed to long-term debt information for the City as provided by SANDAG. Findings: No debt service commitment existed; therefore, Procedure H did not apply.

I. Reviewed the maintenance of effort (MOE) requirement for cities and county:

a. Obtained the current MOE requirements for the City from SANDAG. b. Obtained Schedule 3 of the Annual Street Report from the City. Report the amount of

discretionary funds expended for local streets and roads, less the MOE base amount from the MOE audits calculated as of June 30, 1985, which totaled the excess of the discretionary expenditures over the MOE base.

Current year local discretionary expenditures on streets and roads 1,275,945$

Less: Maintenance of Effort Base 1,190,391

Excess of current year local discretionary expenditures over MOE Base 85,554$

Findings: The City’s FY 08 Annual Street Report – Schedule 3 (Schedule), reflected $1,129,834

of local discretionary expenditures on streets and roads. An additional $146,111 of these expenditures was discovered after the Schedule was prepared. Therefore, the revised amount of $1,275,945 of local discretionary expenditures on streets and roads for FY 08 will be addressed in the FY 09 Annual Street Report.

No findings were noted.

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To the Board of Directors of the San Diego Association of Governments San Diego, California

5

J. Reviewed prior year audit findings and recommendations and determined if they were

adequately addressed. Findings: In 2007, the City exceeded the 30% rule and in 2008 the same finding existed.

Therefore, the finding on the 30% rule and the specific recommendation were not adequately addressed by the City.

K. Proposed current year findings as a result of performing the above-agreed upon procedures. Included the City’s response to address the finding.

Findings: See Exhibit D.

We were not engaged to, and did not perform an examination, the objective of which would be the expression of an opinion on the City’s compliance assertion on its utilization of TransNet funds administered by SANDAG. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the use of the specified users listed above and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes.

San Diego, California April 4, 2009

68

City of Oceanside TransNet FundSchedule of Status of Funds By ProjectFor the year ended June 30, 2008

Project Project MPO Status Funds Interest Project City Status

ID CIP Project Name July 1, 2007 Received Income Expenditures Adjustments June 30, 2008

TransNetHighways

7805 Hwy 76 - Cooperative Agreement No 11-4274 2,049,190$ -$ 92,630$ -$ -$ 2,141,820$ (b/d)

7620 I-5, SR 78 @ College Blvd 418,227 - 18,905 - - 437,132 (d)

4660 College Blvd / W Vista to Marron 63,192 - 2,856 - - 66,048 (d)

7660 College Blvd, W Vista to Lake Blvd 619,441 - 28,001 - - 647,442 (d)

- Total highways 3,150,050 - 142,392 - - 3,292,442

Streets and roadsO04 757542 Street Rehabilitation 1,181,677 1,000,000 29,890 (1,520,435) - 691,132 O04 757790 Miscellaneous Street Projects 2,083,000 1,922,682 181,071 - - 4,186,753 O04 757791 Industry St Reconstruction (40,549) - - (9,314) - (49,863) O04 757792 Sleeping Indian Reconstruction (170) - - - - (170) O04 ST-23 Street Maintenance Projects 625,456 577,318 54,369 - - 1,257,143

Subtotal O04 3,849,414 3,500,000 265,330 (1,529,749) - 6,084,995

O06 779671 Melrose Dr Extension 253,394 1,000,000 56,657 - - 1,310,051 O06 757793 Melrose Dr. Extension Design - - - (368,588) - (368,588)

Subtotal O06 253,394 1,000,000 56,657 (368,588) - 941,463

O09 775606 El Camino bridge widening 884,287 - 39,973 - - 924,260 O12 775613 Pala Road Extension 106,626 - 4,820 - - 111,446 (a)

O13 757216 Street Restoration (11,225) - - (782,707) - (793,932) O13 755231 Neighborhood Traffic Improvement (105,063) - - (93,392) - (198,455) O13 757790 Misc Street Improvements - - - (44,214) - (44,214) O13 765101 Misc Traffic Markings - - - (9,179) - (9,179)

Subtotal O13 (116,288) - - (929,492) - (1,045,780) (c)

O14 775608/9 Bridge Rehabilitation 2,046,968 500,000 115,131 - - 2,662,099 O14 775609 No Coast Hwy bridge Seismic Retro (14,903) - - (6,410) - (21,313) O14 775608 Douglas Dr bridge Seismic Retro (14,102) - - (151,654) - (165,756) O14 775215 El Camino Mesa/Mission (14,021) - - (84,333) - (98,354) O14 8760 Hill St Bridge @ San Luis Ray River 1,656,547 - 74,881 - - 1,731,428 O14 779672 RR Quiet Zone Assmnt Pr (691) - - (18,203) - (18,894)

Subtotal O14 3,659,798 500,000 190,012 (260,600) - 4,089,210

Subtotal streets and roads 8,637,231 5,000,000 556,792 (3,088,429) - 11,105,594

Subtotal streets and roads and highways 11,787,281$ 5,000,000$ 699,184$ (3,088,429)$ -$ 14,398,036$

Notes: (continued)(a)(b)

(c )

(d) Unused highway funds will be returned to SANDAG upon receipt of the letter from SANDAG.

Exhibit A

Prior period adjustments in the amount of $1,890,454 for Hwy 76 - Cooperative Agreement No. 11-4274 will be initiated in FY 2009 to correct expenditures and allocable interest, which were improperly coded to Fund 561 instead of Fund 212 ( TransNet ).

MPO O12 - Spending has been delayed while the City re-evaluates the scope of the project, but expenditure activity will commence in FY 2010.

City will transfer funds to MPO O13 from MPO O09 and MPO O14 with approval by the City Council via a Resolution in June 2009 for adoption bythe SANDAG Board with the next available RTIP Amendment.

669

City of Oceanside TransNet FundSchedule of Status of Funds By Project, ContinuedFor the year ended June 30, 2008

Project Project MPO Status Funds Interest Project City Status

ID CIP Projects July 1, 2007 Received Income Expenditures Adjustments June 30, 2008

Balance carried forward 11,787,281$ 5,000,000$ 699,184$ (3,088,429)$ -$ 14,398,036$

O15 737556 Pacific St Bridge@ San Luis Ray River 209,679 200,000 9,478 (200,000) - 219,157

O18 755237 Gateway Corridor Improve/O'side (6,516) - - (5,174) - (11,690) O18 755239 Misc sidewalks/ADA 344,638 700,000 42,625 (101,665) - 985,598 O18 757544 Str Cavalier MHP Access (2,200) - - (200,500) - (202,700) O18 779672 RR Quiet Zone Assmnt Proj (38,161) - - - - (38,161)

Subtotal O18 297,761 700,000 42,625 (307,339) - 733,047

737557 College Bridge Widen @ SLR - - - (1,230) - (1,230) (h)

757794 College VW to Olive - - - (1,844) - (1,844) (h)

Total streets and roads 9,144,671 5,900,000 608,895 (3,598,842) - 12,054,724

Bikes and pedestrian7740 San Luis Rey bike path, Douglas Dr to Priory 12,354 - 558 - - 12,912 (l)

- Total bikes and pedestrian 12,354 - 558 - - 12,912

- Total TransNet 12,307,075 5,900,000 751,845 (3,598,842) - 15,360,078

Non-TransNetHighways

779673 SR 76 @ ECR Interchange (763) - - (1,220) - (1,983) (e)

Total highways (763) - - (1,220) - (1,983) Streets and roadsO08 755607 College Widen Plaza-Lake (82,317) - - (6,839) - (89,156) (f)

- Total streets and roads (82,317) - - (6,839) - (89,156)

Bikes and pedestrianO16 727803 Citywide Bicycle Plan - - - (122,729) - (122,729) (i)

V02 727801 Coastal Rail Trail (95,941) 34,360 - (21,282) - (82,863) (g)

727745 SLR Bicycle/Ped Bridge - - - (13,050) - (13,050) (j)

727802 SLR Coastal College to N Santa Fe - - - (615) - (615) (j)

Downtown Redevelopment Plan 1,454 - 66 - - 1,520 (k)

Total bikes and pedestrian (94,487) 34,360 66 (157,676) - (217,737) -

Total Non-TransNet (177,567) 34,360 66 (165,735) - (308,876) Total TransNet and Non-TransNet 12,129,508$ 5,934,360$ 751,911$ (3,764,577)$ -$ 15,051,202$

Comprised of:Fund balance 15,051,202$

15,051,202$

Notes:(e)(f)(g)(h)

(i)

(j)(k)

(l)

Exhibit A

Funds will be returned to SANDAG in FY 2009.

737557/757794 - The City will request SANDAG to add as an amendment in April 2009 for a July 2009 (FY 2010) approval and also request a payment from SANDAG upon approval of the amendment in FY 2010.

Downtown Redevelopment Plan - The project was not a TransNet project and the City will transfer the balance to a non- TransNet fund (Fund 561) in FY 2009.

V02 - The City will cover the deficit with a non- TransNet (Fund 561) fund in FY 2009.

O16 - The City received the $145,000 payment of TDA funds (claim #07011001) for this project in FY 2008. Expenditures for this project will be reclassified to the TDA funds in FY 2009.727745/727802 - The City will cover the deficit with a non- TransNet (Fund 561) fund in FY 2009.

MPO O08 - The City will cover the deficit with a non- TransNet (Fund 561) Fund in FY 2009.779673 - The City will cover the deficit with a non-TransNet (Fund 561) fund in FY 2009.

770

City of Oceanside Exhibit BTransNet FundSchedule of Assets, Liabilities and Fund BalanceJune 30, 2008

ASSETS

Cash and investments 15,251,083$

Total assets 15,251,083$

LIABILITIES AND FUND BALANCE

Liabilities:Accounts payable 137,179$ Deposits payable 62,703

Total liabilities 199,881

Fund Balance: Unreserved 15,051,202

Total liabilities and fund balance 15,251,083$

871

City of Oceanside Exhibit CTransNet FundSchedule of Revenues, Expenditures and Changes in Fund BalanceFor the year ended June 30, 2008

REVENUES:

TransNet 5,934,360$ Interest 751,911

Total revenues 6,686,271

EXPENDITURES:

Construction and development 3,764,577

Total expenditures 3,764,577

REVENUES OVER (UNDER) EXPENDITURES 2,921,694

FUND BALANCE:

Beginning of year, 12,129,508

End of year 15,051,202$

972

10

City of Oceanside Exhibit D TransNet Fund Schedule of Findings and Recommendations For the year ended June 30, 2008 Finding 2008-1

In accordance with SANDAG Board Policy No. 031, Rule #17, Section V, an agency that maintains a balance of more than 30% of their annual apportionment (after debt service) must use the remaining balance to fund projects.

During fiscal year 2008, the City exceeded the 30% rule as detailed below:

Annual apportionment 4,515,899$ 30%

Street and road project status balance threshold 1,354,770

Street and road project status balance 12,054,724

Excess street and road project status balanceover threshold. 10,699,954$

In addition, in 2007 the City also exceeded the 30% rule. Therefore, the finding on the 30% rule and the specific recommendation were not adequately addressed by the City. Effect SANDAG will defer further future allocations until the unused balance falls below the 30% threshold. Recommendation We recommend that the City use the remaining balance before requesting future funding from SANDAG. Management’s Response The City of Oceanside has awarded or is pending award of these construction projects, which will spend down the Transnet Fund Balance in this fiscal year:

Project Name MPO Date Awarded Amount of Contract Citywidewide Sidewalk Repairs FY09

O04

3-4-2009

$229,594

Annual Slurry Seal FY09

O18

9-17-2008

$1,247,360

Annual Street Restoration/Overlay

O04

8-20-2008

$3,406,351

The City of Oceanside anticipates construction expenditures for MPO O14 (Bridge Rehabilitation) beginning in FY 2011.

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San Diego Association of Governments – TransNet Program

INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE

May 13, 2009 AGENDA ITEM NO.: 6

Action Requested: INFORMATION

OVERVIEW OF DEVELOPMENTS IN THE FINANCIAL MARKETS File Number 3000800 Given the recent turbulence in the financial markets, the SANDAG Finance Director and Chief Economist will provide an update of events that affect sales tax revenues and/or TransNet program financing plans. (This item will include a report on revised TDA and TransNet revenue estimates but it was not ready at the time of mailout and will be sent out under separate cover when completed.)

TRANSPORTATION COMMITTEE May 15, 2009

AGENDA ITEM NO.: 9Action Requested: RECOMMEND

REVISION TO FY 2009 AND FY 2010 TransNet REVENUES File Number 4000500

Introduction

At the November 2008 meeting, the Board of Directors approved a revision to the FY 2009 TransNet revenues based on actual sales tax received to-date. The revision estimated a 4 percent decline in sales tax receipts from FY 2008 (or to $234.6 million from $244 million). Based on actual receipts through March 2009, the receipts are lower than projected. As a result, we are proposing a reduction in the FY 2009 estimate to reflect a projected 6 percent decline from FY 2008 (or to $229.7 million from $244 million). We are not proposing any changes to the projected growth of 2 percent for FY 2010, however the FY 2010 projection must be revised since it is being calculated from a lower base (as a result of lowering the FY 2009 projection). Attachment 1 contains the FY 2009 and FY 2010 original and proposed projections for the TransNet overall program with Attachments 1a and 1b containing details of the projections for the Local Street Improvement program and the Transit Services program, respectively.

Recommendation

The Transportation Committee is asked to recommend that the Board of Directors approve the revised FY 2009 and FY 2010 TransNet revenue projections.

Transportation Development Act (TDA) receipts also have been affected by the recent sales tax trends. For reasons explained below, we are not proposing any adjustment to the TDA sales tax allocations at this time. Attachment 2 contains information regarding TDA sales tax projections.

Background

San Diego’s economy, like many regions across the nation, has been impacted by the increasingly global economic slowdown. Nationwide, employment is down more than 5 million jobs with losses occurring in each month since the recession began in December 2007. Locally, job losses have not occurred each month over the past year; however the general trend has been the same with more than 44,000 jobs lost over the past year. The recession and job losses have spread to virtually all employment categories and industries, pushing up the local and national unemployment rates to above or near 9 percent for the first time since the 1982-84 recessions. As deep and wide spread as the recession has become, it has progressed in line with expectations expressed during the fall of 2008 when the size of the financial crises was brought into perspective. Nationally, the two worst quarters were expected and have turned out to be the two middle quarters of FY 2009 (last quarter of calendar year 2008 and first quarter of calendar year 2009). As the fourth quarter of FY 2009 begins, there are signs that the voracity of the recession is letting up; consumer spending, retail sales, home sales, and the nations industrial output have all begun to

This Item Relates to Agenda Item #6, ITOC, May 13, 2009

rise. Similar trends have been emerging locally, for example, the number of homes sold is increasing spurred by lower prices and interest rates, the rate of job losses in the construction and financial activities sectors has leveled off and started to improve, and the military has begun a construction process that will ultimately expend more than $4 billion to improve local bases over the next two years. These signs and activities do not mean the recession is over. For example, the number of unemployed and the unemployment rate are expected to rise during the current quarter and next. However, fewer and fewer people are expected to become unemployed with each passing month, slowing the economy’s rate of descent. The impact of the recession on all areas of the economy has been significant. SANDAG has now received the sales and use tax revenue from the state Board of Equalization for the first three quarters of FY 2009. Because of the severity of the recession over the two most recent quarters these receipts are down 5.5 percent when compared to the same period for the previous year. This decline is slightly worse than our forecast of a 4 percent decrease for the entire FY 2009, although within the guideline or confidence interval of between -2.0 and -6.0 percent. Based on this recent information, we are revisiting the FY 2009 and FY 2010 TDA and TransNet sales tax estimates, proposing an additional 2 percent downward adjustment (6 percent total) for FY 2009. We are still projecting a 2 percent increase for FY 2010, although calculated from a lower FY 2009 base. The national and local economies are not expected to fully recover from the downturn until 2011 while the transition to more normal rates of revenue growth may take three years (2013). SANDAG is expecting our sales tax revenue to follow a similar path. Following are the adjusted projected growth rates for TransNet sales tax receipts through FY 2013.

Fiscal Year Current & Projected Change 2008 -1.4% 2009 -6.0% 2010 2.0% 2011 3.5% 2012 3.5% 2013 5.4%

Transportation Development Act

The TDA is the major subsidy source that supports the region’s public transit operators and nonmotorized transportation projects. The TDA comes from 1/4 percent of state sales tax assessed in the region. SANDAG, as the Regional Transportation Planning Agency (RTPA), is responsible for the apportionment of TDA funds each year in conformance with legislative priorities. The transit operators and other member agencies submit their annual TDA claims based on these apportionments and in compliance with SANDAG’s TDA Administration Policy (Board Policy No. 027). The County of San Diego Auditor and Controller Office is statutorily responsible for developing the TDA projections and does so in consultation with SANDAG. As part of that process, and in recognition that projections are estimates, the County retains an amount each year in order to guard against fluctuations such as we are now experiencing. This retained amount was approximately $4 million at June 30, 2008 and is sufficient to absorb the estimated reduction in FY 2009 TDA sales tax receipts (approximately $3 million). As such, we are not recommending an adjustment to the FY 2009 TDA

2

allocation. With respect to the FY 2010 TDA projection, the County provided SANDAG with an estimate which accounted for a 1 percent decline. This is the projection that was approved by the SANDAG Board of Directors in February 2009. We are not proposing to revise the FY 2010 TDA revenue projection at this time, as it is now more closely aligned with the SANDAG projection of a 2 percent growth when compared to the revised FY 2009 projection. Attachment 2 contains information with respect to FY 2009 and FY 2010 TDA projections.

TransNet

This half-cent sales tax approved by the voters of San Diego County includes several subprograms such as the Local Street Improvements for local agencies and the Transit System Improvements (16.5 percent) funding from which the transit revenues are derived. Within the transit share, services provided pursuant to Americans with Disabilities Act (ADA) and subsidies for seniors have specific earmarks (2.5 percent and 3.25 percent, respectively). The remaining revenues can be used for operating or miscellaneous capital purposes. Attachment 1 contains the original and proposed projections for the TransNet overall program with Attachments 1a and 1b containing details of the projections for the Local Street Improvement program and the Transit Services program, respectively. Upon approval of the revised TransNet estimates by the Board of Directors, the revised FY 2010 projection, as well as the revised FY 2011-FY 2014 projections will be distributed to all affected agencies. Staff continues to monitor the sales tax receipts and should there be any new developments that warrant additional action, those will be presented to the Transportation Committee and the Board of Directors.

LAUREN WARREM Director of Finance (Acting) Attachments: 1. Overall TransNet Program Budget Revenue Projections 1a. Local system Improvements TransNet Revenue Projections 1b. Transit Services Program TransNet Revenue Projections 2. TDA Comparison Key Staff Contact: Sookyung Kim, (619) 699-6909, ski@sandag.org

3

Attachment 1

TransNet Program Revenues Approved Proposed Approved Proposed % Change

Estimated Sales Tax Receipts $234,629,971 $229,741,846 $239,322,570 $234,336,683 -2.1%

TransNet Program Allocations

Administrative Allocations1 2,346,300 2,297,418 2,393,226 2,343,367 -2.1%

Independent Taxpayer Oversight Committee3 $323,930 $323,930 $335,310 $335,310 0.0%

Bike, Pedestrian & Neighborhood Safety2 $4,692,599 $4,594,837 $4,786,451 $4,686,734 -2.1%

Total off-the-top Programs 7,362,829 7,216,185 7,514,987 7,365,410 -2.0%

Program Allocations (calculated on net of total revenues less off the top programs)

Major Corridors Program4 $96,361,268 $94,350,880 $98,286,415 $96,235,819 -2.1%New BRT/Rail Operations5 $18,408,638 $18,024,579 $18,776,414 $18,384,673 -2.1%Transit System Improvements6 $37,499,078 $36,716,734 $38,248,251 $37,450,260 -2.1%Local System Improvement7 $74,998,157 $73,433,468 $76,496,502 $74,900,520 -2.1%Total Program Allocations $227,267,142 $222,525,661 $231,807,583 $226,971,272 -2.1%

NOTES:

Overall TransNet Program Budget Revenue Projections

FY 2009

The TransNet Ordinance established the rules for the allocation of all Commission revenues. Commission funds are allocated according to the following priorities:

3 The ITOC allocation is based on the annual increase in CPI beginning with FY 2002, using $250,000 as the starting base. 4 42.4% of the total revenues less off the top programs shall be allocated for Major Corridor projects which include transportation mitigation under the Environmental Mitigation (EMP) program and any finance charges incurred.

6 16.5% of the total revenues less off the top programs shall be allocated for purposes of public transit services including providing for senior and ADA related services.

FY 2010

7 33% of total revenues less off the top programs shall be allocated for local street improvement services which includes roadway projects as well as local EMP and smart growth incentive programs.

5 8.1% of the total revenues less off the top programs shall be allocated to operate new rail or BRT services.

1 Up to one percent of the annual revenues shall be allocated for administrative expenses which includes Commission/Board expenses, administrative reserve 2 Total of two percent shall be allocated for bicycle facilities.

4

Attachment 1a

Approved Proposed Approved Proposed % Change

Carlsbad $2,275,238 $2,239,581 $2,332,272 $2,283,976 -2.1%

Chula Vista 4,364,159 4,272,487 4,451,236 4,358,099 -2.1%

Coronado 496,293 483,864 502,231 492,661 -1.9%

Del Mar 179,345 176,024 181,359 178,579 -1.5%

El Cajon 1,974,097 1,921,638 2,000,869 1,959,586 -2.1%

Encinitas 1,412,210 1,377,847 1,434,058 1,404,769 -2.0%

Escondido 2,882,225 2,818,038 2,935,217 2,874,161 -2.1%

Imperial Beach 604,377 593,317 616,317 604,333 -1.9%

La Mesa 1,282,878 1,250,196 1,301,003 1,274,530 -2.0%

Lemon Grove 595,104 580,216 602,661 590,966 -1.9%

National City 1,201,672 1,165,277 1,212,490 1,187,890 -2.0%

Oceanside 3,768,451 3,680,774 3,834,475 3,754,390 -2.1%

Poway 1,290,570 1,257,846 1,308,978 1,282,336 -2.0%

San Diego 26,299,525 25,711,318 26,797,632 26,231,612 -2.1%

San Marcos 1,674,208 1,662,249 1,730,500 1,694,938 -2.1%

Santee 1,181,130 1,157,592 1,204,479 1,180,049 -2.0%

Solana Beach 378,375 369,587 383,116 376,067 -1.8%

Vista 1,890,650 1,845,318 1,921,319 1,881,719 -2.1%

County* 12,384,232 12,191,798 12,705,794 12,437,979 -2.1%

Total Local Street Improvements $66,134,738 $64,754,967 $67,456,007 $66,048,640 -2.1%

Local EMP3 4,090,809 4,005,462 4,172,536 4,085,483 -2.1%

Local Smart Growth Incentive Program3 4,772,610 4,673,039 4,867,959 4,766,397 -2.1%Total Local System Improvement Allocations $74,998,157 $73,433,468 $76,496,502 $74,900,520 -2.1%

NOTES:

Local System Improvements TransNet Revenue Projections1,2

3 The local EMP and Smart Growth programs are a subset under Local System Improvements designed to encourage early project mitigation and smart growth planning. These funds are available on a competitive Call for Projects process.

FY 2010

*Excludes debt service

FY 2009

1 This table does not include interest earnings, which are allocated to each agency based upon actual cash receipts, or revenue bond proceeds allocated for specific projects.2 Local program funds are allocated based on $50,000 to each jurisdiction and the balance allocated by a formula using on 2/3 population and 1/3 miles of maintained roads.

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Attachment 1b

Approved Proposed Approved Proposed Difference

Total Available For Transit Purposes: $37,499,078 $36,716,734 $38,248,251 $37,450,260 ($797,991)

Less 2.5% for ADA-related Services ($937,477) ($917,918) ($956,206) ($936,257) $19,949

Less 3.25% for Senior Services ($1,218,720) ($1,193,294) ($1,243,068) ($1,217,133) $25,935

Subtotal $35,342,881 $34,605,522 $36,048,977 $35,296,870 ($752,107)

MTS Projects And Services:

Available for Transit Service Improvements (Operations and Supporting Capital Improvements) $25,064,608 $24,498,851 $25,520,739 $24,988,288 ($532,451)

Less Pass Sales Subsidy to SANDAG ($5,500,000) ($5,500,000) ($5,500,000) ($5,500,000) $0

Net Available $19,564,608 $18,998,851 $20,020,739 $19,488,288 ($532,451)

Available for ADA Services $663,683 $649,837 $676,943 $662,819 ($14,124)

NCTD Projects And Services:Available for Transit Service Improvements (Operations and Supporting Capital Improvements) $10,278,273 $10,106,671 $10,528,237 $10,308,582 ($219,656)

Available for ADA Services $273,794 $268,081 $279,263 $273,438 ($5,825)

Regional Discretionary Programs:Competitive Grant Program for Senior Transportation Services $1,218,720 $1,193,294 $1,243,068 $1,217,133 ($25,935)

SANDAG:

Pass Sales Program to distribute to MTS $5,500,000 $5,500,000 $5,500,000 $5,500,000 $0

Transit Service Program TransNet Revenue Projections

FY 2009 FY 2010

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Attachment 2

ApprovedRevised Estimated

Revenues* ApprovedRevised Estimated

Revenues

Total Apportionment $113,800,000 $110,902,372 $112,662,000 $113,120,419

Less County Auditor Expenses (PUC 99233.1) ($42,000) ($42,000) ($43,000) ($43,000)

Less SANDAG Administration (PUC 99233.1) ($421,481) ($410,749) ($552,266) ($553,964)

Less 3% Planning Funds (PUC 99233.2) ($3,400,096) ($3,313,489) ($3,362,002) (3,375,704)

Less 2% Bicycle/Pedestrian Funds (PUC 99233.3) ($2,198,728) ($2,142,723) ($2,174,095) (2,182,955)

Less 5% Community Transit Service (PUC 99233.7) ($5,388,985) ($5,251,771) ($5,328,682) (5,350,390)

Subtotal $102,348,710 $99,741,641 $101,201,955 $101,614,407

Total Available for MTS $72,457,389 $70,611,724 $71,645,548 $71,937,542

Less Regional Planning/Capital Projects ($951,080) ($951,080) ($1,562,700) ($1,562,700)

Less Transferred Functions ($2,118,254) ($2,064,298) ($2,094,522) (2,103,058)

Total Community Transit Service $3 738 810 $3 643 612 $3 696 972 $3 712 033

Transportation Development Act (TDA) Comparisons

FY 2009 FY2010

Total Community Transit Service $3,738,810 $3,643,612 $3,696,972 $3,712,033

Subtotal $73,126,865 $71,239,958 $71,685,299 $71,983,817

Total Available to Claim $73,126,865 $71,239,958 $71,685,299 $71,983,817

Total Available for NCTD $29,891,321 $29,129,916 $29,556,407 $29,676,865

Less Regional Planning/Capital Projects $0 $0 $0 $0

Less Transferred Functions ($500,680) ($487,926) ($495,070) ($497,087)

Total Community Transit Service $1,542,396 $1,503,123 $1,525,136 $1,531,349

Subtotal $30,933,037 $30,145,113 $30,586,473 $30,711,126

Prior Year Carryover $4,618,837 $4,618,837 $4,618,466 $4,618,466

Total Available to Claim $35,551,874 $34,763,951 $35,204,939 $35,329,592

Total Available for SANDAG:

Regional Planning/Capital Projects $951,080 $951,080 $1,562,700 $1,562,700

Transferred Functions $2,618,934 $2,552,224 $2,589,592 $2,600,146

SANDAG Expenses $421,481 $410,749 $552,266 $553,964

3% Planning Funds $3,400,096 $3,313,489 $3,362,002 $3,375,704

Prior Year Carryover $3,240,008 $3,240,008

Total Available to Claim $7,391,591 $7,227,542 $11,306,568 $11,332,522

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San Diego Association of Governments – TransNet Program

INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE

May 13, 2009 AGENDA ITEM NO.: 7Action Requested: INFORMATION

LAKE HODGES BICYCLE AND PEDESTRIAN BRIDGE STATUS REPORT File Number 3000800

Introduction The San Dieguito River Park Joint Powers Authority (River Park) has undertaken construction of a bicycle and pedestrian bridge over Lake Hodges, west of I-15 (see attachment). The new bridge will provide better and safer pedestrian and bicycle access between the north and south sides of the lake. The bridge is scheduled to be open for use beginning May 15, 2009. Since $1,875,000 of the funding for the project comes from the TransNet Extension Ordinance, the project is subject to review by the Independent Taxpayer Oversight Committee (ITOC). SANDAG provided the additional $1,875,000 in funds in March of 2007 under the condition that the River Park would not come back to request additional funding. The ITOC requested that SANDAG staff take an active role in providing oversight on the project and that the River Park provide a regular status report on the progress of the project.

Discussion Budget and Funding Even with the $1,875,000 allocation of funding in March 2007, the project remained underfunded by approximately $600,000. While work on the project proceeded, the River Park continued to seek additional funds and to investigate additional cost-saving measures in an attempt to reach an equilibrium between the funding available and the forecasted total project cost. Recently, River Park has secured an additional $675,000 in funding for the project, assuring the project will be completed within budget and funding. The additional funds are the result of a $400,000 donation to the River Park and a loan secured by the River Park in the amount of $275,000. Construction Progress Phase 1 construction of the project was completed on May 15, 2007, for a total cost of $2,055,000. Phase 2 of the project was awarded in mid 2007, and construction began in September 2007. The original contract amount was $6,579,275 and the current contract amount is approximately $6,573,000. The contract work is 97 percent complete. Total billings to date are $6,392,000.

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The work, except for some Contract Change Order work, is currently scheduled to be complete May 14, 2009, in time for the scheduled opening of May 15, 2009. The River Park had received a revised Biological Opinion and approval from the governing agencies that allowed work to continue after March 15, 2009. The overall construction and inspection has proceeded very well. There have been no major incidents with respect to safety or environment protection. A total of eight Contract Change Orders have been executed resulting in a small net savings to the project. Some additional Contract Change Order work remains to be added by River Park. The project was selected by FHWA for audit purposes, which resulted in a ruling of “No Findings.” Overall, the project is coming to a successful conclusion and has proceeded in accordance with the scope, schedule, and budget; and had its overall funding issues resolved. Attachment: 1. San Dieguito River Park Trails – Lake Hodges Area Key Staff Contact: Bill Prey, (619) 699-1941, bpr@sandag.org

Attachment 1

3

San Diego Association of Governments – TransNet Program

INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE

May 13, 2009 AGENDA ITEM NO.: 8Action Requested: DISCUSSION

ESTABLISHMENT OF AN ITOC SUBCOMMITTEE FOR THE IMPLEMENTATION OF THE FIRST TRIENNIAL TransNet PERFORMANCE AUDIT File Number 1139000

Introduction

The first TransNet Performance Audit report has been finalized and will be presented to the SANDAG Board of Directors on May 22, 2009. The Performance Audit has been conducted by Sjoberg Evashenk Consulting, Inc., in accordance with the requirements of the TransNet Extension Ordinance. The Independent Taxpayer Oversight Committee (ITOC) is asked to discuss the potential establishment of a subcommittee to develop an implementation plan for the recommendations contained within the Performance Audit.

Attachment: 1. Final TransNet Performance Audit Report including Response to Audit Recommendations

Key Staff Contact: Charles “Muggs” Stoll, (619) 699-6945, mst@sandago.org

San Diego Independent Taxpayer Oversight Committee TransNet Performance Audit May 22, 2009 Submitted By:

455 Capitol Mall•Suite 700•Sacramento, California•95814•Tel 916.443.1300•Fax 916.443.1350

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Table of Contents

Executive Summary...................................................................... 1

Introduction and Background ........................................................ 7

Scope and Methodology................................................................ 15

Chapter 1: A Robust Governance Structure is Employed, Although Oversight could be Enhanced ....................................................................... 19

Chapter 2: While Solid Management over TransNet Exists, Greater Performance Monitoring and Reporting Would Further Promote Accountability ..... 37

Chapter 3: Revenue and Cost Models are Practical; Yet, Project Budget and Schedule Reprioritizations Should be Better Chronicled.................... 51

Chapter 4: Project Delivery Methods are Sound; However, Some Practices Could be Enhanced................................. 69

Chapter 5: Conclusions and Recommendations ............................................... 93

Appendix A: TransNet Highway Construction & Transit Projects .....101

Appendix B: Audit Interviews Conducted......................................105

Appendix C: Amendments and Change Orders Reviewed...............109

Response to Audit Recommendations ..........................................111

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Executive Summary In 2004, the San Diego voters renewed their commitment to the region’s transportation improvement program by approving Proposition A, implemented through the TransNet Extension Ordinance (Ordinance), and continuing an existing half-cent transportation sales tax for an additional forty years. Although the measure became effective April 1, 2008, the San Diego Association of Governments (SANDAG) and its partners embarked on an ambitious program to accelerate certain major corridor highway construction and transit projects beginning in Fiscal Year 2005-2006. SANDAG estimated that costs for these early action program (EAP) projects slated for completion by 2015 will reach $5 billion. With the TransNet program only in the infancy of its 40-year duration, it is premature to predict results and reach conclusions on ultimate project delivery efficiencies or the success of performance outcomes given that many projects are still in preliminary scoping and environmental phases. For most projects, complete information is often not available because these projects have not evolved from early development stages into design and construction phases where more defined results can be assessed. Thus, we focused largely on the overall structure, practices, and controls established by SANDAG and Caltrans to plan, implement, manage, monitor, and oversee the development and delivery of the early action projects. Successfully accomplishing these steps should lay the foundation for sustaining a viable 40-year transportation and transit development system. Our audit revealed that SANDAG and Caltrans have launched a solid network with appropriate oversight, fiscal control, program management, and project delivery practices, although we identified activities that could be enhanced at a program-wide as well as project-specific level. In the sections that follow, we describe SANDAG and Caltrans efforts addressing the key elements of a successful program delivery listed below:

• Governance and Oversight • Performance Monitoring and Accountability • Fiscal Control and Budget Data • Project Management and Delivery

A Robust Governance Structure is Employed, Although Oversight Could be Enhanced Over the last three years, SANDAG has worked in conjunction with its transportation and transit partners to employ a robust framework with many critical elements to help achieve long-term project and program success. For instance, we found appropriate levels of governance and involvement from the SANDAG Board of Directors (Board), SANDAG Transportation Committee, and the Independent Taxpayers Oversight Committee (ITOC) that provide valuable and necessary oversight for key project costs and delivery practices. SANDAG’s broad responsibilities and delivery methods have fostered an environment of collaboration that successfully crosses local jurisdictional and governmental borders to create synergies in the development of the region’s transportation and transit projects. In part, this is demonstrated through SANDAG’s use of corridor director positions in concert with

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Caltrans allowing for heightened accountability through a cross-agency project management structure tracking projects from cradle to grave, as well as continuous monitoring over all corridor projects’ schedules and costs. However, better information could be provided to oversight bodies, including the ITOC, to assist in policy-setting, monitoring, and decision-making as current data provided does not capture full project history, critical prior budget actions, scope adjustments approved, project risks and benefits, or cumulative impact of past decisions made. Additional statistics related to project impact on travel time and congestion, as well as project performance in terms of schedule and budget adherence.

While Solid Management over TransNet Exists, Greater Performance Monitoring and Reporting Would Further Promote Accountability In an effort to enhance transparency and promote accountability, SANDAG and Caltrans both utilize appropriate tools and employ reasonable processes to monitor the overall TransNet program as well as manage individual project performance. Throughout the highway and transit project efforts, SANDAG and Caltrans management foster a collaborative environment setting the tone emphasizing the coordinated flow of critical project data between the agencies, controls over budget and schedule adherence, and joint resolution of project dilemmas. SANDAG and Caltrans apply numerous practices and automated tools to track budget and schedule data. For instance, detailed project budget and schedule data used by SANDAG and Caltrans project managers are consolidated through a “Dashboard” database that efficiently streamlines data collection and summarizes corridor, segment, and project status through the automatic integration of data gathered from disparate systems. Available for use by internal project teams as well as the general public, we found Dashboard data related to budgets, expenditures, and schedules to be generally reliable. While the Dashboard provides a good framework for online reporting of project status, older budget and expenditure data included for certain projects may skew data and activities under the TransNet program. Additionally, some early projects are not included within the Dashboard data thus providing an incomplete picture of TransNet funded project activity. SANDAG should revisit the intent and vision of the Dashboard and determine how best to track and provide meaningful project results as well as consider other minor enhancements recommended by our audit. Moreover, the TransNet program would benefit from incorporating challenging goals and targets for program outcomes and develop and track associated measures to assess efficiencies and effectiveness of efforts as part of a comprehensive monitoring system. Existing TransNet program goals could be more clearly defined through objectives linked to specific performance measures. In addition to adopting meaningful effectiveness measures, SANDAG should establish goals, strategies, and performance measures to track program and project delivery efficiency indicators related to meeting delivery milestones, staying within set ranges of cost estimates, and reducing support costs and overhead by predetermined

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amounts. Results from these performance indicators should be made available to oversight entities, particularly the ITOC, Corridor Directors, and to the public.

Revenue and Cost Models are Practical, Yet Project Budget and Schedule Reprioritizations Should be Better Chronicled Another critical component of a successful program is sound financial planning and controls over financial management. Our review revealed that SANDAG’s Plan of Finance and debt structure model appear reasonable and are based on sound assumptions that provide and dedicate funding to complete the EAP projects as promised. Since accelerating funding for these projects, as of June 30, 2008, SANDAG has committed approximately $635 million in bonds and commercial paper financing. Moreover, SANDAG has well-positioned itself to maximize funding and is motivated in identifying potential revenue streams that could leverage sales tax revenue. Although the 40-year revenue forecast is difficult to predict with certainty at this time, such forecasts and cost projections appear reasonable. Further, budget projections are periodically revisited using actual results and adjusted as necessary in preparing future forecasts. For instance, since actual sales tax receipts have decreased in the last two years, SANDAG revised its short-term revenue projections downward, and is in the process of modifying its long-term funding forecasts. However, the availability of sufficient funding is and is likely to remain a significant challenge to project completion. Toward this end, when the EAP projects were identified, the SANDAG Board effectively dedicated nearly all of federal, state, and local TransNet sales tax funds to the delivery of these projects. The governing and oversight bodies publically vetted and deliberated the decision and ultimately agreed the EAP projects would provide the most regional benefits—even at the risk that other TransNet projects may not be accomplished. As part of the biennial Regional Transportation Improvement Program process as well as the annual budget process, SANDAG and its transportation partners continually revisit and revise project budget, scope, and delivery schedules as part of regional planning and prioritization efforts. The continual reprioritization is consistent with its authority as the Regional Transportation Commissions and was reemphasized in the Ordinance. With the ongoing reprioritization and budgetary movement of the various EAP project components, SANDAG should employ mechanisms to formally track the budget history of each corridor or segment outlined in the Ordinance as amended or updated during annual processes. Such tracking of evolutionary changes occurring over time would memorialize the early decisions and actions affecting a particular corridor or segment in a consolidated manner—as well as provide decision makers charged with program oversight with additional information to use when weighing options or alternatives presented to them for resolution. Currently, much of this information is available in a variety of forms such as the quarterly reports submitted to the ITOC and SANDAG Board as well as in project team meetings and other senior management reports; yet, no central repository or consolidated resource exists to easily account for funding or project scope changes made.

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Project Delivery Methods are Sound, However Some Practices Could be Enhanced Generally, SANDAG and Caltrans appear to have an adequate project management and oversight structure to review, update, and monitor projects to ensure sufficient cost controls and timely project delivery. Overall practices in place for project delivery are consistent with peers and industry best practices. However, SANDAG could benefit from formalizing its project delivery practices and procedures by memorializing Board policy direction into procedural implementation manuals to guide daily project activities, and by instituting uniform filing systems and automated tools for tracking project history files. Because the TransNet program is in its infancy, many of the EAP projects are in preliminary scoping or early design stages. For instance, only four projects have begun construction. While not enough time has passed or efforts completed for us to draw conclusions on project performance, preliminary indications revealed that taxpayers are seeing early value for their investment. Our review of EAP project data between Fiscal Years 2006-2007 and 2008-2009 revealed that while several individual projects and segments have experienced budget overruns and schedule delays, the EAP projects generally appear to be on schedule and are currently meeting the TransNet authorized program budget of nearly $5 billion. Our review of the underlying detail behind budget overages by project phase revealed that generally project managers employed reasonable cost monitoring and project management techniques to timely address and mitigate project scope, schedule and cost changes, while minimizing the overall project cost overruns. In addition to reasonably established timelines, proven construction cost estimate models, and techniques based on sound assumptions, solid processes are in place to monitor costs throughout a project’s lifecycle in areas such as task order amendments and change order approvals. Our comparisons of bids to estimates for the 21 EAP project construction contracts issued over the past three years showed an average difference of only 2.2 percent for all contracts. Additionally, our review of key performance indicators for the EAP projects showed industry-acceptable low percentages of change orders as compared to contract amounts, and cost estimate variances within the acceptable norm. Although we found sound procedures were established to award and monitor consultant work, better documentation practices could be employed in reviewing and approving task order requests for time extension for those task order amendments we reviewed. Similarly, change orders issued over the last three years accounted for approximately 14 percent of amounts originally bid. While this percentage is higher than the 10 percent average in the construction industry, the difference between payments and the initial contract bid value was only 7.64 percent. Moreover, lessons learned from previous projects are discussed and considered on an informal basis through weekly project development meetings and monthly corridor director meetings. However, project evaluation closeout forms used by Caltrans should be more consistently prepared and completed as each phase is completed on long-term projects rather than waiting until construction is final and all claims addressed—which extends several years. Other potential project improvement opportunities for TransNet project practices include consistently applying risk assessments and related mitigation plans, improving project performance reporting practices, and creating a comprehensive set of project development policies and procedures for transit projects.

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Recommendations Continuing the strong practices launched and momentum gained in the initial three-year period of the TransNet program, we have recommended 25 improvements and refinements to enhance the TransNet program. A complete list and discussion of each recommendation is provided in Chapter 5 of this report, with highlights summarized below:

• Develop high-level project summary documents, or “Report Card” to capture project detail relating to key project budget, schedule and scope changes;

• Standardize ITOC administrative documents, including meeting agendas and status reports used in the ITOC oversight and decision-making process;

• Revisit the intent and vision for the Dashboard to potentially include all TransNet projects as well as to refine existing data to ensure accuracy, complements, and clarity of data nuances;

• Define and clarify project and program performance goals and targets to measure program performance;

• Continue to regularly monitor and review the debt to revenue ratio and report status monthly to the ITOC;

• Establish a mechanism to link and track the Ordinance planned projects and amounts with current plans and budgets for all TransNet projects;

• Enhance current project management and delivery practices by ensuring post-evaluation forms are consistently used and completed for all projects after each project phase, as well as memorializing transit practices and uniform filing systems; and

• Ensure consistent implementation and reliance on best practices to tighten project delivery tools including risk assessment tools.

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Introduction and Background

With reports of traffic increasing and congestion growing at rates faster than highway construction and available transit services, the voters in San Diego County passed Proposition A in November 2004 calling for a continuation of the existing half-cent transportation sales tax for an additional 40-year period, from 2008 through 2048, to relieve traffic congestion, improve safety, and expand highways, transit, and local streets and services. This proposition, implemented through the San Diego Association of Governments (SANDAG) Board of Directors’ adoption of the TransNet Extension Ordinance (Ordinance), paved the way for these local funds dedicated to transportation improvements to be leveraged through state and federal matching dollars for improving regional systems. SANDAG is designated as the Regional Transportation Commission responsible for major highway and transit projects and is ultimately responsible for implementing the Ordinance and TransNet projects.

TransNet Extension Ordinance of 2004 Recognizing the continued need for transportation and transit improvement projects, the SANDAG Board of Directors prepared and authorized the Ordinance and Expenditure Plan to expand upon the foundation and projects completed under the original TransNet program approved by voters in 1987. The Ordinance and Expenditure Plan, a legal document that formally enacts sales tax measures approved through the public voting process, provided for the implementation of the region’s transportation improvement program and identified an estimated $14 billion for other transportation and transit improvement projects to be completed between 2008 and 2048. The Ordinance distributed funds as shown in Table 1. Table 1: TransNet Distribution of Funds Over 40 Years (in millions, 2002 dollars)

Expenditure Plan Component Amount

over 40 years Major Transportation Corridor Improvements ‐Freeway, Highway, and Transit Capital Projects ‐Project Specific Transit Operations ‐Freeway, Highway, and Transit Environmental Mitigation

$5,150 $1,100 $ 600

Local System Improvements ‐Local Street and Road Projects ‐Local Street and Road Projects Environmental Mitigation ‐Smart Growth Incentive Competitive Grant Program

$3,950 $ 250 $ 280

Transit System Improvements ‐Continuing Bus/Rail Support and Improvements (Senior/Disabled/Youth Transit Passes and Services)

$2,240

Congestion Relief Program $13,570 Bicycle, Pedestrian and Neighborhood Safety Grant Program $280 Administration (SANDAG) $140 Independent Taxpayer’s Oversight Committee (ITOC) $10

Total TransNet Funding: $14,000

Source: TransNet Extension Ordinance and Expenditure Plan, p.18

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Specifically, the Ordinance targeted regional congestion relief projects with funding for environmental mitigation, bicycle and pedestrian safety, local streets and roadways, and smart growth initiatives, transit services. For instance, it specified that major transportation corridor capital projects receive approximately 49 percent, or $6.85 billion of estimated funds, while transit operation services and local system improvements were slated to receive $2.24 billion and $4.48 billion, respectively, over the 40-year life of the program. Within these allocations, the TransNet extension included $850 million for environmental mitigation and approximately $280 million in grants for smart growth incentives to be allocated on a regional competitive grant basis for local transportation infrastructure improvements. Further, the Ordinance laid out 47 specific corridor projects that the SANDAG Board selected for inclusion in the TransNet Extension program (see Appendix A). Two percent of all available funds were earmarked for bicycle paths and facilities, pedestrian improvements, and neighborhood safety projects. The TransNet Extension Ordinance also allocates a portion of funds for senior, disabled, and youth discounted transit passes.

To ensure sales tax revenues are appropriately distributed to the designated entities and programs in accordance with Ordinance provisions, SANDAG has developed an internal system called Project TTRAK which automatically calculates the sales tax distribution in compliance with the Ordinance. Detailed allocations within Project TTRAK serve as subsidiary records to SANDAG’s financial system providing a listing of revenues received that must be distributed to various programs and entities. Designated SANDAG staff reconciles and recalculates the TransNet revenue distribution amounts monthly for all entities and program categories.

The Ordinance also established the Independent Taxpayer Oversight Committee (ITOC) to provide enhanced levels of accountability and monitoring of program expenditures compliance with Ordinance provisions. Further, the Ordinance establishes the ITOC’s responsibility for conducting triennial performance audits of SANDAG and other agencies involved in the implementation of TransNet-funded projects and programs to review project delivery, cost control, schedule adherence, and related activities.

Sales Tax Revenues are Leveraged to Finance Projects One tenet of the Ordinance is to leverage each TransNet dollar with a dollar from another funding source, such as the state gas tax or federal funds. Specifically, the Ordinance assumed that 50 percent of the costs of the major corridor projects would be covered by non-TransNet program sources such as state, federal, and other matching dollars. Some of the other funding sources used for TransNet EAP projects include:

Federal Funds—Four separate federal programs relating to congestion mitigation and air quality improvement, high priority projects, regional surface transportation, and the safe, accountable, flexible, efficient transportation equity act.

State Funds—Four primary state funding pools include state transportation improvement program, state highway operation and protection program, corridor mobility improvement account, and traffic congestion relief program.

Local Funds—Various sources from local cities and districts.

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Depending on the project, TransNet funds do not always constitute the majority of funding. For instance, for the EAP projects, TransNet monies comprise approximately 40 percent of the funding committed for those projects as shown in Figure 1.

Figure 1: TransNet Funding Sources Committed Through Fiscal Year 2008 (in millions)

$1,633.7 40%

$1,257.6 30.8%

$1,164.5 28.5%

$29.1 0.7%

TransNet Program Funding Sources Committed (in millions)

TransNet

State

Federal

Local

Source: Dashboard web‐based system at keepsandiegomoving.com (as of September 30, 2008)

SANDAG has Primary Responsibility over TransNet, Although Other Entities are Involved Originally formed in 1966 as the “Comprehensive Planning Organization” and renamed in 1980, the San Diego Association of Governments (SANDAG) is a regional decision-making body consisting of 18-city agencies and the County of San Diego. Governed by a Board of Directors comprised of mayors, council members, and supervisors that represent each of the local jurisdictions. Supplementing the Board are advisory representatives from Imperial County, Caltrans, Metropolitan Transit System, North County Transit District, United States Department of Defense, San Diego Unified Port District, San Diego County Water Authority, Southern California Tribal Chairmen’s Association, and Mexico’s local consulate office. In addition to other committees, the Board is advised by its nine-person Transportation Committee on major policy-level matters related to transportation and provides oversight for many highway, transit, and other TransNet projects. The Board is assisted by a professional staff of executives, planners, engineers, and researchers. As a result of the increased regional responsibilities assumed by SANDAG over the last seven years, it exercises broader authority and decision-making ability over the region’s highway and transit development. According to SANDAG budget documents, SANDAG

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holds the following related designations and responsibilities in the San Diego region among others:

Council of Governments for the San Diego Region Metropolitan Planning Organization San Diego Regional Consolidated Agency Regional Transportation and Funding Allocation Agency San Diego County Regional Transportation Commission Congestion Management Agency Co-lead Agency for Air Quality Planning

With its multitude of roles, SANDAG has the authority to direct the use of greater levels of transportation funding in the San Diego region than do most other large regional transportation agencies in the State. For instance, as the designated Regional Transportation Commission, the SANDAG entity is charged with responsibility to implement, fund, and administer any regional transportation improvement program including those funded by countywide sales tax initiatives such as the 2004 TransNet Extension Ordinance. Yet, while the authority and administration over the TransNet Extension rests primarily with SANDAG, other key entities provide critical involvement and shared responsibilities over certain transportation development functions as outlined below:

Caltrans For TransNet’s major corridor capital projects, the Caltrans’ San Diego District 11 Office works closely and collaboratively with SANDAG on projects to improve mobility in the region. The Ordinance includes language specifically establishing shared responsibilities between SANDAG and Caltrans for project development and management over local state highway projects. Further, all major decisions regarding project scope, budgets and timelines are to be agreed upon by both SANDAG and Caltrans. Although SANDAG may choose to outsource portions of the project delivery work, Caltrans is responsible by State statute for providing oversight of the projects relating to state highways to ensure that work is performed according to the standards established by the State of California. Under the TransNet program, SANDAG relies on Caltrans for the vast majority of highway project delivery work. Currently, Caltrans District 11 employs approximately 1,400 staff, of which approximately 800 are dedicated to TransNet highway transportation projects.

Metropolitan Transit System (MTS)

MTS is a California public agency that owns assets of the San Diego Trolley, Inc. and San Diego Transit Corporation and provides transit services for the central, south, northeast and southeast regions of San Diego County. It also owns San Diego and Arizona Eastern Railway. Overseeing operations is a 15-member board of directors with representation from the cities of San Diego, Chula Vista, Coronado, El Cajon, Imperial Beach, La Mesa, Lemon Grove, National City, Poway, Santee as well as the County. Currently, MTS staff participates on transit EAP projects providing planning insight and input into the transit networks MTS will operate once developed.

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North County Transit District (NCTD) NCTD is a regional transit operator that provides public transportation to Northern San Diego County through the BREEZE bus system, COASTER commuter rail service, SPRINTER light rail, and LIFT para-transit services. Its board of directors includes representatives from Carlsbad, Del Mar, Encinitas, Escondido, Oceanside, San Marcos, Solana Beach, and Vista as well as a county supervisor representing unincorporated areas of North County. In addition to managing the completion of the TransNet designated-SPRINTER light rail development project, NCTD provides transit planning input and advice to SANDAG on TransNet projects as needed.

City of San Diego The City of San Diego Engineering and Capital Projects Department is responsible for a wide range of activities related to design, construction, and delivery of public improvement projects including local roadways. Based on the City’s submission of a number of eligible local transportation improvement projects, SANDAG began distributing TransNet Extension sales tax revenue to the City in July 2008 for these projects. Additionally, the City of San Diego is involved in all Caltrans and SANDAG-administered highway and multi-modal projects that impact the City’s use of land including local roads, existing transit lines, and other areas under the permit process as well as participates on the SANDAG regional Cities and County Transportation Advisory Committee.

County of San Diego

The County of San Diego’s Department of Public Works maintains nearly 2,000 miles of roads in the county’s unincorporated areas and is responsible for local traffic engineering, land development civil engineering review, design engineering, and construction management. Similar to the City, the County also submits its list of eligible local transportation improvements projects to SANDAG and receives distributions of the excise tax. Given the TransNet Extension distributions have only recently commenced in July 2008, the County has not yet seen any substantial funding. However, the County does provide advice and insight to SANDAG and Caltrans for the TransNet major corridor highway and transit projects surrounding connector roads, ramps, or permits needed. Regional perspective and input is also provided through the County’s participation on SANDAG’s Cities and County Transportation Advisory Committee.

Independent Taxpayer Oversight Committee (ITOC)

The TransNet Extension Ordinance established an Independent Taxpayers’ Oversight Committee (ITOC) to provide increased accountability for expenditures made under the TransNet program and ensure all voter mandates are carried out as required by developing recommendations for improvements to the financial integrity and performance of the program. Additionally, the ITOC oversees independent annual fiscal and compliance audits as well as triennial performance audits to ensure voter mandates are carried out in accordance with the Ordinance. The Ordinance further states that ITOC also serves as an independent resource to SANDAG.

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TransNet Early Action Program Projects In 2005, statistical data indicated regional congestion was increasing, but the infrastructure to handle traffic was not being built fast enough to keep pace. To demonstrate its commitment towards immediate improvement of the region’s transportation needs, SANDAG worked in close collaboration with Caltrans to accelerate the delivery of certain major corridor projects identified in the Ordinance. These accelerated EAP projects were initially selected following guidance established in the Ordinance and given priority as they remained uncompleted from the original ordinance in 1987 and under criteria established through the regional transportation improvement planning process. Additionally, during the ensuing three years, other projects were eligible to be added or accelerated as an early action project if they met similar criteria. Yet, because sales tax revenues from the TransNet program could not be distributed until July 1, 2008, the SANDAG Board made a strategic decision to borrow against future revenues and leverage available state and federal funds by approving the sale of $135 million in commercial paper in 2006. SANDAG further increased its financing activities in the spring of 2008 by authorizing $600 million of long-term variable rate bonds. With the availability of funding through the early financing techniques employed, the SANDAG Board approved certain EAP projects, as shown in Figure 2, for accelerated delivery by 2015.

Figure 2: TransNet EAP Projects and Distribution of Project Funding

$22 $270

$670

$30

$70

$770 $118

$72

$14

$200

$170

$60 $180

$154

Distribution of TransNet Funds between EAP (in millions, 2002 dollars)

Mid‐City Rapid Bus Purchase

Superloop

Mid‐Coast LRT

Blue Line Trolley

Orange Line Trolley

I‐15 Managed Lanes (3 projects)

I‐15 BRT

I‐805 BRT

I‐805 Managed Lanes Environmental

SR‐52 Extension

SR‐52 Widening

SPRINTER Completion

SR‐76 Widening

I‐5 North Coast & Lomas Santa Fe Interchange

Source: TransNet Extension Ordinance and Expenditure Plan Analysis, March 2004; and Board actions as documented in meeting minutes between 2005 and December 2008

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Most of the projects are in preliminary project phases of environmental or design. Given that the TransNet Extension program has just started its 40-year clock, only three main EAP projects have been completed or are nearing completion—namely the I-15 Middle segment, SPRINTER rail, and I-5 HOV lanes. Further, not all early action projects are related to development and construction of highway or transit systems—some are related to purchases of new buses, trolleys, and station improvements. In addition to the 17 projects identified as EAP projects, there are approximately 32 non-EAP projects also designated in the Ordinance as shown in Appendix A.

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Scope and Methodology

The TransNet Extension Ordinance established a requirement that ITOC conduct triennial performance audits of the agencies involved in the implementation of TransNet-funded projects. In August 2008, Sjoberg Evashenk Consulting, Inc. (SEC) was selected by the ITOC to conduct the first in a long series of triennial performance audits of TransNet-funded Early Action Program (EAP) projects. The period covered by this audit was July 2005 through June 2008, except where we needed to obtain contextual or underlying support data from periods prior to 2005 or more recent information to fully analyze project activities and practices. The main audit objectives were to:

• Determine whether the organizational structure and operational processes allow for effective and efficient project delivery, cost control, and schedule adherence

• Identify process changes in contracting, construction, permitting, and other procedures that could improve the efficiency and effectiveness of the program

• Evaluate the efficiency and effectiveness of the ITOC, and adherence to bylaws • Identify potential barriers to proposed changes and implementation challenges

Toward these goals, we assessed the underlying framework established over the last three years to guide the 40-year TransNet program by reviewing practices in the following areas:

• Governance and organizational structure; • Program and project oversight; • Financial management and modeling; • Project and program development and progress monitoring; • Program and project adherence to budgets and schedules; • Technology and communication tools used; • Existing program and project performance measures; • Procurement and contracting practices; and • Task order amendments and change order processes.

As part of understanding the environment and historical context of the TransNet program, we reviewed federal, state, and local laws and ordinances in addition to annual budgets, prior audits, fact sheets, online data, program management assessment conducted in 2005, and regional planning documentation and prioritization criteria including:

• Regional Comprehensive Plan of 2004 and 2007; • Regional Transportation Congestion Improvement Plan of 2006 and 2008; • Regional Transportation Improvement Program of 2006 and 2008; • 2030 Regional Transportation Program of 2003 and 2007; and • SANDAG’s Capital Improvement Program and Overall Work Program for Fiscal

Years 2006, 2007, 2008 and 2009.

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To analyze and consider the full complement of challenges and successes surrounding the organizational and operational procedures in the development of the EAP projects, we researched similar programs, current best practices, and industry benchmarks as well as conducted a wide-range of interviews to ascertain perspectives, insights, options, and recommendations on the implementation of the TransNet program. Specifically, we met with over 60 transportation executives, officials, managers, staff, and stakeholders. For a complete listing of audit interviews conducted, refer to Appendix B of this report. As part of assessing governance and oversight, we reviewed meeting agendas and minutes from the SANDAG Board of Directors, SANDAG Transportation Committee, and the ITOC including reports and data provided at these meetings over the last three years as well as memorandums of understanding, program handbooks and manuals, board policies, bylaws, organizational charts, status updates, quarterly reports, and annual reports. Using these documents, we analyzed roles and responsibilities, levels of communication and collaboration, communication of program status, depth and type of data provided to decision makers, and sufficiency of oversight inquiries. Additionally, we reviewed a mandated governance assessment report conducted by the State Legislative Analyst’s Office in accordance with Senate Bill 1703. Moreover, we reviewed state and federal requirements and available audits conducted by the Bureau of State Audits, Federal Transit Administration, Federal Highway Administration, and contracted firms over transportation and transit activities. To ascertain the adequacy of financial models, projections, and management over the TransNet program, we studied and analyzed pertinent documentation from various sources including SANDAG’s financial records, modeling spreadsheets and databases, historic and prospective revenue projections and underlying assumptions, regression analyses, bond issuance documents and official statements, interest swap agreements, plans of finance, board status reports, and SANDAG Board meeting minutes. Similarly, we reviewed cost estimates and underlying supporting documents with assumptions and calculations. Additionally, we reviewed SANDAG’s general ledger and subsidiary ledgers to recalculate sales tax distributions to ensure they complied with the Ordinance provisions. Based on inquiries and documentary review, we assessed the project priority process used to identify the EAP projects as well as employed on a regular basis to change project budgets, modify schedules, accelerate or delay projects, or add projects to the TransNet program. Specifically, we reviewed the Ordinance, Board minutes and Board policies, TransNet Plan of Finance, regional transportation plans, capital improvement programs, and project meeting documentation. To evaluate and assess program and project development, monitoring, control, and oversight, we analyzed policies and procedures, project delivery manuals, practices, and processes. Additionally, we selected a sample of projects from the 17 EAP projects to review for compliance with policies and procedures, adherence to budgets and schedule, monitoring and approval of activities, and reasonableness of approach. Because of the preliminary phases of several of the projects, data available was incomplete at this project stage. However, we reviewed and analyzed project specific documentation including, but not limited to—environmental documents and design plans; project team coordination meeting minutes;

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detailed schedules and budgets; cost estimates and actual costs; contracts and change orders; task orders and amendments; payment vouchers for contractors and invoices for consultants; and resource staffing assignments. We reviewed automated tools used to manage the TransNet program and individual projects against budgets and schedules. Specifically, we compared budgeted costs, actual expenditures, planned timelines, and actual completion dates displayed in the Dashboard with underlying Primavera and Microsoft Project program management scheduling tools as well as SANDAG’s financial data recorded in its Integrated Financial and Administrative Solution (IFAS) and Caltrans’ Transportation Accounting and Management System (TRAMS) financial system. Additionally, we calculated percentages of budgets exhausted against progress made on project tasks as well as analyzed how corridor directors and project managers used data from the Dashboard to manage projects. To assess existing program and project performance measures, we conducted inquiries of SANDAG and Caltrans staff as well as reviewed SANDAG’s State of the Commute report from 2005, Caltrans’ Performance Measurement report from 2007, and the State of Virginia’s Transportation Accountability Commission 2008 report. Further, we reviewed data tracked and reported through the University of California, Berkeley’s on-line Performance Measurement System (PeMS). We compared the TransNet measures used against those employed by other entities, general best practices, and trends in the industry. Additionally, we evaluated SANDAG’s and Caltrans’ contracting and procurement practices through a review of contracting and procurement manuals, board policies and directives, project file documents, competitive proposal documents, bid summaries, contracts, agreements, task orders and scopes of work, change request documents, invoices, payment vouchers, and contractor evaluation. Further, we selected a sample of task order amendments and construction contract change orders to assess the controls over the contract modifications, budget and schedule adjustments, consultant and contractor monitoring and performance evaluations.

Finally, we attempted to compare the TransNet program practices and protocols against other like entities in terms of size, population, and urban focus. As such, we identified transit and transportation entities in the following to compare San Diego against—Los Angeles, Orange, San Jose, San Francisco, and Sacramento, California as well as entities in Arizona, Washington, and Virginia. However, we were not able to obtain full and complete data; thus, only limited comparisons could be drawn. We conducted this audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The audit findings and conclusions were presented and discussed with representatives of SANDAG, Caltrans, and the ITOC prior to completion of the audit. Management comments were considered and incorporated into the report as appropriate.

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Chapter 1: A Robust Governance Structure is Employed, Although Oversight Practices Could be Enhanced Since 2005 when the early action program (EAP) projects of the TransNet Extension Ordinance (Ordinance) were launched, the program has enjoyed a strong framework in place to vision and guide direction over the Ordinance major corridor projects. Building upon the responsibilities outlined in the Ordinance, SANDAG and its partners have established a structure to guide the planning, development, implementation, management, and monitoring of the TransNet program. Specifically, the program employs elements consistent with industry best practices such as the following:

• Employing governance and oversight for the ongoing and frequent review of progress made towards achieving goals and objectives and timely decision-making process to effect changes to program management and administration when necessary.

• Using written plans, agreed-upon approaches, and memorandums of understanding to define and clarify roles and responsibilities for management principles and decision-making parties involved in the TransNet program.

• Establishing a joint agency management structure to implement and monitor project development, delivery, and performance and be accountable for project schedule and cost.

Functioning under the guidance of the San Diego Association of Governments (SANDAG) Board of Directors (Board) and its Transportation Committee as well as oversight of the Independent Taxpayer Oversight Committee (ITOC), the governance and management structure established for the Ordinance has operated with concurrence over the first three years of the program. The structure affords open and ongoing collaboration and communication amongst all players between the governing board, SANDAG Transportation Committee, SANDAG executive and project teams, and external partners at Caltrans, Metropolitan Transit System (MTS), and North County Transit District (NCTD). Critical program and project-level detail related to costs, schedule, and scope are fully discussed and vetted at all levels, and alternatives and decisions are regularly deliberated. With transparency and accountability as key tenets and driving forces behind the TransNet program, SANDAG appears to have practices in place over its EAP projects to ensure those concepts remain clearly in focus. Operating under written plans and formal memorandums of understanding, SANDAG and its partners have defined roles and responsibilities to accomplish region-wide goals that include conflict resolution practices designated to ensure challenges and obstacles are promptly vetted and resolved to keep projects moving forward. For instance, memorandums of understanding between SANDAG and Caltrans for the joint development of highway construction projects as well as between SANDAG and regional transit operators guiding transit development projects provide the relationship framework. Supplemental written plans further define project team member roles and activities, cross-jurisdictional project team reporting relationships, and conflict resolution procedures.

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Moreover, SANDAG uses an innovative corridor director structure steering its transportation construction relationship with Caltrans that holds individuals accountable for managing multi-disciplinary teams of experts with the expectation that projects are ultimately delivered on budget and on schedule. While independent oversight is exercised by state and federal agencies as well as external private firms that conduct reviews and audits of administrative, operational, and project delivery practices, other local bodies also maintain a watchful eye over the TransNet program and individual projects. Specifically, the SANDAG Board, SANDAG Transportation Committee, and the ITOC conduct critical reviews and deliberations of EAP project activities and the use of funds for these projects. We have, however, identified areas where enhanced information would provide decision makers, including the ITOC, with better tools to deliberate project items, weigh and make decisions, and strengthen its oversight role. For example, information related to individual project history, critical prior budget actions and scope adjustments approved, or cumulative impact of past decisions made could enhance oversight practices. Additionally, data related to project financing, risks, and benefits could be provided through a “Report Card” type concept that is employed by others in the transportation industry. Moreover, oversight bodies could better monitor the overall TransNet program with access to statistics related to project impact on travel time and congestion as well as project performance in terms of schedule and budget adherence.

Board and Transportation Committee Are Involved in Decision Making From the inception of the TransNet program, the SANDAG Board has been designated as the final arbitrator in regional issues and continues to be appropriately involved in active governance and approval of program activities. Specifically, changes to project scope, schedule, budget and any other amendments to project concept as outlined in the SANDAG long-range and short-range regional transportation plans, are reviewed and approved by the Transportation Committee and the SANDAG Board. Based on interviews and reviews of Board meeting minutes, it appears that the Board is appropriately involved in its governance of the TransNet program and does not appear to provide “rubber-stamp” approvals. Moreover, acting in its capacity as an oversight and policy-advisory committee to the SANDAG Board, the SANDAG Transportation Committee engages in significant discussions of key aspects on project planning and funding priorities with committee members and considers public input before forwarding its recommendations to the Board for a formal approval. Under provisions of the original 1987 TransNet Ordinance and its enabling legislation, the SANDAG Board, in its capacity as the Regional Transportation Commission, is authorized to allocate revenues derived from the excise tax per the terms of the ballot measure and consistent with the Regional Transportation Plan. As part of this role, the Board must approve an expenditure plan for all excise tax revenues that includes statutory provisions and a number of major capital corridor projects with road construction, highway improvements, and transit elements—a responsibility that continued with the passage of the TransNet Extension Ordinance in 2005. Since the voters extended the excise tax, SANDAG has collaborated with local jurisdictions and transportation partners to identify and refine specific projects and programs to be included in the plan. Nonetheless, the Board ultimately makes

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the final decision to move forward with a plan as well as maintains the authority for any amendments to that plan or changes to the overarching vision of the TransNet program. Decisions appear to be made and input considered at both an overall TransNet program level as well as at the individual project level. SANDAG and its partners routinely provide the Board with program and project information related to cost, scope, and schedule to enhance the process. For instance, data such as project updated budgets, environmental impact studies and related air capacity conformity analysis are presented to the Transportation

Committee for incorporation into the Regional Transportation Plan. Also, we found that various parties pose rigorous questions relating to the impact of time delays on project budgets, underlying reasons for recurring requests for additional funding, and project management approach that serve to vet issues and assist in maximizing cost savings and ensuring cost efficiencies in project delivery. Appropriate elements seem to be considered as additional requests and inquiries are made of the Corridor Directors, Caltrans, and SANDAG executives participating in these meetings. Moreover, the SANDAG Transportation Committee and the ITOC often request additional information to explain reasons for augmented project

funding and project-specific matters to attain a better understanding of the underlying issues and make fully informed decisions. Further, several options are typically reviewed and project additional costs and desired scope changes may be scaled up or down. Thus, we found a deliberative and thoughtful process is employed to allow the many alternatives and impacts to be considered—yet, it is too early in the TransNet program to conclude with certainty the quality of the oversight on ultimate outcomes. Similarly, the SANDAG Transportation Committee, in its role to advise the SANDAG Board on major policy-level matters related to transportation, is also heavily involved in the TransNet program with its assistance in the preparation of the Regional Transportation Plan and making ongoing recommendations to the Board relating to key project scope, budget and schedule changes. During its monthly meetings, the Committee asks probing questions of SANDAG and its partners as part of the Transportation Committee’s governance over the timely and on-budget completion of projects. For instance, the reallocation of funds between different project phases on the SR-76 project and mitigating the budget shortfall due to a statewide shortage of funding from the State Transportation Improvement Program was considered with respect to the risks and potential impact on the overall TransNet EAP project delivery schedule and budget. Specifically, budgeted dollars for the SR-76 right-of-way were reallocated to the SR-76 Middle segment to augment the project budget and accommodate the environmental studies needs. Other SANDAG committees also provide information and recommendations to the Board. One committee, the Regional Planning Committee, provides data and details related to needs assessment, plans, transportation goals, financing, and design components of the entire region that can be considered by the Board against the framework of the TransNet program.

SANDAG Board has the authority to:

Approve TransNet expenditures

Reprioritize TransNet projects consistent with the Regional Transportation Plan

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Similarly, the Public Safety Committee advises the Board on matters related to public safety through collaboration, information sharing, effective technology, monitoring, and assessment.

ITOC Efforts fulfill its Oversight Role Established in 2005 as part of the Ordinance, the ITOC was created to oversee the TransNet program and ensure activities are carried out in accordance with the Ordinance. The ITOC members, screened and selected based on specific professional expertise delineated in the Ordinance, have the following responsibilities:

• Provide an increased level of accountability for expenditures under TransNet Extension;

• Ensure all voter mandates are carried out as required in the TransNet Ordinance; • Assist SANDAG in the implementation of TransNet projects and programs through

professional expertise offered by ITOC members; • Report to the SANDAG Board with regard to program and project delivery, and

overall performance;

• Rely on project/program data furnished by SANDAG, and strive to improve the reliability of data, to improve the analytical and modeling processes;

• Facilitate a cooperative and productive working relationship between the ITOC and SANDAG implementation team;

• Assist SANDAG in finding opportunities to advance technologies and transportation developments; and

• Provide general oversight in terms of monitoring project schedules, refining TransNet performance measures, and assisting SANDAG in evaluating transportation system performance.

Since its inception, the ITOC has made significant achievements in fulfilling its defined responsibilities and provided much oversight of the TransNet program. For instance, operating under a set of by-laws to govern its oversight process, ITOC has implemented a well-developed meeting structure to support its project review and decision-making process. ITOC routinely receives a multitude of data and information from SANDAG and its transportation partners related to project specific activities, budget, scope and schedule updates, as well as financing information. Frequently, the ITOC members submit questions and concerns to specific SANDAG staff that relate to the members’ technical expertise and experience. For example, one ITOC member with environmental and engineering expertise requested supplemental information on the TransNet environmental mitigation program. SANDAG staff work diligently to address such requests from the ITOC. Our observations of ITOC meetings and review of meeting minutes found the ITOC members pose appropriate questions and engage in meaningful discussions, such as inquiring as to effect of proposed budget and schedule changes on the overall EAP project delivery schedule when reviewing proposed project funding or bridge loans. As such, the ITOC’s

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allegiance to the public’s trust and its commitment to work with SANDAG and partners in meeting TransNet goals over the last three years appears steadfast. However, it is reasonable that some inherent conflicts might arise as the ITOC’s focus remains on TransNet only whereas the various approved projects also fulfill larger regional needs and goals.

SANDAG’s Broad Responsibilities Afford Regional Focus and Collaboration from Regional Partners Unlike many of its local government peers, SANDAG’s authority is broad and includes several responsibilities outside of the transportation realm. While other regions have governmental entities carrying out similar transportation and regional planning duties as SANDAG, these responsibilities are typically distributed among multiple organizations. For instance, operating under several of its other designations as described in the Introduction of this report, SANDAG also makes regional transportation decisions based on quality of life factors, traffic safety, and smart growth concepts. Similarly, in its role as the Regional Transportation Commission, SANDAG is charged with administering the TransNet Extension Program and is entrusted with the following related transportation and transit responsibilities that allow for broader levels of planning and funding of regionally significant projects:

• Transit planning, programming, project development, and construction;

• Allocation of expenditures of federal transportation revenues as the metropolitan planning organization;

• Adoption of a congestion management plan as the congestion management agency;

• Plan and program of funds as the regional transportation agency; and

• Determination of the conformity of transportation plans with air quality plans as co-lead agency for air quality planning.

Originally formed in 1966, as the “Comprehensive Planning Organization” and in 1980 renamed SANDAG, the organization was charged with oversight and coordination of long-range transportation and regional planning across the urban area. In subsequent years, its responsibilities were broadened to include roles in areas such as transportation funding, transportation construction, and transit development—thus, forming a more complex entity. For instance, SANDAG’s role in planning and development of the transit transportation projects has changed significantly over the last several years. Specifically, in 2003, Senate Bill 1703 transferred responsibilities for transit planning, programming, development, and construction from the North County Transit Development Board and the Metropolitan Transit System to SANDAG. Additional responsibilities were granted to SANDAG under the TransNet Ordinance that further provided and defined general roles and responsibilities over highway transportation planning, implementation, delivery, management and oversight. For instance, for major capitol corridor projects such as those defined in the early action program, SANDAG has authority to establish project eligibility criteria for funding under the Ordinance and must ensure that all TransNet projects are consistent with its near-term Regional Transportation

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Improvement Plan and the longer-range Regional Transportation Plan—both plans that are ultimately approved by the SANDAG Board. As part of its authority, SANDAG approves project schedules and budgets and can amend the Ordinance expenditure plan, budgets, and priorities as needed to maximize federal, state, and local transportation funding for the region. This responsibility includes the ability to exchange or loan funds to augment the Regional Transportation Plan and ensure project delivery for the benefit of the region. Because of its far reaching responsibilities over both planning and funding for both transportation and transit projects, unlike many of its local government peers, SANDAG is in the position to more easily encourage collaboration among its regional partners and, ultimately, make the final decision on initiating and completing regional projects. While coordinating its different roles and responsibilities can be challenging, this broad exposure affords SANDAG opportunities to consider and assist in the design of programs that envelop various projects that coordinate and accomplish several region-wide goals simultaneously. As a 2006 Legislative Analyst Office Report concluded, SANDAG has a greater ability to consider a wider range of options such as highway expansion, transit, or managed lanes in its allocation of funding and can “weigh service needs throughout its region.” This ability is of further value when factors such as San Diego population growth and continued geographic dispersion of employment and housing increase the complexity of commute patterns and demand more transportation flexibility and options. Moreover, due to the SANDAG Board and staff having a broader set of responsibilities, the State Legislative Analyst’s Office also believes it is better able to detect linkages among policies and pursue multiple objectives simultaneously—a feature benefiting the Regional Transportation Improvement program goals, and ultimately the TransNet Extension Ordinance provisions as well. As demonstrated throughout the documents we reviewed and persons interviewed, major decisions on policies and projects are studied carefully by SANDAG and Caltrans staff with frequent and significant input from other transportation partners and stakeholders. Moreover, the Legislative Analyst’s Office found that SANDAG operates in a deliberative fashion placing emphasis on resolving disagreements and attempting consensus before issues reach the full governing board.

Defined Roles and Responsibilities Foster Collaboration

Given its position in the region’s transportation and transit development projects, SANDAG in conjunction with the Ordinance, has created a framework for the definition of roles and responsibilities amongst the key transportation associates to plan, develop, implement, and deliver TransNet projects. For instance, acknowledging Caltrans’ role in highway projects, the Ordinance establishes a shared responsibility in that all state highway improvements, including project development and overall project management, shall be a joint responsibility of Caltrans and SANDAG. It further stipulates that all major decisions regarding project concept, scope, location, budgets and timelines are to be agreed upon by both SANDAG and Caltrans. For transit projects, although SANDAG is responsible for delivery of the transit component of TransNet projects, local transit operators MTS and NCTD are also involved in the planning of transit projects and work closely with SANDAG on project delivery to ensure an effective network will be sustainable once in operation. The oversight structure is depicted in Figure 3.

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Figure 3: TransNet Program Oversight Structure

SANDAG BoardApproves RTP,

Program/Project Budget, & Schedule

ITOCProvides TransNet

Program Oversight –Budget & Expenditures

SANDAGTransportation CommitteePrepares RTP, & Provides

Oversight of Regional Programs Including TransNet

MTS, NCTD & Other Local Agencies

Provide Input At The Program & Project Level

SANDAG ExecutivesProvides Oversight of

TransNet Program Administration & Implementation

SANDAG Staff Corridor Directors,

TransNet Project Office, & Project Managers

Develop & Implement Projects

Caltrans StaffCorridor Directors,

TransNet Project Office, & Project Managers

Develop & Implement Projects

Caltrans ExecutivesProvides

Oversight of Capital Projects Implementation

Guiding the involvement of the different and unique government entities are several master agreements and memorandums of understandings (MOUs) between SANDAG and each entity. For instance, one master agreement and subsequent supplemental agreements discuss the sharing of roles and responsibilities between the State (Caltrans) and the Transportation Commission (SANDAG) including the provisions surrounding project preliminary, development, and oversight services, the creation of a new project delivery structure, and establishment of director positions and their specific responsibilities for timelines and budgets, as well as an outline of the scope of work agreed upon for the EAP projects. Additionally, there are project specific MOUs that are created between SANDAG and primarily Caltrans that contain more granular detail of responsibilities and tasks in addition to cooperative agreements over the street and highway areas that involve multiple jurisdictions.

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Combined, these written documents provide a solid albeit complex basis from which each entity operates within the TransNet network that designates accountability and responsibility of each. We found the MOU documents to be clear and contain a sufficient level of detail to guide actions. To address instances of disagreement or dispute resolution, SANDAG created a written conflict resolution plan outlining the protocol for resolution. Specifically, once a conflict is identified at the project level, the plan requires discussion among project staff; if unresolved, the conflict may then be elevated through additional levels including project manager, corridor director, executive management, the Transportation Committee and ultimately the SANDAG Board. To avoid the elevation of issues to the Transportation Committee or even Board level, SANDAG and Caltrans have instituted informal meetings where the Executive Management team, Corridor Directors, and project managers meet after work hours to renegotiate issues and diligently seek consensus. These meetings are on an ad-hoc basis in addition to other regularly scheduled project meetings. Over these initial years of the ordinance, the plan appears to work as intended in resolving disagreements. With just three years into the TransNet program, we found an apparent true sense of communication, collaboration, and commitment among parties afforded through not only the written agreements established, but also through standard practices employed designed to seek buy-in and agreement of project team members and oversight players. The processes employed call for involvement of external entities at critical points; for instance, entities such as MTS and NCTD are involved at the global planning and strategic level as well as participation as members on individual project development teams as needed. Part of making the TransNet program a success is ensuring that all parties are working well together and issues impeding effective cooperation are promptly resolved. An ongoing and inherent challenge for TransNet remains maintaining open communication between all project stakeholders and addressing and resolving issues as they arise and in a timely manner. For instance, factors such as the variability of available funding, construction price fluctuation, or depressive market conditions make the need for close communication and collaboration essential to address project delivery. We found that frequent communications occur between and amongst SANDAG management and its transportation partners, project staff on individual teams, and the ITOC and the Board to coordinate and seek buy-in of changed approach to cope with such economic changes. Executive management from all entities meets formally and informally with project team members and Corridor Directors to ensure communication is unrestricted and collaboration is ongoing. Yet, there appears to be an appropriate balance between staying involved and avoiding micro-managing the project team. The communication structure in place seems to avoid potential disconnects between staff and management as well as between management and the Board with all team members brought into decisions at the appropriate point and level. Moreover, many staff involved with the TransNet program have previously worked with several of the agencies involved and, thus, have a common understanding of various organizational cultures and business practices that facilitates the day-to-day staff interactions. Several MTS and NCTD developers now work at SANDAG as part of the legislatively mandated transfer of responsibilities and a number of high-level SANDAG employees are former Caltrans employees.

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SANDAG and Caltrans Relationship Creates Synergies The successes and track record of the original TransNet seem to have set the stage for the unique partnership between SANDAG and Caltrans that continues today at the onset of the TransNet Extension Ordinance—a much larger scale and scope program. Over the years, SANDAG has hired several key design and construction management executives who previously worked for Caltrans; thus, bringing on intimate experiences and systems knowledge that becomes critical in delivering projects that are often co-delivered by SANDAG and Caltrans. Management and staff from both agencies operate as a cohesive team focused on a shared goal, rather than exercising parochial decisions benefiting one entity over another. This synergy seems related both to the specific entrepreneurial spirit of the individuals involved as well as to practices developed to guide delivery of the program. While the California Public Utilities Code mandates that the Caltrans San Diego District 11 coordinate with SANDAG for all projects where the entities have common planning or programming responsibilities, SANDAG could enlist other public or private contractors to undertake project development activities. This state and local commitment and enduring relationship was formalized in the 2005 Ordinance that states all state highway projects, including project development and overall project management, are determined as a “joint responsibility of Caltrans and the Commission.” For instance, within the TransNet program, all major decisions regarding project scope, budgets, and timelines are agreed upon by both SANDAG and Caltrans before moving forward to seek Board approval. Alternatively, our reviews of the similar regional transportation programs, such as the Arizona Department of Transportation’s regional transportation sales tax program, show that other regional programs outsource much of the highway construction to private consultants, whereas the existing SANDAG delivery model involves heavy reliance on the Caltrans construction expertise in project delivery. This reliance appears to create a synergy between the entities and a strong collaborative environment with other regional transportation partners. Generally, the Caltrans and SANDAG management work closely together in coordinating efforts on TransNet projects. There are frequent formal and informal meetings among staff at both entities and at various executive and project management levels that provide multiple opportunities for exchange of information, ideas, and problem solving. Formal meetings are documented with action items and records of agreements reached. Although the vast majority of design and construction on the current EAP projects has been delivered by Caltrans project managers, SANDAG also employs design and construction staff. Together, the two entities strive toward achieving TransNet goals by following similar project management techniques and approaches.

Corridor Director Structure Enhances Accountability Over the last three years, a key component of the TransNet project delivery strategy is a concept using Corridor Directors responsible for the development, implementation, and delivery of projects located within a defined freeway corridor. While the TransNet program requires the collaboration of many individuals and entities with varying levels of authority and project involvement, each Corridor Director is charged with ultimate accountability to ensure the project is delivered per the scope, within budget, and on schedule.

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Our review revealed that the Corridor Director approach employed helps streamline coordination of efforts among various project managers and functional teams and other municipal entities on a given corridor. For example, the Corridor Director on the I-15 corridor serves as a single point contact for Caltrans and SANDAG project managers and staff. While the I-15 highway project has a transit component, SANDAG has a Transit Project Manager who reports to the Caltrans Corridor Director to ensure closer monitoring and oversight of all projects within the corridor. Detailed and specific responsibilities of Caltrans Corridor Directors and Transit Project Managers are outlined in the joint SANDAG-Caltrans supplemental amendment to its Master Agreement guiding TransNet projects. Currently, three of the four Corridor Directors are Caltrans district employees and one is employed directly with SANDAG. The performance of Corridor Directors is motivated by higher salaries subsidized by SANDAG. Specifically, provisions of the position include a salary step increase financed by SANDAG based on an annual performance evaluation. The evaluation form has a self-assessment feature along with opportunities for SANDAG’s Mobility Director to document areas for improvement. Executives from both SANDAG and Caltrans review Corridor Directors’ performance and provide feedback in management areas such as:

• Controlling costs and economical utilization of staff time, resources, and equipment;

• Developing and maintaining resource-loaded project schedules and meeting milestones;

• Coordinating team member roles and responsibilities and communicating objectives clearly;

• Identifying issues that can affect deadlines, scope, or budget and resolving them timely; and

• Ensuring plans are effectively carried out. Included in the reporting structure for monitoring EAP project deadlines and budget schedules, TransNet project management and functional teams from both entities convey project status directly to the Corridor Directors empowered to make binding decisions regarding the project activities which facilitate timely and efficient progress of projects. This single point of responsibility structure appears to be good business practice, particularly combined with the high level of cooperation and coordination of efforts among the Caltrans and SANDAG project managers and executive team. Further, a consistent flow of communication between the Corridor Directors and executive management teams at SANDAG and Caltrans through weekly, monthly, and quarterly meetings and written reports allows for adequate review of issues and proactive issues resolution approach. Over the past decade, national trends in the transportation industry have moved more toward integrated approaches to transportation solutions, both as they relate to the inclusion of various stakeholders in project development, as well as with regard to the phases of project development. Specifically, we found that SANDAG’s Corridor Director structure conforms to a significant degree to two of the industry’s best practices—cradle-to-grave or single-point project management, and the integration of various disciplines and stakeholders in project

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development and management. Having a single person, or team of persons, responsible for managing the project from inception to completion results in improved understanding of total costs and impacts of proposed projects, and enables timely tracking of concurrent activities and monitoring of project schedule.

TransNet Program Overseen at the State, Federal, and Local Levels All TransNet funded projects undergo standard programming, budgeting, and prioritization cycles as part of the regional short-term and long-term transportation planning processes mandated by State and Federal statute. Specifically, the TransNet project programming documents prepared by SANDAG staff in coordination with local entities and reviewed by the SANDAG governing board and transportation committee at least annually and incorporated into the following transportation plans to meet various state and federal statutory requirements:

SANDAG annual Capital Improvement Program

Local five-year Regional Transportation Improvement Plan

State five-year State Transportation Improvement Plan

Federal four-year Federal Statewide Transportation Improvement Program (FSTIP) and Federal Transportation Improvement Plan

Local 30-year Regional Transportation Plan

Local Regional Short-Range Transit Plan The project programming process requires various levels of careful preparation, management, and administrative oversight by SANDAG and its local jurisdictional partners to meet state and federal provisions prior to receiving funding authorization. Many of these requirements demand project elements with typical internal controls, effectiveness in outcomes, quality products and practices, and solid business practices. For instance, state and federal funding for programs related to regional surface transportation and traffic congestion relief include requirements related to traffic congestion studies, air quality conformance, tracking and reporting of allowable activities and expenditures, and public notice of planning document amendments to name a few provisions—all features that promote greater accountability. Because all TransNet transportation and transit projects are funded through a combination of state, federal, and local excise tax sources, project activity is subject to oversight and audits from state and federal entities to ensure money is spent in accordance with funding provisions and projects are carried out as prescribed in state and federal legal requirements. For instance, federal funded projects are subject to periodic reviews by the Federal Transit Administration and the Federal Highway Administration as well as required to undergo independent annual financial audits. Additionally, as part of its funding allocation process, the California Transportation Commission reviews project data including support costs and changes to project costs, scope, and schedule as reported by SANDAG and Caltrans.

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Moreover, both SANDAG and Caltrans are subject to internal and external audits of operations, project delivery, and program expenditures. The various audit requirements are described as follows:

Federal Transit Administration—Recipients of federal transit grants must obtain annual audits to assure grant funded projects are delivered in accordance with federal requirements. On a triennial basis, the Federal Transit Administration audits the grantee on their performance on planned project implementation and compliance with statutory and administrative requirements.

Federal Highway Administration—This federal identity mandates recipients of Transportation Infrastructure and Innovation Act funding to acquire annual financial audits that are reviewed by the federal team.

SANDAG Internal Audits—Established in 2007, the Internal Audit function performs reviews on an as-needed basis as well as under an annual defined audit plan. During Fiscal Year 2007-2008, the Auditor reviewed pre-contract award activities, task order solicitation processes, and project specific financial activity.

Caltrans Internal Audits—Caltrans’ Audits and Investigations Division reviews SANDAG’s Indirect Cost Allocation annually, as well as conducts internal audits of the Caltrans San Diego district’s internal controls over local procurement practices and use of state, federal, or local funding streams.

Bureau of State Audits—Responsible for the Single Audit of California, the Bureau of State Audits review encompasses Caltrans’ compliance with federal program provisions over activities such as land acquisition practices, right of way, indirect costs, resident engineer activities, procurement and contracting, use of transit equipment and facilities, and allowable activities and project expenditures.

Annual Financial Audits—Contracted by the ITOC, annually an external Certified Public Accounting firm conducts a financial statement audit of SANDAG that includes reviews of financial activity, operational internal controls, and separation of duties.

Triennial Performance Audits—Under provisions of California Public Utilities Code, SANDAG is subject to a triennial independent performance audit of its role administering state transportation development act funds as the regional transportation planning agency. These audits evaluate the effectiveness and efficiency of SANDAG with respect to transportation planning and regional coordination, fund administration and management, grant applications, and claimant oversight. Additionally, the ITOC contracts for a separate triennial performance audit of the TransNet program.

Periodic Local Audits—SANDAG is also subject to other periodic audits. For instance, in March 2008, the County of San Diego Office of Audits and Advisory Services conducted a Grand Jury Audit of SANDAG’s internal control over the TransNet program grants and whether TransNet program administration was properly designed and implemented.

Thus, throughout a project’s lifecycle, state and federal staff will audit, review, question, and investigate SANDAG’s and Caltrans’ practices, delivery, and expenditures. While these

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inquiries may not be isolated specific to local TransNet sales tax funding, the oversight of transportation and transit development projects would encompass TransNet funded projects. In addition to the annual financial audit of TransNet overseen by ITOC as well as the triennial TransNet performance audit process, the activities and performance of SANDAG and Caltrans are being overseen and reviewed at various levels. To ensure that the ITOC stays informed and abreast of all related audits in progress and completed, SANDAG and Caltrans could provide status updates outlining existing audit requirements, scope of audit work, results of audit efforts, corrective actions planned or taken, and outstanding findings and unresolved issues as they relate to the TransNet program.

Management Reports Would Strengthen Oversight and Enhance Decision Making for All Partners As part of its program practices and focus on transparency, SANDAG and other regional transportation and transit entities routinely prepare and provide vast amounts of detailed data, reports, and graphs describing individual project status of expenditures, schedule, scope, tasks, and issues. At monthly meetings, these oversight groups receive a multitude of data and graphics discussing project funding, budget amendments, finance status, and right-of-way acquisition approaches to maximize resources. While this wide array of detailed, competent, and reliable project data is valuable, the vast volume and breadth of these materials makes assimilating and using such information challenging especially for advisory board members. SANDAG could assist by gathering such raw data and converting it into management reports for the Board, Transportation Committee, and ITOC to aid decision making. Specifically, additional data needed by management includes the following:

Project and Program “Report Cards”

Performance Indicators and Targets

Financial History and Status Data

Administrative Tracking Tools

While ITOC does not have a direct role to manage TransNet projects, its responsibilities as outlined in the Ordinance suggest that it continuously review and track TransNet performance progress and recommend ways to improve program effectiveness and efficiency—responsibilities that could also be implied to the SANDAG Board and Transportation Committee. The ITOC relies on the information provided by SANDAG staff related to project performance; thus, the quality and type of information made available to the ITOC is critical to reaching sound decisions with meaningful impact on program performance monitoring. Although the ITOC had to rely extensively on SANDAG staff during its formation, it should now determine the type of data it needs to provide appropriate oversight. Building upon the examples of management data we believe is important for those charged with program oversight, the ITOC should identify the requisite information it would like to see from SANDAG and project partners within reason. Moreover, the ITOC should identify and select the specific individuals or other entities to provide them with regular status reports and data.

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A Report Card Feature Could Provide a Quick Snapshot of Project Status

For instance, SANDAG could provide a one-page high level summary, or “Report Card,” on each transportation project describing project budget and schedule by phase, project performance measures, financial assumptions and highlights of project changes to scope, schedule and cost. Other transportation entities provide similar project status reports to their oversight entities; for instance, the Nevada Department of Transportation provides a one-page summary for each project as shown in Figure 4, describing elements such as:

• Project scope and description

• Schedule, highlighting major milestones and progress toward each

• A “What’s Changed Since Last Update” feature in terms of scope, schedule, and cost

• Project benefits which tie to region-wide performance measures such as improving travel times, land use, and environmental mitigation efforts as well as progress toward meeting the goals

• Cost ranges for project showing acceptable or planned ranges for each project phase, including engineering, right-of-way, constructions, and total anticipated project costs

• Project risk, including potential price escalation and construction delays

• A “Financial Fine Points” section describing financial assumptions on an existing project

Providing similar summarized data for the ITOC and other decision makers into a “Report Card” would help in assimilating the disparate details into a quick snapshot of individual projects in a centralized location that could be combined and viewed for the TransNet program in its entirety. In addition to the data suggested on the Report Card example in Figure 4, valuable management data that should be provided includes budget-to-actual detail, project funding sources, and project performance indicators as discussed in the next section. After considering project specific details as they do now, the ITOC and others could monitor multi-faceted project activities and decisions against the higher-level project blueprint. Thus, the ITOC and other oversight bodies should work with SANDAG to identify the desired information to be included to provide a valuable resource and tool to better fulfill oversight responsibilities. While SANDAG prepares and distributes quarterly reports to the ITOC and other oversight bodies in accordance with the Ordinance that summarizes status of TransNet projects and provide some Report Card-type elements, our review revealed that the level of project detail is incomplete and insufficient to evaluate cumulative effects of project budget and schedule changes or identify possible trends or reoccurring issues. Several projects included on the reports, such as the SR-52 high occupancy vehicles and managed lanes project, did not identify projected completion dates or project schedule status. Moreover, although project documentation indicated the project was shelved and funding was reallocated to a different SR-52 project, the quarterly report did not summarize the evolution from the Ordinance through project decisions made over the last three years to the current project budgets in place. SANDAG should work its oversight bodies and provide on-going and historic budget information for projects included in the TransNet program that summarize key project-

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specific decisions made that impact or revise scope, funding, or schedule. This data would better allow those charged with oversight to track current program status with original Ordinance direction. Figure 4: Example of a “Report Card” Format Used in Nevada

Source: Nevada Department of Transportation

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Overall, the data elements key to a Report Card are currently available in a variety of disparate project files, reports, and locations throughout SANDAG and Caltrans—as a result, compiling the detailed project information into a Report Card format should not prove overly burdensome.

Project Performance Statistics should be Tracked and Communicated

Additionally, data reflecting key project milestones and performance statistics could be summarized or put into matrices for tracking period-to-period for the program overall, as well as at a corridor or segment level. These key milestones may include schedule adherence and budget status on projects by phase and key performance goals and target milestones for the year. By establishing and consistently reporting these simple project delivery indicators, the ITOC members could better evaluate program accomplishments from a global position as well as at a more detailed perspective for projects as necessary. Further, summaries of project status reports, including budget and schedule targets compared to actual performance, could be provided on an ongoing and updated basis allowing the ITOC to monitor overall program adherence to the Ordinance and assess the overall program impact from compiled project budget and schedule deviations. Such statistics could better allow oversight bodies to filter through the multitudes of detailed data currently provided and make oversight decisions based on ultimate TransNet goals such as cost-effective congestion mitigation rather than getting diverted on decisions at the project activity level. ITOC members indicate interest in receiving such management information such as program summaries as evidenced by a recent request to have a comparison between budgeted costs per the Ordinance with project expenditures to date that could be placed in ITOC’s annual report. Trending this data as well as developing and tracking robust performance data could assist various interested parties in identifying schedule and budget changes as well as allow tracking of such activities throughout the year. Moreover, SANDAG should develop specific program-wide performance measures that would help underscore SANDAG’s progress towards meeting program objectives such as levels of reduced congestion, project cost per mile, and percentage of projects completed on time and on budget. Adopting meaningful performance measures would help create greater transparency and visibility among responsible Caltrans and SANDAG parties in charge of program implementation strategy. Improvements to performance measures and summary data that could enhance accountability are discussed in more depth in Chapter 2 of this report. Existing SANDAG information technology systems currently capture key project and program data, including major capital construction schedules, budgets and actual expenditures. Coordinating and tracking this from project cradle-to-grave at a high level would provide valuable budget to actual comparisons that would reflect original milestones and revised schedules.

Financial History and Status Information is also Needed

In addition to project specific Report Card data, budgets, actual expenditures, and cost efficiency performance indicators, we believe oversight would be enhanced by providing management data related to the history or evolution of a project’s budget over time that could

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be used to track key project changes in scope, schedule and budgets. Because of the frequent movement and reprioritization of projects and sub-projects to accommodate funding constraints, a document summarizing changes made against original Ordinance projections would assist with oversight. A more detailed discussion of this document is presented in Chapter 3 of this report. Moreover, to assist the ITOC and other oversight entities in monitoring whether TransNet revenues are appropriately spent and tracking how projects are performing, it would be valuable for the ITOC to receive quarterly data related to sales tax revenues collected during the quarter, collected to date, and amounts distributed to the various Ordinance projects (e.g. major capitol corridor I-805), programs (e.g. bicycle projects), and entities (e.g. individual cities’ local road projects). Although our audit found that SANDAG diligently tracked sales tax revenues expected and received as well as appropriately distributed the revenues in accordance with Ordinance provisions, it currently does not provide that data to the ITOC.

Better Administrative Tools Could Enhance Decision Making

Combined with the multitude of detailed information provided, the additional Report Card and performance measure data should also be tracked and managed on a quarterly and annual basis. To assist the ITOC and other entities, the project specific Report Card or other management data could be summarized monthly and annually to identify trends or issues. Comparisons between years could provide tools for stronger oversight through the use of these overarching indicators of TransNet program progress and success as well as serve as the framework against which the ITOC could weigh individual project activity decisions to be made. As the TransNet program continues to launch other Ordinance features including smart growth, environmental mitigation, and grant programs, useful tools to track data and decisions will become more critical. To better track ITOC decisions or issues resulting from monthly discussions, one or more matrices summarizing items resolved as well as those action items carried forward to subsequent meetings could be developed and maintained as part of the monthly meeting minute format. With owners assigned as well as timeframes for completion, action items could be tracked and progress updated at subsequent meetings. The administrative tool memorializes prior months’ discussions, decisions, and oversight provided into a convenient table that can be referenced and shared with new ITOC members as they join the committee. Other tracking documents could be implemented that would assist the ITOC in tracking outstanding concerns or issues and monitoring resolution. Each ITOC member currently tracks prior dilemmas or decisions on an individual basis or through the review of past meeting minutes. Additionally, at monthly meetings, standard agenda categories could be established to ensure all critical TransNet areas receive the oversight focus needed in addition to project-specific activities. Suggested categories could include those presented in Figure 5.

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Figure 5: Suggested ITOC Agenda Areas

Moreover, the ITOC may want to establish protocols providing specific time allocations allowing for adequate deliberation prior to decisions rendered for the more critical areas with high-dollar or high-profile impacts.

1. Sales Tax Revenue Collection and Distribution

TransNet dollars collected and spent

Quarterly and To-Date Collections

2. TransNet Program-wide Areas of Interest

Budget & Updates

Other Funding Sources Available for Projects

Regional Transportation Plan Items

Program Performance Statistics

Budget History Documentation & Discussion

Plan of Finance Updates

3. TransNet Major Corridor EAP Project Status

Project Report Card

EAP Project Performance Statistics

Funding Recommendations Needed

4. Status of Other TransNet Programs and Projects

Bicycle, Pedestrian & Neighborhood Safety Program

Smart Growth Incentive Program

Local Cities and County Projects

Recommendations Needed

5. Audit Updates

Internal Audits

Annual Compliance Audit

Triennial Performance Review

Other On-Going External Audits

6. Other Business

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Chapter 2: While Solid Management over TransNet Exists, Greater Performance Monitoring and Reporting Would Further Promote Accountability

Although efforts on the Ordinance have only been underway for a little more than three years, SANDAG and its partners have already implemented many solid controls and practices to help ensure the delivery of major corridor highway and transit projects promised on schedule and on budget. Specifically, SANDAG has demonstrated through the TransNet Extension program activities:

• An accountable environment set by management’s “tone at the top;” • Defined tools and processes to monitor program and project development,

performance, and results; and • A robust public accountability structure reporting on project results, including

progress made on freeway segments and budget to actual expenditure comparisons that are available online for public view.

Throughout all highway and transit project efforts, management attitudes and actions at both SANDAG and Caltrans have created a culture providing a coordinated flow of information between and within SANDAG and Caltrans for overseeing program-wide finances and administration, consistent communication and information sharing between executive management teams at SANDAG and Caltrans, deliberative processes employed to consider critical elements, and staff openness to continual improvements and constructive criticism. Executive management’s “tone at the top” embodies practices encouraging review, controls, justification, buy-in, and accountability of actions and outcomes. To assist in controlling overall program as well as individual project performance, SANDAG and Caltrans utilize several processes and automated tools to track budgeted costs and schedule data against actual results. Moreover, reliable management information is provided through the use of automated schedule software that tracks individual tasks, effort, and milestones for all projects at the discrete task level as well as for the critical path elements. Financial systems, databases, and spreadsheets following a common project numbering scheme between SANDAG and Caltrans systems provide critical budget and expenditure data to monitor project performance. Project data from SANDAG and Caltrans is consolidated through a data warehouse concept created by SANDAG that efficiently streamlines data collection by interfacing with individual systems to summarize program and project status. This database, known as the Dashboard, is an automated project budget, schedule, and progress reporting tool used by internal project teams and members of the public as well. Not only is the Dashboard used to track schedule progress and budget to actual expenditures, but it also increases transparency and controls with the public’s availability to performance data and their need to ensure project decisions are prudent, justifiable, and in the public’s best interest.

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Generally, financial and schedule related data maintained in the Dashboard is reliable and supported by underlying source documentation. Yet, our review also found that while the Dashboard provides a good framework for online reporting of project status, older budget and expenditure data included for certain projects may skew data. Additionally, while SANDAG designed the Dashboard to function as an integrated budget and schedule tool where EAP project performance and progress could be monitored, not all early projects are included within the Dashboard data. Thus, SANDAG should revisit its intent and vision for the Dashboard to determine whether it should report on all Ordinance programs such as non-capital construction projects including transit operator funds and environmental mitigation efforts. Other enhancements could be made to the Dashboard including defining and consistently applying percent of completion estimations as well as summarizing some performance indicators that could be used to monitor progress—such as percent-of-work completed compared to expenditures to date or percent of support costs to capital construction. Finally, SANDAG could enhance accountability and transparency by incorporating concrete performance goals and targets to measure project outcomes as well as performance efficiencies into a defined performance monitoring system. While SANDAG has established general goals as part of its Regional Mobility Plan and regional transportation plans that it is starting to track through its performance monitoring system, TransNet program goals could be more clearly defined through objectives linked with specific performance measures. For instance, a broad goal to “improve mobility” could be redefined by an objective “to increase transit ridership by 10 percent by 2010.” In addition to more clearly defined effectiveness measures, SANDAG should establish goals, strategies, and performance measures to track program and project delivery efficiency indicators related to hitting targets on meeting delivery milestones, staying within certain percentages of cost estimates, and reducing support costs and overhead by set amounts. We believe that setting meaningful goals and tracking performance against those goals can help highlight potential areas in need of improvement, hold project owners accountable and economical, and demonstrate performance to the public. Once program-wide performance data is collected by SANDAG, it should be made available to Corridor Directors and their project management team as well as communicated to governance boards and the ITOC. Management Structure and Tone Provides Coordination and Control To guide and manage TransNet program and project delivery over the EAP major corridor capital highway and transit projects, SANDAG has created an effective structure between its own executive management, internal SANDAG program officers, and Caltrans executives and managers that demonstrates control and coordination over activities and information. Specifically, the Executive Directors from both SANDAG and Caltrans empowered each project team member to make appropriate decisions, based on assigned responsibilities and authority provided, and operate under a documented conflict resolution process to address and elevate any project issue that cannot be solved at a low level. Another designated SANDAG employee, the TransNet Program Manager (Program Manager), is

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responsible for managing and coordinating the efforts of various entities involved with planning, development, and implementation. On both an informal and formal basis, the Program Manager regularly communicates and coordinates with SANDAG executives on program and project implementation status. Standard meetings are held on a monthly and quarterly basis, as well as more informally as needed, to share actual performance against budgeted plans and discuss project detail with other functional departments in SANDAG such as Finance and Mobility Management and Project Implementation. Because SANDAG and Caltrans practice a cooperative and coordinated “tone at the top,” both agencies work well together to create solid budgets and schedules, obtain adequate buy-in and approvals, and require strict record-keeping to document staff decisions made and related justifications. Because of the far reaching regional approach to the transportation planning and project implementation that permeates the SANDAG organization, Caltrans is a fully vetted partner in programming and executing the Regional Mobility Plan. Additionally, as shown in Figure 6, the TransNet program also operates two Project Offices—one at SANDAG and one at Caltrans—both syncing efforts in coordinating the flow of information between the entities to oversee program-wide finances and administration.

Figure 6: Program Management Structure

Specifically, each TransNet Project Office Manager is responsible for developing and implementing tools and techniques to monitor the program-wide budget and schedule as well as report progress and delays to executive management, SANDAG Transportation Committee, and the ITOC. In this role, the TransNet Project Offices work closely with

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Corridor Directors and individual project managers to track project budgets and ensure that all resources necessary as identified by the Corridor Directors are available at the program and project levels. Staff from these offices participates on and support individual project teams in weekly meetings where information on budget and schedule is discussed, as well as program-wide meetings with SANDAG executives and functional staff from other SANDAG departments. These frequent meetings provide additional controls whereby management can review underlying data, buy-into project approaches, and provide approvals where necessary. While executive management is closely involved in overseeing and guiding the program, management also relies on a Corridor Director approach for ultimate accountability and management of individual project delivery. This approach streamlines coordination of efforts among the various project managers and functional teams as well as with the other

municipal entities and consultants working on a given corridor. Each of the five Corridor Directors functions as a central point of responsibility and contact for projects along a particular corridor and together provide a high level of cooperation and coordination between the directors, their project managers, and the executive team. Frequent daily communications and both weekly and monthly project development team meetings are part of the project delivery framework provide on-going project status updates, deliberation of practical approaches to ensure projects stay on schedule and on budget, and open communication for solutions to mitigate issues when they do arise. Further, there is a consistent flow of communication and coordinated information between executive management teams at SANDAG and Caltrans through weekly, monthly, and quarterly meetings in addition to written reports allowing for review of issues and a proactive issue resolution approach. Additionally, there are weekly project development team meetings

that include project managers, Corridor Director, project consultants, and Project Office representatives from SANDAG and Caltrans in addition to weekly team meetings between project managers and functional managers regarding areas such as environmental, right of way, or design matters. Control features of these meetings include management’s review of budget and schedule status, involvement in evaluating contract selection, monitoring of project tasks, and approval of project activities. More informal meetings are held with Caltrans and SANDAG executive and management staff on an as needed basis to discuss and resolve any project issues as they arise. Thus, several controls are in place to ensure management is aware of budget and schedule issues to direct the quality of project activities. As part of the tone at the top and collaborative spirit embraced on the TransNet program, we found that both SANDAG and Caltrans appear focused and open to continual improvements and constructive criticism. For instance, in 2005, SANDAG and Caltrans jointly embarked on an initiative to have an external consultant conduct an analysis of existing processes

Management Controls in Place Include:

Close Executive Level

Oversight

Consistent Communication and Flow of Information

Frequent Team Meetings to discuss Issues and Approach

Written Conflict Resolution Protocols Followed

Automated Tracking and awareness of Project Costs, scope, and Milestones

Culture open to Continuous Improvement

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currently in place at the two entities. Several recommendations were made to better ensure the successful delivery of the TransNet program. Specifically, the consultant prioritized and recommended actions in areas including organization structure, scope and cost estimates, external reporting system, project expenditures, schedule management, quality assurance and quality control including value analysis, earned value, and document control. In the two years since the completion of the external consultant’s review, SANDAG and Caltrans have made significant progress to incorporate nearly all of the recommendations—many of which required considerable efforts and innovation to secure buy-in of approach and implementation. For instance, the assessment suggested the entities alter their typical project delivery organization structure into the new corridor director approach that currently is employed. Additionally, SANDAG and Caltrans defined roles and responsibilities for all TransNet related staff and documented a formal decision-making process outlining a change management and conflict resolution framework. SANDAG implemented another noteworthy accomplishment in 2006 with the development and application of the “Dashboard” web-based concept that offers on-demand access to summary snapshots of the TransNet program, corridors, and segments related to budget, cost, schedule, progress, and status. In conjunction with an external vendor, SANDAG designed this system for increased public transparency as well as use by internal project managers in their project level oversight to help identify potential risks and needed changes to budget, scope, or schedule. SANDAG and Caltrans also embraced a recommendation to use an automated middleware solution to translate the different scheduling tools used by the entities—Primavera and Microsoft Project—onto a common platform allowing for cross-project integration and analysis. Additionally, both entities created a shared project numbering system to map financial data from Caltrans’ accounting system and SANDAG’s fiscal system into a consolidated project number and incorporated into the Dashboard. Moreover, previously implemented recommendations are now being reassessed and enhanced to provide additional levels of value to the program framework. As part of its reassessment, SANDAG should revisit 2005 recommendations made, but not yet incorporated into TransNet. For instance, one recommendation we believe has merit relates to the need for document control and using automated tools. Applying a “data warehouse” concept for controlling and sharing all critical project data would be useful to track key project performance indicators and serve as a data repository system containing information to assist in the project planning in the future. Additionally, SANDAG and Caltrans should continue working together to improve the Dashboard system functionality ensuring that meaningful and reliable data are gathered as part of the daily management processes.

Automated Tools and Practices Improve Management and Assist in Monitoring Project Performance Similar to other transportation development entities, both SANDAG and Caltrans rely on automated tools to track and analyze budget and schedule data to manage TransNet projects. For fiscal information, SANDAG relies on its Integrated Financial and Administration Solution (IFAS), while Caltrans mines its data using its Financial Data to Oracle (FIDO)

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intermediary to interface with its Transportation Accounting and Management System (TRAMS) accounting system. Both databases provide real-time project level fiscal data that project managers use to monitor project costs. Additionally, project managers use industry standard automated project management scheduling tools—either Primavera or Microsoft Project—to track and manage project phases, critical path, sub-project tasks, and milestones. Thus, while TransNet projects are delivered collaboratively by SANDAG and Caltrans with project management teams at both controlling various fiscal and schedule aspects of a larger project, the two entities employ slightly different or unique project management, data recording, and reporting tools. Recognizing that these differing tools could potentially cause difficulties in sharing electronic project data, SANDAG contracted with an outside consultant who developed the Dashboard system to achieve efficiencies and compile the TransNet project data from both entities. Monthly, project fiscal and schedule data are consolidated into the Dashboard—online viewers can access the data warehouse to obtain budgets, actual costs, schedules, and key milestones at the TransNet program, corridor, and segment level. Data from each entity is extracted via a custom-developed automated interface that uploads information into the Dashboard, thereby reducing the need for manual preparation of reports to summarize activity by project. Although the Dashboard provides the public information at the overall program level, by corridor level, or at the individual segment level, the Dashboard also contains an internal project team feature allowing users to drill down into detailed expenditure data at a project level or pull up detailed Primavera schedules for a project to better understand summarized results. For instance, while the public will see an expenditure amount for design, internal users can get more specificity such as design costs broken into individual project elements such as consultant charges, project management expenditures, and permit fees. Thus, the Dashboard allows project managers to access consolidated TransNet project data from various entities and sources in one single database; record project events and milestones as they occur; update budget and schedules as necessary; identify remaining time and budget on projects; and provide funding information updates.

Dashboard Concept also Enhances Focus on Accountability Using a concept employed by the State of Virginia, SANDAG’s “Dashboard” not only provides transparency to the public, but also promotes greater accountability within its organization. This interactive tool allows the public to obtain timely information about corridor or individual project status, budgets, and schedules at a level of detail commensurate with their personal interest. Generally, the vision and goals of the Dashboard system are two-fold—to provide current information on TransNet projects to the public and to develop an internal project management tool in a variety of project functions. The Dashboard consolidates data from various sources, records project events and milestones as they occur, and identifies remaining resources including time and budget needs to deliver the projects. One of the Dashboard’s central features is a project performance indicator tool divided into three distinct colors or sections—green, yellow, and red. If a TransNet project is over-budget by 10 percent or unlikely to meet schedule milestones, the dashboard arrow in the particular

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gauge will be in the yellow zone. Budget variances greater than 20 percent or missed schedule deadlines would change the indicator to red. If all project indicators are on target, the indicator will register in the green zone.

Generally, these project performance indicators provide a quick view of status and highlight where budgets or key milestones appear to be in jeopardy. Yet, our review found that project managers, corridor directors, and Executive Management were aware of project status and risks well before the data appeared in the Dashboard. Another project performance indicator maintained in the Dashboard shows project phases in a “donut” graphic. Clicking on the graphic provides data on the percent of expenditures incurred compared to the percent of project

completion. When the expenditures exceed the expected amount for the percentage of completion, a different dashboard indicator turns yellow or red depending on the amount of discrepancy. These features may also serve as valuable project monitoring tools for both project managers and executives overseeing TransNet from a more global perspective. Presenting this type of data on the public Dashboard site provides another layer of accountability in that all project development deliverers are aware that they need to justify overruns and delays. Another section of the Dashboard provides cash flow data that depicts budgeted or anticipated expenditures as compared to actual expenditures to-date at the program-wide, corridor, or segment level, depending on view selected by the user. Expenditures are summarized by project development phase including environmental, design, right-of-way, and construction. This area in the Dashboard also presents data on the financing plan, with details of projected state, federal and local revenues planned for the life of a specific segment. While the information residing in the Dashboard system may help the ITOC and other decision-makers in tracking project progress and other critical program-wide data, we believe these data should be better summarized and presented to the ITOC on a regular basis. For example, the Dashboard data could be utilized to prepare a “Report Card” type summary by project, as described in Chapter 2. Another Dashboard section relays information on emerging trends, risks, and issues surfacing from the construction industry that could impact the cost, schedule, or scope of a project. Data provided could be used to identify key industry trends, explain reasons for industry-wide construction cost increases, or highlight scarce supply of the construction materials, for example.

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Expenditure and Schedule Data in Dashboard is Generally Current, Reliable, and Complete Keeping detailed cost and schedule information for the multitude of projects in the Dashboard current and up-to-date is certainly a challenge. Yet, we found that most of the data presented is current for the previous month and is reliable in that it traces back with underlying fiscal system data and Primavera schedule data. Generally, Dashboard data is 30-days old as it is automatically uploaded at the end of each subsequent month period using a middleware interface. Specifically, the data transfers occur with a one month lag between the “real-time” expenditure data and the accounting reporting cycle for a closed month. Budget fiscal data is loaded into the Dashboard when the SANDAG Board approves new budgets for the TransNet projects. Actual expenditure updates occur automatically via an interface that downloads expenditure data from the SANDAG and Caltrans accounting systems. Budget and actual schedules are uploaded using a Primavera Electronic Scheduling Utility Tool that collects project schedule data from both SANDAG and Caltrans. Some SANDAG managers use Microsoft Project for scheduling and must forward their schedule information to the TransNet Project Office for manual entry into the interface before uploading the schedule into the Dashboard. In addition to the timely data reported through the Dashboard, our review revealed that the tool’s expenditure and schedule data is generally reliable based on source system information. Using an internal view feature, we traced a sample of September 2008 Dashboard project expenditures and schedules into the underlying data contained in SANDAG’s and Caltrans’ financial systems and project management systems and found no material variances—although some discrepancies existed. Additionally, cost data uploaded into Dashboard is reconciled by accounting staff at SANDAG and Caltrans prior to the monthly interface and upload process. For instance, staff at Caltrans review expenditure data against staff timesheets and invoices for reasonableness and reconcile data to be imported against Caltrans Headquarters data as part of its monthly reconciliation and closing process. Similarly, SANDAG accounting data is reconciled and posted by mid-month of the subsequent month. Both SANDAG and Caltrans data is also subject to financial audits conducted annually by external auditors that assess the appropriateness of transactions, recoding of expenditures, controls in place, and general accuracy and reliability of financial data. Moreover, both SANDAG and Caltrans TransNet Project Office staff monitors the monthly data transfers and updates to ensure accuracy and reliability.

Improvements Could Increase Dashboard’s Functionality and Value While SANDAG’s Dashboard is a very robust system, the tool could become more valuable by incorporating some slight modifications to address items related to data consistency and related budget data, inclusion of all projects, budget and schedule history, and performance indicators as described in more detail below. As the Dashboard continues to evolve, SANDAG should revisit its overall vision and goal of the system and determine whether it is intended to be an “in-progress” tool for only current projects or should be a comprehensive historical data warehouse for the 40-year duration of the TransNet Extension Ordinance.

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Once that direction is determined, the resulting vision should dictate the specific approach employed to address the following items revealed by our audit:

• Costs incurred prior to the 2005 Ordinance are included in the Dashboard While designed to provide information on the EAP projects identified after the 2005 Ordinance, our review identified at least five projects that reflected expenditures and schedules incurred before the Extension Ordinance was effective. For example, the Mid-Coast Light Rail transit project started in the 1990s and was incorporated into the Ordinance as it remained uncompleted in 2005. Instead of the Dashboard presenting expenditures incurred only after the launch of the Ordinance, data for this project reflects costs reaching back to 1997. While such expenditures relate to the project, including these costs may misrepresent costs incurred under the Extension Ordinance. Similarly, other projects started prior to 2005 also reflect expenditure data from earlier periods as well. SANDAG’s current approach shifts a project’s entire cost history into the Dashboard when the project transitions into the TransNet program resulting in distorted total program costs. Even though some projects were already in development prior to 2005 and were carried-forward, only the budgets and costs of the remaining work to be completed should be included under the TransNet program to reflect a more accurate picture of TransNet activity. However, because past expenditures are automatically included in the Dashboard through the simplified annual budget upload, it would be more cumbersome to separate out the pre-2005 expenditures prior to upload. Rather, SANDAG could consider adding an explanatory note to better explain the data or isolate and remove the pre-2005 expenditures to more accurately reflect the TransNet Extension Program costs.

• Historic schedule data could easily be disclosed Currently, TransNet project schedules are generally incorporated into the Dashboard based on the underlying detail maintained in the Primavera system. Whenever an authorized and approved schedule revision occurs, Dashboard will reflect an updated “current plan” for the schedule effectively replacing the prior information. As a result, the Dashboard data does not provide a complete picture of a project’s evolution. According to the Dashboard system developer, the system is designed to keep track of the original baseline schedule regardless of the subsequent revisions—thus, still includes the historic data currently. SANDAG should develop the Dashboard to report the key schedule changes that occur over the course of each project.

• Percent of completion data is not accurate or complete While most Dashboard data is reliable, estimates of percent of project completion do not seem accurate. When we attempted to verify the percent of completion shown in the Dashboard with underlying project manager information, we found errors and discrepancies. In some instances, the percent of completion was not tracked for each project phase—specifically, in the areas of administration and right-of-way support, the Dashboard did not always reflect actual completion data even when expenditures were incurred. Rather, these categories were often marked with a “not applicable” in the percent complete category. As such, SANDAG should ensure assumptions and

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definitions behind percent of completion calculations are clearly and consistently communicated if this data provided by project managers is deemed important for the Dashboard reporting. Moreover, the SANDAG TransNet Project Office could monitor these indicators for reasonableness and accuracy.

• Clarifications are needed on whether all EAP projects should be included Although most of the major corridors EAP projects are reflected in the Dashboard, not all projects designated as EAP are included. Specifically, project specifics related to the SPRINTER project that was added in 2007, Mid-City rapid transit bus, and the orange and blue lines of the trolley are not currently reflected in the Dashboard. While these transit projects may have different project delivery structures, each has budget and cost data that could be tracked, reported, and made transparent to the public. Moreover, as other non-EAP projects or programs commence such as the Environmental Mitigation Program, the Dashboard could reflect the project and related cost and schedule data in some form. According to SANDAG’s TransNet Project Office, management discussions have occurred surrounding the best approach to use for these inclusions. According to management, SANDAG is planning to launch a data reporting component for the Environmental Mitigation Program in Dashboard early in 2009.

• Trends, risks, and issues could be updated Additional data in the Dashboard provides narrative description of the trends, risks, and issues identified by corridor directors or their designated representatives related to a specific corridor or segment. We were informed that some of the intent behind this feature was to describe the overarching issues facing the construction industry and help in understanding of the construction price increase circumstances surrounding the escalating project cost issues in the early 2000s. However, most of the narrative in the Dashboard is not kept current, with data not updated since 2006. Thus, SANDAG should reassess the need and use of this narrative data and either ensure full and timely completion of project specific data or eliminate the section and capture and report data through a different venue.

• Data should be used to measure and track performance against targets With the breadth of valuable project data contained within the Dashboard, SANDAG should use the information to develop performance measures related to project efficiencies. For instance, data currently exists that could be translated into statistics such as “percent of project costs within 10 percent of budget” or “percent of projects within 2 months of schedule” or other meaningful measures and monitored as part of a robust performance measurement system.

Performance Outcome Goals should be Established When TransNet projects were considered during regional transportation planning processes, potential project impacts were considered against overarching outcome goals for mobility, accessibility, reliability, efficiency, and environmental sustainability. With travel outcomes affected by many factors such as demographics, economy, and work patterns, SANDAG has begun developing a baseline system to benchmark progress towards meeting these

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overarching goals on an annual basis. Our audit efforts reveal several enhancements that should be incorporated into measures of performance for a more competent and robust system. Importantly, the system should set clear and specified goals, establish clearly defined targets, measure project effectiveness, and be tailored to the TransNet program. Currently, SANDAG uses data captured in the web-based Performance Measurement System (PeMS), jointly developed by the State of California and the University of California at Berkeley (UC Berkeley) to monitor the region’s freeway system. In-pavement and above-ground automated detection devices transmit data related to traffic speed and volume to the PeMS online performance monitoring analysis application. SANDAG Technical Services combines the PeMS information with data collected from other sources such as daily transit ridership counts from the NCTD and MTS operators to analyze and evaluate traffic volume, travel times, and transit usage. SANDAG also gathers other data and performance measures from other local jurisdictions as part of its Congestion Management Program. Working with Caltrans and UC Berkeley, SANDAG has begun tracking outcome measures such as:

Hours of traffic delay Daily accidents and fatalities

Cost per trip traveled Daily vehicle miles traveled

These performance indicators are beginning to be tracked in particular for the SANDAG “Regional Comprehensive Plan Annual Performance Monitoring Report.” Most of the data analyzed and reported by SANDAG in December 2008 covering the 2007 year was focused on the Regional Transportation Plan versus impacts of the TransNet program specifically. Nonetheless, such measures are valuable and as the data becomes available, SANDAG should use it to calculate month-to-month and annual changes to identify trends and patterns. The data could also be correlated with various project completion dates to identify potential impacts derived from the TransNet projects within specific corridors. More detailed corridor monitoring was envisioned in a 2005 State of the Commute report issued by SANDAG that discussed performance indicators developed jointly with other project partners— Caltrans, MTS, and NCTD— related to improving mobility, expanding freeway capacity, and managing roadway demand. Yet, the one-page document only provided a nexus between “travel time” and certain corridors; specifically, the document depicted “hours saved per person” for three of the six TransNet major corridors. Other indicators were presented for hours of travel, traffic delays, and vehicle trips, but this data was summarized by year and not available at a corridor or project level. While SANDAG has set some general goals as part of its Regional Mobility Plan and regional transportation plans, TransNet goals could be more clearly defined through objectives and linked with specific performance measures. For instance, a broad goal to “improve mobility” could be defined by an objective “to increase transit ridership by 10 percent by 2010.” Measures tracking ridership numbers by line or route could be maintained and compared against TransNet projects. In delivering regional capital construction projects, Caltrans has linked its effectiveness goals with specific objectives as part of its entity-wide Caltrans Performance-Based Management System. For instance, to track outcomes related to a mobility goal to maximize transportation system performance and accessibility, Caltrans has set an objective to “by 2012, reduce daily vehicle hours of delay by 30,000 hours

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throughout the transportation system.” While these objectives and data measured are not set specifically for the TransNet program, data from the San Diego Caltrans District 11 operations feeds into the entity-wide tracking system that could be mined and provided to SANDAG in its development for a system specific to the TransNet program. Other potentially useful data captured and models developed by Caltrans include a California Life-Cycle Benefit/Cost Analysis Model that SANDAG used in the past to estimate benefits of advancing the EAP projects. This model considered benefit categories such as travel time savings, accident reduction benefits, reduced vehicle operating costs, and reduced emissions—all potential outcomes and benefits to be realized directly by San Diego residents. We believe SANDAG should incorporate these “baseline” benefits or goals into our suggested revised performance monitoring system whereby expected savings could be compared against actual results once projects are completed.

Indicators of Project Efficiency should be Measured In addition to more robust effectiveness measures, TransNet should have established goals, strategies, and metrics to track program and project delivery efficiency indicators as well as link strategic planning with resource allocation. At the current time, it seems that only Caltrans is using performance efficiency measurement concepts although data tracked is at the statewide level and not specific to TransNet. Yet, we believe that setting meaningful goals and tracking performance against those goals can help highlight potential areas in need of improvement, hold project owners accountable and economical, and demonstrate performance to the public. Specifically, since 2005, Caltrans has been reporting a select set of performance measures to its state oversight agency on a quarterly basis. Performance measures relating to efficiencies presented in its Quarterly Report are generally compiled from the data provided by San Diego Caltrans District 11 and the various project managers. Targets tracked by Caltrans include items such as the following:

• Meet 100 percent of project delivery milestones for each fiscal year

• By 2012, reduce the support-to-capital ratio to 32 percent or lower and reduce overhead cost to 13 percent

• Each year, keep the total of all low bids within 5 percent of the engineers’ estimates

Not only do these measures require the gathering and tracking of quantitative useful data, but they are enhanced by setting specific and defined targets and goals for efficient performance SANDAG could build on these specific measures and also collect data to measure and track:

• Percent of projects that exceed programmed budget

• Number of change requests for cost changes

• Number of change requests for schedule changes

• Average construction support costs, engineering support costs, etc.

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To ensure such performance measures are useful and inspire efficiency, targets with challenging yet attainable numbers should be set to assess the timeliness and cost-effectiveness of the TransNet highway construction and transit projects. In April 2007, SANDAG began implementing a quarterly monitoring program to track indicators such as operating cost per passenger, passengers per revenue mile, reliability, and ridership for transit specific projects. Yet, we found that targets, goals, and related outcome objectives were not defined. Moreover, SANDAG should also track its performance against quantitative criteria and calculations used during the regional transportation planning process whereby projects are ranked and prioritized based on estimated cost per person-miles traveled and cost per travel time savings calculations. A useful activity could be to also perform these calculations after project completion to identify variances from anticipated cost-effectiveness, discuss reasons for the differences, and use results to adjust future modeling or trend and compare projects against each other. Other transportation entities across the country are finding that efficiency and effectiveness performance measurement is a critical tool used at both the project level and the policy level allowing stakeholders to evaluate the benefits of highway and transit improvements. A 2007 report by the State of Virginia Transportation Accountability Commission describes key objectives as the “desired outcomes” of programs and reflects the key measures associated in meeting those performance goals. The targets include both short-term and long-range milestones and performance measures are tracked by quarter. Following such a model, SANDAG could establish meaningful goals and targets and associate at least one measure with each thus setting forth tools for SANDAG to directly gauge the efficiency and effectiveness of transportation improvements in the region. For example, if the objective is to manage congestion, the measure would be to contrast the annual hours of delay before and after the roadway improvement. Lastly, as part of a robust performance measurement and monitoring system, staff should be designated to follow-up on missed targets, assure corrective actions where needed, or assess impact of any shortfalls to the overall TransNet program. Thus, to make the process meaningful and value driven, SANDAG should develop performance measures and routinely follow-up on the impact of performance not meeting targeted goals.

Performance Data Should be Used by Management and Shared with Oversight Bodies Once performance data is collected by SANDAG, it should be made available to TransNet Corridor Directors and their project management team as well as communicated to governance boards and the ITOC. These entities could use the data to quickly monitor the effectiveness of operational strategies and assess the success of SANDAG and Caltrans in achieving targets or benchmarks. Combined with the detailed project information already provided to these oversight bodies, the summarized performance data could enhance decision making. Given that much of the performance data already exists in either the Dashboard system or Caltrans databases, compiling and communicating the data should be plausible.

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As mentioned in Chapter 1, the ITOC and other oversight bodies could use performance measures focused on budget, schedule, and scope to more closely monitor overall program adherence to the Ordinance and baseline cost and schedule goals. Additionally, future quarterly reports could also communicate program level milestones and success at meeting performance benchmarks when discussing TransNet program accomplishments or areas needing improvement. Providing this statistical data and performance measures tied to targets and outcome objectives, SANDAG would also create greater transparency and visibility among the various responsible partners in charge of program implementation strategy. Moreover, this type of reporting also assists in answering the public’s questions such as, “what are we getting for our investment” and “is the spending of our investment as efficient as possible.”

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Chapter 3: Revenue and Cost Models are Practical, But Project Budget and Schedule Reprioritizations Should be Better Chronicled

With the 2008 projections estimating that the TransNet program will reach nearly $41 billion over the next 40 years, like its peers across the nation, SANDAG utilizes a complex structure for financing highway transportation and transit development projects with a variety of funding sources from federal, state, and local programs. As part of the blueprint established over the last three years, our audit revealed that SANDAG has established sound financial plans and reasonable revenue and cost estimates in cooperation with Caltrans, and these efforts had undergone appropriate levels of review and rigorous deliberation. SANDAG’s approach to TransNet financial planning is often referred to as a Plan of Finance and consists of a series of continuously updated revenue and expenditure projections for the TransNet projects covering the 40-year program lifecycle. Local sales tax revenues and related bonds issued fund only forty percent of the TransNet EAP projects, as the majority of projects are financed using state and federal sources. Consequently, project financing deliberated for the SANDAG Regional Transportation Plan is driven largely by state and federal program requirements. Strict state and federal regulations generally mandate that SANDAG use a “revenue constrained” program planning scenario whereby governmental revenues are projected using the most conservative approach based on committed or pledged dollars, and assumes that no additional funds will become available. Since provisions require SANDAG to match project estimated costs with available projected revenues, projects are annually reassessed and reprioritized to meet funding requirements. Because SANDAG generally has limited control over the amount of revenues it receives from state and federal sources, it has employed innovative financing strategies using TransNet local revenues to expedite delivery of the EAP projects. Specifically, SANDAG issued commercial paper and bonds totaling approximately $635 million in outstanding debt as of December 2008 under the assumption that benefits from spending money on construction projects today would outweigh financing costs and increased construction costs in the future. SANDAG’s financial leveraging of the TransNet local sales tax dollars is consistent with the financing strategy employed by other similar programs we identified. In San Diego, the SANDAG Board has dedicated nearly all of future TransNet, federal, state, and local resources to the EAP major corridor projects believing these projects would best address regional transportation needs. While the risk to this approach includes the uncertainty of whether future TransNet funds will be available to complete non-EAP projects, other alternatives and ultimate decisions underwent a deliberative and public process to determine that the EAP projects selected best fit the regional needs. As funding challenges are inherent in the government transportation project arena, SANDAG continuously monitors financial risks and updates cost estimates and revenue projections to determine the amount of money available to complete projects. Actual funding for projects is generally allocated on a year-to-year basis at the beginning of the annual budget cycle

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when anticipated federal and state allocations are authorized. In consultation with its transportation and transit partners, SANDAG must continually designate, shift, or reallocate scarce funding towards TransNet projects in alignment with the highest priority at that time, given the typical changes that evolve on long-term projects and the conflicts resulting from multi-year project cost estimates and the limited funds to cover such expenditures. This continual need to reassess projects based on available funding is not unlike other transportation planning agencies we reviewed. We found that SANDAG’s decisions are vetted through deliberative processes to ensure that funding is maximized while minimizing significant impacts on individual projects or to the regional transportation system as a whole. Further, the SANDAG Board’s continual reprioritization is consistent with its authority as the Regional Transportation Commission as re-emphasized in the Ordinance. Because funding is an ongoing challenge and projects are continually shifted and reprioritized to stretch limited resources, the TransNet program could benefit from creating and memorializing a budget history document that would track the funding and scope changes for individual projects as identified in the Ordinance to reduce confusion and increase accountability to promises made to the voters.

Plan of Finance is Rational, Reasonable, and Approved by SANDAG Board of Directors While securing adequate funding for the TransNet transportation projects is a critical requirement of the program, our review of the SANDAG’s financial strategy to deliver the TransNet projects found that the assumptions behind programming techniques to secure funds, as well as the revenue forecasts for the TransNet half-cent sales tax revenues, appeared reasonable and reliable. When the TransNet Ordinance was initiated in 2005, SANDAG’s Finance Department worked closely with SANDAG and Caltrans project managers, financial advisors, SANDAG and Caltrans executives, and program stakeholders to prepare a financial plan, which is also referred to as the Plan of Finance. The Plan of Finance is a systematic process employed to match the TransNet project estimated costs with available or anticipated revenues, and determine the best financing option. Project cost data are prepared by SANDAG and Caltrans project managers, and designated SANDAG staff at the TransNet Project Office compiles project cost summaries working in conjunction with the SANDAG Finance Department. SANDAG Technical Services and Finance Planning groups work together in analyzing project cash flow needs, reviewing available funding sources for each specific project, identifying funding gaps, developing funding alternatives, and creating a finance model for the TransNet program including short- and long-range plans. In December 2005, the SANDAG Board approved the Plan of Finance for a ten-year timeframe between 2005 and 2015 with a total cost for the period of more than $2.8 billion to complete the EAP projects identified. In subsequent years, SANDAG developed and the Board approved a long-range financial plan covering the entire TransNet 40-year program. As part of the deliberation processes, external experts, such as Public Financial Management Incorporated, have helped develop, review, and provide input into SANDAG’s models and

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plans including assessing strategy for bonds and commercial paper issuance as well as mitigating exposure risks, particularly in the current fluctuating financial market. The underlying concept behind the existing Plan of Finance is to ensure that funding is available for the accelerated delivery of the EAP projects, including those projects that remained uncompleted from the original ordinance. While the project costs and anticipated revenues may change year-to-year, SANDAG has established a sound process to review the finance plan and make the necessary modifications. In 2008, when estimated funding requirements for the EAP projects grew from $2.8 billion to nearly $5 billion due to various factors including increasing construction and labor costs, project scope changes, and unforeseen time delays, the SANDAG Board considered several options to maintain the momentum on these EAP projects. For example, one less costly option was to extend the project schedules until 2020 on the Mid-Coast Transit, I-805 Bus Rapid Transit, SR-76 Widening, and Blue and Orange Lines improvement that would effectively release allocated funds in the short-term. After reviewing these alternatives, the Board made a decision to maintain project schedules unchanged and issue $600 million in long-term variable rate debt in April 2008. This action was to increase cash flow and revise SANDAG’s commitment of state and federal funds for the TransNet program from 85 percent to nearly 94 percent of amounts authorized for all regional projects. This authority to prioritize TransNet and dedicate future sales tax revenues to address current regional priorities and bond repayment is explicitly granted in the Ordinance. Other entities and transportation authorities tasked with the implementation of regional transportation programs funded through an excise tax have employed similar financing models such as issuing bonds against future revenues to expedite the delivery of projects. For example, the Maricopa County Regional Freeway System financed through various sources including local excise tax, state, and federal funding, had nearly 37 percent of its total program resources generated with bonds and government loans. Although SANDAG’s decision to dedicate the vast majority of the TransNet program funding from local sales tax revenues, state funds, and federal sources to EAP projects appears to be a significant commitment of future funds, the underlying process to establish cost and revenue projections appears reasonable. Moreover, external financing agencies have conducted detailed analysis of SANDAG’s financial information opining that it has the ability to cover its Plan of Finance and a reasonable expectation of fulfilling the Ordinance. Additionally, the Plan of Finance is vetted with a multitude of project stakeholders, and is reviewed and approved by the ITOC, SANDAG Transportation Committee, and SANDAG Board. The TransNet financial strategy is reviewed and revised at least annually as part of the SANDAG regional transportation plans and annual budget processes.

Key Assumptions of Plan of Finance Include:

Nearly all of TransNet Major Corridor Funding will be dedicated to EAP projects

94 percent of state, federal and other local funds will be dedicated to TransNet program

EAP projects are accelerated and slated for completion by 2015.

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Current Debt Model Seems Appropriate As of June 30, 2008, SANDAG had nearly $635 million in outstanding debt in commercial paper and bonds issued against the Ordinance half-cent sales tax revenues. Specifically, starting in November 2005, SANDAG entered into several agreements with major banking institutions to borrow capital funds against future sales tax revenues as part of the SANDAG Board-approved Plan of Finance. The debt financing model was developed by SANDAG in conjunction with external financial consultants, such as Public Financial Management Incorporated hired by SANDAG to help link projected cash flows through 2048 with the accelerated cash flow requirements of the EAP projects. Public Financial Management Incorporated also provided advice reviewing the bond structure and identifying opportunities to minimize financing costs by locking in low interest rates through hedging agreements. As a result, SANDAG entered into three interest rate swap agreements that could allow SANDAG to lower interest payments with the goal of holding total program debt service costs at four percent. Because the interest rate payments under swap agreements are pegged to variable London Inter-bank Offer Rates, interest payments may still fluctuate significantly. Although the agreements were executed in 2005 and captured the forward rate to start in 2008 when the bonds were issued, the interest payments made by SANDAG since April 2008 have varied significantly from month-to-month. Currently, the SANDAG Finance Department has designated a team to review weekly the actual payments and compare them with the projected financing costs. However, at the time of our review, insufficient time has elapsed to make any conclusive statements regarding the financing cost trend. While the recent depressed market conditions necessitated SANDAG to lower its sales tax revenue projections by 4.63 percent in November of 2008, thus, slightly increasing its debt to revenue ratio, SANDAG has employed a similar debt model in the past where commercial paper and bonds were issued against the original Ordinance’s local revenues, and has been successfully meeting those obligations and repaying its debt. However, in light of the recent economic downturn, SANDAG must continually monitor and review the debt to revenue ratio as well as total financing costs to ensure it meets short- and long-term obligations. On a go-forward basis, at a minimum, SANDAG should also continue carefully analyzing projected debt service costs and compare planned program financing costs to track any higher than expected bond issuance and debt services costs. Further, SANDAG should determine whether the Plan of Finance strategies should be modified in the long-term, and report to the ITOC and the SANDAG Board on the status of the debt-to-revenue ratio on a regular basis.

Revenue Projections and Assumptions are Reasonable Critical to the success of the Ordinance, like other long-term, large-scale transportation improvement programs, sound and prudent methodologies for estimating revenues cash flow to cover project costs. Our review found that SANDAG’s estimate assumptions and methodologies employed appear reasonable and generally conservative. When developing the financial plan for the TransNet program, SANDAG’s Finance Department begins with identifying project finance needs based on project costs developed by SANDAG and Caltrans managers. Because TransNet projects receive allocations from

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three major funding sources—state, federal and local sales tax monies—projects undergo the same programming processes that are in place for all SANDAG major corridor construction projects. While Caltrans is responsible for preparing and submitting project cost estimates for the highway projects, SANDAG is responsible for developing project cost estimates for the transit capital projects. Once combined, project budgets are annually programmed into the SANDAG Capital Improvement Program and the Regional Transportation Improvement Plan based on available federal, state and local funding sources. Figure 7 depicts TransNet anticipated revenues by funding source.

Figure 7: EAP Projects Funding, Proposed for Fiscal Years 2009-2010 through 2017-2018

$1,241,976 25%

$625,236 12%

$574,613 11%

$2,578,617 51%

$28,7251%

Federal STIP Other State TransNet Other Local

Source: SANDAG’s Capital Improvement Program authorized budget, Fiscal Year 2009

According to the Ordinance, 50 percent of all program revenues are anticipated from state, federal, or other funding sources. The funding composition tends to fluctuate, however. For example, through 2008 due to the SANDAG Board’s decision to commit the vast majority of available state and federal funds to the TransNet program, such state and federal sources provide 60 percent (approximately 30 percent equally from each) and the related half-cent local sales tax funds comprising less than half, at 40 percent. As shown in Figure 7, future projections reflect that the other funding sources will provide about half—still achieving the forty percent expectations. While the revenue projection and programming methods for these funding streams vary due to slightly different processes employed in the fund appropriation process, we found the underlying assumptions and approaches were reasonable.

• TransNet Local Sales Tax Revenues Projections are developed based on SANDAG’s Demographic and Economic Forecasting Model that has been in existence for several decades. SANDAG Finance Department staff use the model as a predictor of economic and population growth region-wide and trend expected sales and project the amount

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of sales tax revenues expected to be generated. Model results are reviewed and evaluated on an ongoing basis by SANDAG Finance Department and the SANDAG Chief Economist. Additionally, SANDAG has an advisory committee that oversees the half-cent sales tax projections consisting of local experts in the area of municipal finance, economics, housing, real estate, and utilities, as well as academic researchers. Since 1980, the sales tax revenue projections-to-actual results have been monitored and reviewed on a quarterly and annual basis, and have been within 8 percent of targets. In the past, to correct for minor discrepancies and improve accuracy and reliability of data, SANDAG made adjustments to the model, and since 2000, resulting in revenue projections generally fall within two or three percent of estimated amounts. Because sales tax revenues have been impacted by the past year’s economic conditions, the SANDAG Board lowered its Fiscal Year 2008-2009 projections to reflect an expected 4.63 percent decline for the EAP projects. SANDAG is committed to review the TransNet list of projects on an ongoing basis to consider and re-prioritize funding and potentially “shelve” projects as needed due to lower than expected sales tax revenues. During our review, SANDAG was in the process of revising its long-term projections for the TransNet revenues; however, the results were not yet available for our review.

• State and Federal Funding

These funds are programmed into the TransNet program based on currently committed level of funds incorporated in the SANDAG’s short-term and long-term regional transportation planning documents. Generally, the state and federal revenue projections are developed through the project programming plans, such as statewide State Transportation Improvement Program and the Federal Transportation Improvement Plan. While SANDAG is not a direct recipient of these funds, SANDAG’s financial managers work closely with Caltrans to incorporate state and federal dollars into the regional and TransNet program. The SANDAG Finance Department develops short-term and long-term projections based on the existing state and federal requirements as well as amounts authorized. For example, SANDAG relies on the statewide “Fund Estimate” released by the California Transportation Commission which outlines state authorized funding sources by county, including the San Diego region. In this programming process for near- and long-term state revenue projections, SANDAG applies a conservative five percent escalation factor. Fund Estimate dollars are matched with the project cash flow needs for the TransNet programs.

• Federal Grants

These sources, including the Federal Transit Administration New Starts Program, Regional Surface Transportation Program, Traffic Congestion Relief Program, and Congestion Mitigation and Air Quality programs, are generally guided at both the state and federal level with SANDAG and Caltrans staff ensuring timely submission of funding requests and grant applications to maximize regional transportation dollars. For instance, New Starts Program funds are formula-based allocations for the region’s transit operator capital improvement projects; in San Diego; these funds are primarily used to fund the Mid-Coast and South Bay Bus Rapid Transit

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projects. Although Caltrans is the direct recipient of some of these federal grants, SANDAG works closely with Caltrans to incorporate the estimates and programming of these funds into the regional transportation provisions of the federal Safe Accountable, Flexible, Efficient Transportation Equity Act which reflects a steady program growth of two percent on an annual basis.

Program Cost Estimates and Budgets Appear Supported by Underlying Detail While project cost estimates for the TransNet Ordinance were developed based on project budgets created for the 2003 Regional Transportation Plan, these estimates require annual budget revisions to account for project scope changes and cost inflationary factors. These changes, however, are reviewed and approved by the SANDAG Transportation Committee and the SANDAG Board as part of the annual budget process. Our audit analyzed TransNet project costs outlined in the Ordinance and compared them to authorized EAP project budgets in the December 2005 Plan of Finance, as well as traced the budget history from Fiscal Year 2005-2006 to Fiscal Year 2008-2009. Generally, we found that project budgets were well defined, and SANDAG and Caltrans had a sound process in place to develop and modify project budgets throughout the project life. Further, budget changes were properly approved and a process was established for proper authorization. Moreover, we found that TransNet program budget documents traced to the underlying supporting documents maintained by SANDAG and Caltrans project managers. To arrive at cost estimates used in the Plan of Finance project budgets in 2005, SANDAG utilized the Ordinance project costs and applied a price escalation factor based on the Caltrans construction cost index and right-of-way escalation elements. SANDAG and Caltrans project managers worked closely together to review specific budgets for the EAP projects to develop accurate cost estimate with the precision of project estimates varying based upon the stage of the project. For instance:

o Design and construction estimates generally represent well-defined costs that are likely to hold true;

o Feasibility study estimates for projects that are planned, but not yet developed, are generally less accurate than the estimates calculated during the design stage;

o Projects planned several decades in the future often do not have feasibility studies and are estimated by SANDAG and Caltrans engineers using a “rule of thumb” formula and assumptions based on historic data of similar transportation project cost per mile.

Overall, SANDAG and Caltrans generally have sound processes to develop project cost estimates that are currently reflected in the Plan of Finance. Project development methodologies employed at both entities include establishing baseline budgets for each phase, including administration, environmental, design, right-of-way support, right-of-way capital, construction support, and construction capital costs. Cost estimates are generally refined throughout the project development process, and become definite at the construction

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contract award stage where project managers monitor cost to keep within a 10 percent contingency. Project environmental and design budgets vary greatly based on the complexity and magnitude of the project. Construction cost estimates are developed based on unit costs, material and labor estimates. Project costs for administration support are determined at an entity-wide level, and costs are allocated to specific projects based on the total management and administration hours each incurs. Generally, project costs are updated at least annually to reflect current market conditions that are tracked through various cost indexes and comparable bids data. Between 2001 and 2006, Caltrans construction cost index increased nearly 60 percent, and TransNet project costs were revised upward to account for the rising price trend. To reflect the anticipated price increases, SANDAG applied various price escalation factors to project costs program-wide, which appears consistent with the project budget and financial planning processes used by other transportation entities. To better understand the nature of project budget changes from the time of the Ordinance to most recent years, we attempted to trace project cost for all EAP projects from Fiscal Year 2003-2004 to Fiscal Year 2008-2009. Even though the project dollar amounts outlined in the Ordinance varied from year to year, demonstrating steady increases in project budgets, our review found that, generally, budget changes were well documented and supported by project files maintained by project managers or through board documents. For the most part, the budget changes were explained by inflation, authorized project scope changes, and other modifications. While Caltrans and SANDAG maintained records of budget approval authorizations in project files, SANDAG and Caltrans should establish a better mechanism to link and track the Ordinance planned projects amounts with current plans and budgets for all TransNet projects as described in greater detail later in this chapter.

Anticipated Revenues are Matched Against Project Costs SANDAG short- and long-range transportation planning documents, as required by statute, reflect project authorized budgets based on the anticipated revenues matched with project cost estimates. Although part of the financial planning process involves generating overall program budget estimates, every project is reviewed and evaluated for funding priority on an annual basis, as required by state and federal regulations. Moreover, project annual budgets as mandated to be consistent with the Regional Transportation Plan and Regional Transportation Improvement Program. Revisions to revenues from state, federal and local funds occasionally occur due to a shortfall of authorized resources which necessitates additional revisions and reprioritization of projects. Additionally, cost overruns and scope changes also inevitably occur in the transportation industry with the susceptibility of project costs to the volatility of economic markets that often result in scope changes when funds are reduced. For instance, the rise in the construction prices in the early 2000’s set a new precedent in SANDAG’s planning approach where an unusually high inflationary factor had to be considered for the short-term cost projections to reflect unexpected market changes. As revenues are realized on an annual basis, project budgets need to be revised to account for discrepancies between updated revenue projections and costs. Towards this end, SANDAG has an established process to make mid-point budget adjustments to match anticipated revenues with project costs allowing project stakeholders and SANDAG Finance Department staff to reassess available cash flow and determine project-specific plans of action. As a

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result of the cash flow review, projects are reprioritized and those with lower priority are occasionally shelved based on the project’s stage or percent of completion unless additional funds can be made available. In addition to annual budget drills to fund project costs with forecasted revenues, SANDAG staff develops short- and long-range planning documents for Board approval as shown in Figure 8. Based on available funding to meet estimated costs, projects are prioritized by the SANDAG Board according to the Regional Transportation Plan’s criteria established under its authority as the Regional Transportation Commission. In 2006, criteria for evaluating highway, transit, freeway connectors, and high occupancy vehicle connector projects was updated and strengthened by a working group comprised of representatives from SANDAG, Caltrans, MTS, NCTD, bicycle-pedestrian groups, and housing experts.

Figure 8: Transportation Programming Plans and Approval Process

Cost Estimates

Caltrans and SANDAG engineers prepare project

cost estimates

Revenue Estimate

SANDAG Finance Department develops

funding projections of Sales Tax Revenues, State, &

Federal Funding

TransNet EAP project costs

estimates

Data Shared and Exchanged

Regional Transportation

Plan (RTP)

30 year project planning document

State Transportation

Improvement Plan (STIP)

5 year project planning document

Federal/Statewide Transportation Improvement

Program (FTIP & STIP)

4-5 year project planning document

Approved by SANDAG Board of

Directors

Approved by SANDAG Board of

Directors

Approved by California

Transportation Commission

Caltrans incorporates SANDAG approved

RTIP into FTIP

Approved by Federal

Government

Regional Transportation

Improvement Plan (RTIP)

5 year project cost planning document

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Projects are assigned points based on technical models considering such elements as congestion relief, crash statistics, habitat and residential impacts, transit integration, and travel time savings as well as qualitative factors assigned percentages for serving goods movement and being compatible with smart growth. Projects are also prioritized based on regional goals to serve travel needs, develop network integration, and be cost-effective. In setting regional transportation priorities, SANDAG also reviews individual projects in light of the entire regional system elements of mobility and travel time, reliability and accidents, accessibility from home and work, and environmental sustainability. These priority methods were deemed reasonable and sound by a State Legislative Analyst’s Office review conducted in 2006. While the SANDAG Board initially matches prioritized project costs with available revenue based on a quantitative evaluation and ranking system through these short- and long-term planning efforts, a project with a lower ranking may take precedence if the project is more in line with the long-term regional transportation goals, considered “shovel ready”, or has non-local funding sources available for use. Moreover, despite the Ordinance prescribing certain projects as priority, the Ordinance also authorizes the SANDAG Board to “amend the programming of projects as necessary” following the Regional Transportation Improvement Program amendment procedures. Thus, SANDAG Board can add, remove, or modify projects listed in the Ordinance to accommodate the region’s transportation needs.

Financing Uncertainty and Volatility Generate Challenges for SANDAG as Current Plans Show Future Funding Shortfalls As a result of current economic conditions, projections for available sales tax revenues have been reduced; this situation is just one example of the volatility of transportation financing that the TransNet program could face over its 40-year lifecycle. Compounding news of the recession is the State of California’s budget crisis and discussions of cancelling more than $5 billion worth of infrastructure projects statewide unless there is a comprehensive budget solution. Yet, at the same time, speculation of a federal economic stimulus package brings promises of the largest public works construction program since the creation of the interstate highway system a half-century ago. With so much uncertainty and funding decisions entirely outside of SANDAG’s control, one of its biggest challenges for the TransNet program remains securing the necessary funds to cover projected long-term shortfalls of more than $2.8 billion by the year 2026. However, it is important to note that SANDAG’s short- and long-range plans are generally based on conservative projections of revenues and include only those state and federal programs that were available at the time the long-range plans were developed, thus assuming no additional sources or programs would become available. Throughout the years, SANDAG has experienced both the inflow of additional funds from statewide Proposition 1B monies, as well as shortfalls due to statewide budget cuts. Thus, maintaining a budgeting and financing structure that allows for flexibility while ensuring accountability is an important element in a successful transportation planning organization. Clearly, market volatility dictates caution and continuous review and update of the revenue estimates used in the

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development of the TransNet program’s financial model as well as diligence in tracking fiscal conditions and making timely decisions as situations warrant. While the changing financial environment is complex and difficult to manage, the SANDAG Board made conscious decisions to deliver the EAP projects within the first quarter of the Ordinance lifecycle rather than stringing the projects out over the full 40 years. The existing Plan of Finance was based on assumptions representing key policy decisions of the SANDAG Board to dedicate significant amounts of future funding presumed available for the entire TransNet program for the completion of just the EAP projects. Specifically, the Plan of Finance identifies the following key assumptions:

Nearly all of TransNet major corridor project funding is dedicated to completing EAP projects;

94 percent of the state and federal funding will be dedicated to the TransNet program as matching funds. While this is a departure from past historic practice whereby similar major highway and transit projects received approximately 77 percent of state and federal matching funds, additional funding from local Proposition 42 monies were available to fund street and roadway improvements making other monies available for direction to major highway and transit projects.

Subscribing to an informal philosophy of using federal and state monies before drawing on local funding pools as well as the approach of “not leaving any money on the table,” SANDAG is able to utilize local resources to leverage other funding sources. Occasionally, state and federal authorities adjust the annual authorized program amount based on overall statewide and federal priorities. Thus, SANDAG is often required to review and revise funding plans for individual projects and the entire TransNet program. As certain federal and state grants become available only for projects that are ready to advertise, SANDAG and Caltrans have an incentive to remain flexible in managing projects and shift priorities as necessary to meet the external funding requirements and secure such funds. Instilling in its project managers a “use it or lose it” motto has encouraged all partners to utilize available funds as soon as money becomes available—thus promulgating a more speedy project delivery and timely funding application process. For instance, SANDAG ensured projects were “ready to go” when the California Transportation Commission (CTC) allocated nearly seven percent, or $490 million, of total funding available from statewide Proposition 1B monies to SANDAG capital construction projects. Additionally, SANDAG projects were often ranked highest compared to other transportation entities statewide as determined by the CTC in the Corridor Mobility Improvement Account revenues allocation process. Specifically, only four statewide projects received the highest score of 14, with three of these projects designated as SANDAG projects. While the projects were evaluated based on delivery times and value, SANDAG’s high performance rating in 2007 allowed it to secure nearly $430 million in funding. While many funding sources contain legal and grant-related restrictions or provisions, SANDAG’s ability to manage and oversee the spending to ensure compliance with various statutory requirements continues to be an important aspect of managing the TransNet program.

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Moreover, faced with uncontrollable impacts on capital construction projects from the current economic recession and lower than expected sales tax revenues that could ultimately delay the delivery of both EAP projects and non-EAP projects, SANDAG appears to have taken reasonable actions over the last three years to secure funding, control projects, and oversee the TransNet program. Much uncertainty still exists with the TransNet program in preliminary stages. With current SANDAG projections calling for TransNet project costs to reach amounts greater than $41 billion, the key is to continually focus on bringing in new and steady financing—as SANDAG seems to have been successful in doing up to this point of the program.

Projects are Continually Reassessed and Reprioritized based on Available Funding, but Decisions are Vetted and Approved through SANDAG Board Because the availability and estimates of funding is critical to the success of the TransNet program, SANDAG continuously monitors financial risks, updates cost estimates and revenue projections, reviews project status, and communicates with those charged with governance. Available funding and project status can change significantly over the course of a year, thus, SANDAG and Caltrans meet frequently to reconsider the budget and schedule of major corridor highway and transit projects. As the designated Regional Transportation Commission, the SANDAG Board possesses the requisite authority to adjust TransNet project budgets and reprioritize them to maximize benefit for the transportation system of the entire region as referenced in the Ordinance. Other transportation entities have taken similar approach to the regional planning requiring the use of local funds to support transportation objectives of the entire region. For instance, Orange County and Riverside County jointly financed the expansion of a SR-91 project that impacted commuters traveling between the two counties for employment. Similarly, El Dorado County committed its local funds to a SR-50 High Occupancy Vehicle lanes project within Sacramento County boundaries to improve travel times for its residents traveling on SR-50 into Sacramento County for employment purposes. While SANDAG and its Caltrans partner have employed sound models of estimation that appear reasonable, variances naturally occur requiring a review of status and priorities on an as needed basis or, at a minimum, during the annual budget cycle. Because actual costs or revenues that miss estimated targets have cascading effects on other projects, detailed cost and project activity data is discussed with the ITOC and SANDAG Transportation Committee on a monthly basis as well with the SANDAG Board on a quarterly basis. When funding is scarce or lower than projections, SANDAG staff provides the governing and oversight bodies with a range of alternatives and impacts of each option based on factors such as project priority as outlined in the Ordinance, readiness to enter construction, status in terms of addressing regional transportation goals, and ranking based on quantitative and qualitative scoring criteria used as part of the regional transportation planning process. Thoughtful questions are asked, data is vetted, and projects are reprioritized based on the Board’s deliberative and transparent process. For instance, the SR-52 project has undergone various reprioritization discussions vetted through the established processes. In Fiscal Year 2008-2009, the Corridor Director requested

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additional resources due to cost overruns on the SR-52 Extension project as a result of escalating construction pricing. Although the members of the Transportation Committee required additional information about the underlying reasons for the request, Caltrans offered different alternatives for consideration. Both the Transportation Committee and Board decided to shift project priority from the SR-52 managed lanes project to the SR-125 to SR-67 Extension to maintain momentum on the project. Although the decision required that the environmental phase of the SR-52 High Occupancy Vehicle Managed Lanes project be postponed until additional funding became available, the process of evaluating project alternatives in light of potential scope and schedule options appears sound and demonstrates effective disclosure, deliberation, and decision-making allowing for consensus of critical funding issues at the highest level when necessary. Due to the state budget deficit crisis, SANDAG and Caltrans have had to reassess and reprioritize many of the TransNet projects on a more frequent basis, as the crisis poses a significant risk to ongoing transportation projects including several major EAP projects that are funded using statewide Proposition 1B funds. While SANDAG does not expect the funds to be permanently eliminated, the State’s current inability to issue bonds to fund statewide transportation projects is creating a cash flow shortage affecting the progress of EAP projects. Specifically, SANDAG identified approximately $177 million of projects ready to start and $557 million in projects currently under construction that may be at risk of delay or suspension. For instance, discussions are underway that could see EAP projects on the SR-52 and I-15 corridors worth more than $435 million, absorbing some of the impact by being placed on hold and possibly pushing completion schedules out several years. With the state funding not yet authorized for Fiscal Year 2009-2010, Caltrans’ potential inability to proceed with several of the TransNet projects could ultimately result in a domino effect wherein one project delays subsequent work as well as increased costs related to the suspension of projects. According to SANDAG and the Caltrans TransNet Project Office, staff is tracking the delay of programmed funds and finding alternative solutions to backfill for the Proposition 1B funds such as monies from the proposed federal stimulus package. Given the recent economic volatility and concerns amid growing variances between the estimated and actual revenues and expenditures over the last few years, more frequent focus has been directed at the list of TransNet projects to re-prioritize funding and potentially “shelve” projects. Currently, the SANDAG Board is reevaluating the potential risk that some of the projects outlined in the Ordinance may not be completed at all due to a lack of funds. Specifically, at a November 2008 board meeting, SANDAG executives and its Board discussed the possibility of reviewing the list of currently authorized TransNet projects and identifying those that may be removed. However, the SANDAG executive team cautioned such action as the budget shortfall could be short-term and may be overcome through increased future cash flows. With the TransNet program mandated to be in place 40 years, SANDAG’s current wait-and-see approach before formally eliminating non-EAP projects also envisioned in the Ordinance seems appropriate as the financial turmoil from the past few years may not yet provide enough evidence to revise such long-term plans or the overall approach to financing projects. A meeting is anticipated in early 2009 between TransNet program management and the governance team to revisit and reassess project delivery priorities once again. In the

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meantime, SANDAG continues to monitor its projections, actual receipts, and models to adjust as appropriate and afford the best information and data available for decision-making.

While Certain Projects may be Shelved in the Future, Other Projects Have Been Blended into the TransNet Program

Although certain TransNet projects originally anticipated for completion may ultimately be cancelled at some future point, it should also be acknowledged that more projects than originally envisioned have been provided or are in the final stages of completion using TransNet-backed funding. For instance, both the SPRINTER Rail System and I-15 Middle Segment Managed Lanes were added through SANDAG Board action that expanded upon the Ordinance’s vision. According to SANDAG and Caltrans, options for including additional projects or phases into the TransNet program originate from discussions among individual project teams, Corridor Directors, and SANDAG’s Finance Department. Factors considered include priority status identified by the Ordinance, whether projects are “shovel ready,” project ranking from the Regional Transportation Plan modeling process, availability or allowable use of state or federal funding sources, and impact to other currently programmed projects. For example, a weekly project team could raise an issue that one project in the final stages of completion might be in jeopardy because it needs local matching dollars to leverage greater amounts of state or federal funding to finish the project. After meeting with SANDAG Finance Department and SANDAG executive management to deliberate the impact of the project on the region’s transportation system, a recommendation could be crafted to use available TransNet monies on the project as well as other options if TransNet monies are not provided. For instance, the I-15 Middle Segment Managed Lane project was initiated through this process. Although not designated as a TransNet project, the I-15 Middle Segment was halfway through construction in 2005 when project scope and higher-than-expected construction bids compelled Caltrans to seek additional funding sources to complete the project as planned. In Fiscal Year 2008-2009, SANDAG Board approved an additional $5 million of TransNet sales tax revenues for the project, thus allowing completion of the project in September 2008 when the I-15 Middle segment was open for public use. While these projects only received a small portion of TransNet funding when compared to the entire project budget, their related accomplishments are encompassed under the Ordinance umbrella. Decisions to allocate TransNet monies to these projects underwent significant discussion and data review by SANDAG and Caltrans staff, the ITOC, Transportation Committee, and the Board. SANDAG’s project prioritization criteria are generally stated and reviewed in the Regional Transportation Plan and Regional Transportation Improvement Program. Because all of the projects described in this report are included and authorized in these regional plans, it appears that the prioritization process was followed. Thus, the projects added to the EAP program between 2006 and 2008 clearly benefited from the funding available from local sales tax money, which helped accelerate these projects and enhanced the regional transportation system—the explicit intent of Proposition A ballot language passed by the San Diego voters in 2005, and the TransNet Extension Ordinance.

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Creation of Budget History Documents to Track Project Movement Would Provide Strengthened Accountability With continued reprioritization of projects based on available funding, there is frequent and significant movement occurring with some projects being temporarily shelved while others are accelerated based on annual budget discussions or meetings with governance bodies. Also, as project scopes are more refined in more detailed design plans or project costs increase more than expected, levels of funding are shifted among projects or within phases. We found that these constant shifts can be difficult to follow and track, although SANDAG has not implemented some type of institutionalized method for tracking the budget history and funding evolution for the EAP projects. Specifically, the complexity of project funding, prioritization, and scoping change between project budgets and original cost estimates presented a challenge to our audit. While SANDAG and Caltrans project managers met our requests with a tremendous sense of cooperation and willingness to assist us in our tasks, we believe that SANDAG and Caltrans would benefit from creating protocols to better track and document all changes to project budget, scope, and schedule. Data regarding project reprioritization, cost estimate changes, and funding reallocations are shared and approved by governance bodies as necessary which is an important step in the process. However, SANDAG does not maintain a history of changes made against original Ordinance estimates. Best practices dictate that year-to-year project budget changes should be tracked, and the documents supporting reasons for the change and the proper authorization should be easy to access to assist in future decision-making purposes. Thus, we believe budget history documents would allow SANDAG to better explain and justify to the public how project promises from the 2004 Ordinance were amended to result in actual projects delivered. Accountability could be further strengthened by analyzing the changes to identify whether they were based on need, priority, or bad decisions. Moreover, the data could be used to help the ITOC oversee and understand the cumulative impact of their recommendations related to TransNet funding as well as statistics showing how the local sales tax revenue is leveraged and maximized to address regional transportation needs. Although it appears that the SANDAG Board authorized scope and budget modifications and project files contained disparate evidence surrounding project changes, SANDAG and Caltrans generally did not have a centralized tracking to memorialize project evolution. When we endeavored to compare the original budgets approved in the Ordinance with the project budgets data authorized by the Board for Fiscal Year 2008-2009, generally, we found significant variation on all EAP projects. Our detailed review of project files revealed that all budget changes were appropriately reviewed and authorized, although the link between the project budgets in the Ordinance and current project budgets could not be easily established without going through the specific project detail. For example, one of the challenges was to determine how a project defined in the Ordinance evolved into several project components over the years. Moreover, due to the project reprioritization process that takes place annually, certain TransNet projects budgeted in previous years were not always included in the most recent SANDAG budget. These inconsistencies seem inherent to the existing planning approach where the funding and project scope may change year-to-year based on competing funding priorities and regional transportation needs. Thus, reasons for omissions

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could include situations where projects with similar scope were combined under one project as well as where projects were placed on hold pending further development of environmental or concept design plans. For instance:

I-15 Bus Rapid Transit Direct Access Ramps: Although we found records tracking back to Fiscal Year 2002-2003 Plan of Finance documents showing project scope and budget for the I-15 Bus Rapid Transit project to add direct access ramps at Hale and Hillary Streets, the project was omitted from the SANDAG’s Fiscal Year 2008-2009 approved Capital Improvement Program. Upon further research, we found that the project was re-scoped and re-prioritized, whereby the Hillary Street direct access ramp was folded into the I-15 South Managed Lanes segment and the Hale Street direct access ramp was merged into the North Managed Lanes segment.

SR-52 Middle Lane from I-15 to SR-125:

In another example, we found that the SR-52 Middle Lane from I-15 to SR-125 project was identified as one of the EAP projects and had incurred costs, but was not currently included in SANDAG’s Fiscal Year 2008-2009 program budget. According to the TransNet Project Office Manager, the project was placed on hold due to a reallocation of funds between SR-52 Managed Lanes and the SR-52 Extension Project. Based on project team discussion, the initial SR-52 Middle Lane project currently held a lower priority compared to other sub-projects on the same corridor and also had experienced cost overruns related to cost increases in design modifications.

I-805 Corridor:

While only an I-805 Middle Managed Lanes Environmental Phase project was identified to be completed as part of the Early Action Program, the budget priority was reassigned to the I-805 South Managed Lanes Environmental project instead as that project is moving forward with design and construction. Moreover, because of the availability of additional state bond monies, funds were budgeted for another project—the I-805 High Occupancy Vehicle/Carroll Canyon Direct Access Ramp—currently scheduled for completion by June 2012.

Thus, due to the complexity of project budget development and funding re-prioritization process, it is often difficult to track the various project scope and budget changes. Also, as previously mentioned, TransNet projects could likely face continued challenges such as increasing construction materials costs, evolving project scope, and growing contingencies that alter budgets and scope. From a project design point of view, it is important to understand that projects identified in the TransNet program may likely continue to experience changes in scope and cost due to various circumstances such as changing priorities, escalating costs, and changing market conditions. However, the general public, as well as future decision-makers, may not be aware of all these issues or the history behind changes and, thus, not fully understand their effects on the bottom-line budget and schedule. While changes and modifications are Board approved and follow an open, transparent process, our view is that a project by project budget history should be maintained to represent all significant changes over the life of the TransNet program. Table 2 provides one possible

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example of a budget history document that could be developed to track key project changes throughout a project’s lifecycle. Table 2: Example of Proposed Format of a Project Budget History Document Summarizing Major Project Changes

Project Name Project Description: Brief summary of project (e.g. transit, highway, location, completion date)

Key Project Changes 2005 2006 2007 2008 Current

2005 Ordinance Amount $$$

Market Adjustments

-Cost Escalation/Inflation/Deflation -Additional Changes & Description: -Project-Wide -Environmental -Design -Right-of-Way -Construction -Other

Scope Change Impacts -Scope Reductions -Additional/Expanded EIS/EIR -Realignment Work -New Lanes -Stakeholder Design Changes

Major Project Redefinitions -Project/Segment/Phase Merger -Project/Segment/Phase Split

Schedule Change Impacts -Rework Needed -Accelerated Opening -Suspension Items

Other Adjustments

Current Authorized Project Budget $$$

Note: Category/details can be added or modified to address particular nuances of project.

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[PAGE INSERTED FOR REPRODUCTION PURPOSES ONLY]

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Chapter 4: Project Management and Delivery Methods are Sound; However, Some Practices Could be Enhanced Over the last three years, SANDAG and Caltrans have been following established project management practices and sound project delivery techniques and methods for planning, implementing, and monitoring the EAP projects. Generally, we found that the management structure employed was sufficient to ensure:

• Roles and responsibilities were established;

• Milestones, budget and timelines were well defined and communicated;

• Key project action items and project decisions were memorialized in project files; and

• Project status was tracked weekly, and budget and schedule changes were communicated to executive management on a monthly and quarterly basis.

Compared to other public works and transportation programs and entities, the TransNet program appears to have similar or better project management practices in place over project documentation, monitoring and oversight, conflict resolution protocols, and on-going formal and informal feedback from project team members to senior and executive level management. These aspects all help expedite problem-solving and provide opportunity for discussion and buy-in on project direction from staff at all levels. Other sound project controls are in place to ensure cost estimates are reasonable, expenditures are contained, schedules are adhered to, and quality of work is appropriate. Nonetheless, we identified a few areas where SANDAG should strengthen its practices as well as tighten project documentation. For instance, while budget changes appeared reasonable, project files did not always maintain consistent documentation to support cost items as key data was not always centrally located or maintained and took some time to gather. Additionally, several policies and practices should be memorialized in a more formal project delivery manual to guide project managers and staff involved in the day-to-day project. Although we found SANDAG and Caltrans’ exercised sound project delivery practices, the TransNet program could be enhanced by consistently completing project evaluation forms and documenting lessons learned. In addition, there are several control features and practice tools to be gleaned from the NCTD’s SPRINTER Rail project that should be considered on future SANDAG transit projects—as well as for highway construction projects and the TransNet program overall. Because the TransNet is in its infancy, many of the EAP projects were in preliminary scoping or early design stages. Thus, not enough time has passed or efforts undertaken for us to draw conclusions on project performance. For activity we did review, the EAP projects in general appear to be on schedule and within authorized budgets although we noted several instances of project cost overruns and schedule delays within certain phases. Budget or schedule revisions were substantiated or documented, and we found that SANDAG and Caltrans operated sufficient processes to track, monitor, and address budget and cost changes on the projects we reviewed. However, we cannot determine the impact of these cost and time changes on the overall program outcome until TransNet projects are closer to completion.

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For instance, our review revealed that both SANDAG and Caltrans project managers, resident engineers, and task managers all closely monitor task orders and related amendments as well as contracts and resulting change orders. Although the project team could improve documentation of reasons for time extensions on task order amendments, task order amendments and change orders were generally well documented. Additionally, construction change order amounts were monitored against a 10 percent benchmark to ensure that the changes did not exceed the stated contract amount. These project and contract monitoring techniques appeared consistent with industry best practices and existing procedures noted at other peer entities.

Current Project Structure Seems to Work Well While most of the current TransNet EAP projects are jointly conducted by Caltrans and SANDAG, Caltrans is primarily responsible for highway construction projects and SANDAG plans, develops, and monitors transit improvement projects. We found that over the last three years a coordinated project level structure exists between the two organizations that appears well managed. Specifically, the TransNet program has to date on EAP projects enjoyed a strong project management and delivery structure as shown in Figure 9 that works well and has been followed diligently. Key project managers’ and Corridor Directors’ roles and responsibilities are defined to ensure sufficient review and monitoring of project costs, quality management, scope changes, resource management, risk planning, and financial management. Interviews with both entities reveal that the structure allows for frequent communication, detailed tracking of work-in-progress, continuous flow of information, and feedback and support from all team members across agencies. Moreover, we found that:

• Throughout project phases, Corridor Directors and their project managers work on multidisciplinary teams to consider various aspects of each project—members of any particular project could include Caltrans staff, SANDAG staff, external consultants, stakeholders, and representatives from the MTS or NCTD, and city or county staff.

• While each corridor can contain multiple segments and each segment may contain multiple projects, each project has its own series of project managers with defined responsibilities over schedule and budget, design, and construction—all of whom meet on a weekly basis to resolve any project issues. Others on the project team attend as well including consultants, advisors, and invited stakeholders. Any deviations from the budget or schedule are discussed in the team environment during various meetings, one of which is the monthly Project Development Team meeting.

• To ensure the communication channels remain open and all stakeholders have a chance to discuss concerns and issues on a regular basis, each transit-related project team meets with transit operators NCTD and MTS, at a regional Project Development Team meeting. In addition to these meetings, the division also has a monthly half-day meeting on projects that are in construction.

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Figure 9: Current Project Management Structure Example

* Project structure below the Corridor Director level can change and evolve to fit individual project needs.

• Corridor Director and project managers hold weekly “progress meetings” with all team members and consultants where schedules, deliverables, technical issues, and action items are discussed. Every few weeks, the team also conducts risk-based discussions where each project is reviewed from a more broad perspective and factors that impact the overall delivery are considered in “what-if” scenarios. These meetings are memorialized with meeting minutes that are prepared by the consultant, reviewed by project managers, and approved by the Corridor Director.

Enhancing this structure are two additional SANDAG executives involved in the planning, development, management, and implementation of the transit projects. These two directors oversee functional areas at SANDAG—namely, the Land Use and Transportation Planning Department and the Mobility Management and Project Implementation Department—and provide guidance, supervision, and general coaching to the TransNet project managers. However, the project managers report to, and are overseen by, a specified Corridor Director who is directly accountable for schedules, budgets, and scope of assigned corridors and projects.

Effective Project Management Tools are Employed Currently, both SANDAG and Caltrans are exercising several tools allowing for effective project management over resource planning, cost estimation and budgeting, cost and progress monitoring, scheduling, and reporting areas. Although both entities use separate automated systems such as Primavera and Microsoft Project for developing project schedules and

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milestones, these systems are merged together through a middleware tool that feeds into the Dashboard system. Project accounting data from both SANDAG and Caltrans, including authorized budgets and actual expenditures also are input into the Dashboard. The Dashboard displays critical project milestones, including budgets, expenditures, schedules, and progress, for each individual project as well as for the overall TransNet program. The system serves as a project monitoring tool internally as well as externally, for the general public. Additionally, our review found strong project management and documentation throughout a highway project’s life cycle. At both SANDAG and Caltrans one or more project managers are responsible for all aspects of project planning, including budget projections by phase, schedule development, decisions to outsource work or conduct work in-house. Project documentation generally memorialized significant decisions and illustrated various types of monitoring tools and spreadsheets in addition to the automated Primavera and Microsoft Project scheduling tools. Moreover, financial records are also used to manage projects. For instance, for our sample of projects, SANDAG and Caltrans project manager regularly reviewed, maintained, and used the following project documentation to manage projects and tasks:

• Environmental documents, design plans, and status;

• Results of project coordination meetings with stakeholders and communications with external parties involved;

• Proposed transit operating plans and ridership counts;

• Detailed schedules and budgets for work orders and amendments;

• Transit financing requests and financial grant applications;

• Cost estimates and projections at various project phases;

• Construction status, bid, award reports, and construction progress payments;

• Contracts and task orders including amendments and change orders;

• Data from SANDAG’s cost management system used to track contract working days, quantities of items used, and change orders;

• Payment vouchers for contractors and invoices for consultants prior to authorization;

• Responses to contractor or vendor questions related to billing discrepancies;

• Evidence of verification of labor surcharges and equipment rates, tentative agreements, and time and material for daily extra work reports submitted by contractors;

• Internal resource staffing assignments for each project; and

• Detailed spreadsheets tracking historic revenue sources, budgets and actual costs by phase, and burn rate calculations.

As a result, day-to-day project activities appear well-managed and monitored, with project decisions and action plans readily available to the project team, Corridor Directors, and

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public through vehicles including formal quarterly reports, various governance and oversight committees’ public meeting minutes, project development team meeting minutes, informal daily and weekly discussions, and Dashboard data. For instance, project meetings and decisions are documented with action items to enhance institutional memory and transparency. Although well managed overall, some historic project data, such as documentation of critical changes to project budgets and schedules as discussed in Chapter 3 of this report, were not easily located in project files.

Project Delivery Methods and Schedules Appear Reasonable Guided by extensive project management and oversight techniques employed by project managers as well as several Caltrans project manuals, TransNet projects undergo sound and consistent delivery methods intended to track progress against scheduled milestones and ensure appropriate tasks are completed at each phase—with some slight deviations to fit specific project circumstances and individual project manager style. Project managers as well as Corridor Directors continually reiterated to us that delivering projects on budget and on schedule throughout the various project phases is one of the key project objectives jointly identified by SANDAG and Caltrans. While each project phase as shown in Figure 10 may require different techniques and skills, our audit revealed that, generally, both SANDAG and Caltrans employed similar processes to develop and manage both transit and highway construction projects. Project delivery phases are as follows: Figure 10: Typical Project Delivery Phases

In general, both entities consider and track work in six different phases—environmental, design, right-of-way support, right-of-way capital, construction support including the bid and award process, and construction capital. Additionally, Caltrans seems to monitor its development and construction projects against eight critical milestones as shown below:

1. Project Analysis and Environmental Document

2. Projects Plans, Specifications, Estimates

3. Office Engineer Verification of Complete Plans, Specifications, Estimates

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4. Right-of-Way Certification

5. Ready to List for Bid

6. Construction Advertising

7. Contract Award

8. Contract Acceptance For highway construction projects, these key milestones are tracked on a monthly, if not more frequent, basis. Specifically, the Caltrans District 11 Director has a performance contract with the Caltrans’ Executive Director to meet estimated schedules and targets for delivery. Justifications for any variances must be documented, and the District Director’s performance evaluation is directly tied to district performance. To ensure all key dates are considered and interim project delivery milestones are closely monitored, the Caltrans District 11 Director identified additional delivery targets in the environmental stage and design stage to be tracked by Corridor Directors. These supplemental dates include:

• Begin Environmental Document

• Circulate Environmental Document

• Presidential Permit Approval

• Encroachment Permit Approval Moreover, in each project phase, it appears that appropriate tasks take place. For instance, project development team meetings held early in the environmental stages include all project stakeholders such as the MTS, NCTD, cities, and County whenever appropriate or whenever the project crosses multiple municipal boundaries. Often, environmental studies are performed by an external consultant hired by either SANDAG or Caltrans. Highway regulations mandate that a Final Report study including the environmental study and the value analysis are performed on all projects receiving over $25 million in federal funds. All TransNet highway construction projects receive some level of federal funding and thus, according to Caltrans executives, all projects are built to meet federal specifications for the environmental and design requirements. Work is managed by task order, consultants are held accountable to a task, and costs are only reimbursed based on work performed and invoiced. A designated project manager is responsible for monitoring consulting work and authorizing consultants’ reimbursements for the work performed. In the design and environmental stages, SANDAG and Caltrans have an option to outsource the work or perform engineering designs in-house. Both entities have sophisticated resource allocation planning processes to match the available resources with the project needs. For instance, SANDAG utilizes an Overall Work Plan detailing projected resources allocated to each project task at a high level, while Caltrans establishes and monitors its Resource Plan detailing project budget and staff resources available. A designated project manager is responsible to ensure that the decision to outsource work is thoroughly evaluated, reviewed and approved. Further, the decision to outsource is generally due to lack of available in-house resources to complete the job and meet the planned schedule. While the project

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manager is charged with monitoring work, both SANDAG and Caltrans have policies and procedures to monitor engineering and design work performed by external consultants. Additionally, in the design stage, project managers facilitate and monitor those project activities performed by other transportation partners—such as permit issuance—that are incorporated into overall project schedules. For instance, SANDAG and Caltrans often must coordinate with local cities to review project design plans for compliance with city codes and regulations and to issue necessary permits. Because the review and permit process can take longer than expected to meet city requirements, the project manager’s role is to minimize any potential delays. Each city has unique administrative codes and permit requirements, resulting in unique review processes dependent upon individual project specifics and location. According to SANDAG senior management, SANDAG is currently working with city officials to identify better protocols to maximize the benefit of the city plan reviews and minimize time needed to secure permits. In all transportation and transit programs, timing of right-of-way acquisition can be a tricky venture—buy land too soon, and one could end up managing the property; buy land too late and project delivery may experience added costs and possible delays from contested acquisitions. For the EAP projects we reviewed, Corridor Directors informed us that only limited amounts of right-of-way land will be needed since many of the projects relate to improvements and expansions of existing corridors. However, for the parcels identified by SANDAG or Caltrans to be purchased, each entity must follow rigorous and standard federal requirements. Once a typical project enters the construction phase, costs are more defined and plans more concrete. Construction contracts are awarded through a competitive bid and award process that spanned a four to eight month time frame—between the engineer’s estimate that forms the basis of bid requests, and the receipt and opening of the bids—for the 21 contracts entered into thus far for EAP projects. The competitive procurement process for Caltrans construction contracts takes slightly more time than at SANDAG, since once completed, plans and specifications at the District also have to be reviewed by Caltrans Headquarters, which is also responsible for advertising the bids and awarding the contract. Since this additional layer does not exist at SANDAG, the bids, depending on the size and complexity of the project, contracts are awarded within about six months. Best practices and controls are in place to ensure competitive processes seek the best bid price, and contractor performance is monitored on a daily basis by resident engineers in the field.

Project Evaluation Forms should be more Consistently Employed and Used during Various Project Phases Several strong practices are in place to plan, develop, deliver, and manage TransNet transit and highway construction projects, including the availability of post evaluation forms available for highway construction projects. These forms and resulting evaluation reports compare initial costs to actual expenditures within various phases, as well as request input on lessons learned and recommendations for improvements. However, these forms are not used with consistency or on a real-time basis to garner meaningful insights.

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In part, the uneven use of post evaluation forms is a result of past practices of waiting until a highway development project was formally closed-out with all claims, settlements, disputes, and final project costs known so that Caltrans staff could perform a true budget-to-actual comparison. Yet, with some claims resulting in litigation and keeping projects open for years, any benefits gleaned from a post-project evaluation would grow stale and be forgotten. However, the benefits of such tools could be realized by Caltrans completing post-evaluations after each phase to enhance its existing project monitoring tools and ensure needed changes are made mid-stream on a project—further, SANDAG may want to incorporate its own similar protocols. Moreover, as Caltrans and SANDAG pioneer various project delivery approaches to meet the EAP schedule, TransNet project managers and Corridor Directors would benefit from a close review of the lessons learned on these projects. For instance, the unique design sequencing approach implemented on the I-15 Corridor warrants further analysis of actual costs incurred, including staff and support costs to ascertain whether the practices employed should be applied to future projects. Furthermore, conducting cost benefit and risk analyses including reviews of project delivery options and associated costs should be considered on all future projects prior to making a decision between project delivery methods, such as a design-sequencing or design-build, for example. Although post evaluations are not always performed on completed projects, SANDAG and Caltrans staff hold informal discussions on lessons learned and improvements proposed on future projects or even subsequent project stages. SANDAG and Caltrans also employ value analyses on projects and quality control items to improve design features that have been identified and serve to enhance projects. Various process improvements and tools are now available on Caltrans’ intranet, including a database containing design specification updates and improvements.

SANDAG Should Strengthen Transit Project Development Practices Prior to the passage of Senate Bill 1703 in 2003, SANDAG was not involved in the project development or construction aspects of transit projects. Senate Bill 1703 transferred responsibility for the planning, development and construction of regional transit projects from MTS and NCTD to SANDAG. While the vast majority of TransNet early action transit projects currently underway were primarily planned and developed by MTS or NCTD prior to SANDAG’s assumption of development responsibilities, SANDAG is in progress of establishing practices and structure to plan, develop, and managed future transit projects. Many of the current SANDAG project managers, consultants and executives have previously worked at Caltrans, MTS, or NCTD and collectively bring unique insight, experience, and knowledge of project delivery methodologies and tools used by these other entities. In several areas, these project managers stated that they rely on Caltrans or other project manuals to aid in their own transit project development efforts. With much of the project development knowledge “transferred” to SANDAG from these other transit and transportation agencies, SANDAG should build upon, improve, and formalize its documentation of current processes and procedures to better ensure long-term

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continuity of in-house expertise. There are several areas that SANDAG could strengthen as it moves forward with future transit projects including memorializing its policies and procedures into project delivery manuals, and implementing consistent project performance monitoring tools to capture and assess key data on transit projects. To assist in its new transit roles and responsibilities, SANDAG hired several staff members from MTS and NCTD to oversee and manage project planning and development of the transit component of the regional transportation system. Of the current 17 EAP projects, seven are transit-specific projects in addition to the I-15 Middle that incorporates bus rapid transit components. Specifically:

• Mid-Coast and Super Loop (2 projects) These two projects were initially developed by MTS, with environmental reports prepared jointly by MTS, United States Department of Transportation, and the Federal Transit Administration.

• Blue Line and Orange Line Trolley (2 projects) While the initial trolley lines were built by MTS, these two TransNet projects on the Blue and Orange lines involve improvements only. Currently, SANDAG is in the early planning stages with the environmental study not expected to clear until December 2010.

• I-805 South Bus Rapid Transit This project was started by MTS, with former MTS employees joining the SANDAG team to continue planning and early design work.

• SPRINTER SANDAG provided oversight of this project beginning in 2007, but NCTD was responsible for the planning, development, and delivery of the rail line.

• Mid-City Rapid Bus SANDAG completed the conceptual engineering work in December 2008 and will be entering early design stages, pending approval of additional federal funding.

Because most of the SANDAG’s ongoing TransNet transit projects were developed and planned by other entities and are still in preliminary environmental or early planning stages, SANDAG has not yet developed or formalized all the needed protocols since subsequent design and construction phases have yet to be started. For instance, while interviews with SANDAG project managers reveal that development protocols are similar to those used at Caltrans, we did not find documented comprehensive procedures memorializing these processes and practices. Although the SANDAG Board adopted several policies outlining SANDAG’s responsibilities over transit project delivery, these directives are geared at a higher policy level and do not provide sufficient “hands-on” guidance for project managers and staff involved in the day-to-day project management and delivery. Towards this end, SANDAG should consider establishing working-level policies and procedures to ensure the uniform application and documentation of practices, controls, and preferences and make such guidance available to staff for reference and training purposes.

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Additionally, SANDAG could implement more rigorous protocols to augment its effectiveness in planning, developing, and overseeing TransNet transit projects. For instance, while SANDAG project managers employ good project management and monitoring techniques, SANDAG lacks entity-wide comprehensive guides and procedures for the application of consistent project management techniques on all projects to ensure quality. Up to this point, many TransNet transit projects were originally scoped and designed while under the authority of MTS and NCTD. Yet, because SANDAG’s role over the planning and project delivery has increased dramatically over the last five years, we believe more formal protocols are needed to ensure the process and established practices continue as envisioned and planned to achieve the desirable outcomes. At a minimum, SANDAG should consider consolidating board policies into a single project delivery manual where further defined procedures could be established and practices memorialized. Policies, procedures, and protocols should then be available to SANDAG staff for reference and training purposes. More importantly, with project development and project delivery staff transferring from other transit agencies and municipalities to SANDAG as part of its growing responsibilities over transit projects, consistency in processes and procedures would better ensure continuity of SANDAG’s expertise relative to transit planning and development. However, while SANDAG may lack detailed transit development policies and procedures, SANDAG’s existing project delivery practices appear to be sufficient. For instance, our review of project files for the I-15 Bus Rapid Transit Stations and the Mid-Coast Super Loop suggest that processes followed were generally similar to those applied on highway construction projects in terms of establishing key project milestones and budgets, establishing a process to monitor performance, track project status, and documenting project delivery actions and issues to ensure ongoing communication and frequent updates to Corridor Directors and executive management. Moreover, many of the TransNet EAP projects with a transit component are also subject to Federal Transit Administration requirements. Based on our cursory review of Value Analysis Reports and Congestion Impact Studies that were performed jointly by the MTS and Federal Highway Administration, adherence with federal requirements was part of the deliberate project delivery processes. Another feature that would strengthen transit project management is the creation of a uniform filing system where critical project documentation such as cost estimates, project budget history, project development team meetings, change orders, and other data are organized and located under a similar numbering system to ensure consistency and availability of important project data. Further, SANDAG may want to consider creating a shared database to house the electronic copies of project documentation. For highway construction projects, Caltrans organized project files on an automated shared drive and electronic documents followed as the physical files. However, while most critical project data seems to have been retained in SANDAG and Caltrans, project historic data, such as important changes to project budgets and schedules, were not always easily located in project files.

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Lessons can be Learned from SPRINTER Project In 2006, the SANDAG Board approved approximately $24 million in TransNet Extension funding to pay for cost increases on NCTD’s SPRINTER transit project. At that time, the project was approximately 70 percent complete and the Federal Transit Administration and SANDAG required a number of best practices and cost controls to be implemented on the project that could prove valuable to employ on future SANDAG transit projects. Initially started and planned in the late 1980s under the original TransNet ordinance, the SPRINTER Rail project involved the conversion of a 22-mile existing older freight line built in the 1880’s into a new light rail transit line running between Oceanside and Escondido. Using diesel multiple unit light-rail vehicles that are self-propelled and known for being more fuel efficient and quieter than traditional commuter rail counterparts, the new generation vehicles are only the second of their kind used in the country. Acquiring and launching a new type of rolling stock for the light-rail project required significant review and approvals from federal, state, and local authorities, which took significantly longer to obtain than was originally anticipated based on experience with past “traditional” light-rail projects. In fact, NCTD reported that federal approval to enter into the final design phase was not granted until 2000—nearly a decade after the first right-of-way acquisitions began. Subsequent state budgetary problems and funding freezes between 2002 and 2004 forced NCTD to explore bridge financing and bonding options, adding unanticipated increased costs and additional administrative efforts. Additionally, like other regional and statewide transit and highway construction projects, the SPRINTER project was faced with unprecedented construction industry cost escalations between 2003 and 2006. The initial 1987 TransNet ordinance funding of $60 million in 1990 dollars rose to today’s $484 million level and pushed the development timeframe out more than 20 years; it should be noted, however, that the $60 million funding was intended to be matched by other funding sources. Nonetheless, NCTD reports that the SPRINTER is the lowest cost-per-mile new rail project in the state and country, at $22 million per mile when compared to similar rail projects in Los Angeles, Charlotte, Denver, Pasadena, and Pittsburgh among others. The NCTD had secured funding from federal and state sources to cover the increases, but it ran short in 2006 when an additional $42 million in funding sources were authorized by the NCTD Board in order to cover project cost overruns due to a number of factors, including— time lags between initial design and vehicle authorization process that resulted in overall project delays; significant design issues partially due to the need for redesign to accommodate technical specifications of newly acquired trains; the inability to remove freight operations from the line during construction necessitating the use of construction “work windows” and an added year of construction; and, the resulting overall work remaining to complete construction. Decision makers believed the project to be an integral part of the regional transit network and part of the region’s transportation solution and realized that the Ordinance plan to extend the SPRINTER line could not be achieved if the line was not constructed. While the SPRINTER project began service in March 2008 and continues to close-out construction claims, there are several lessons and practices that SANDAG could consider and incorporate into TransNet transit and highway construction projects where applicable. Some of these best practices include:

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Adopting the Federal Transit Administration’s process for evaluating individual

project elements and risks related to cost, scope, and schedule and formalize the results in risk mitigation registers including descriptions, cause, potential impact, likelihood of impact materializing, mitigation strategy and costs to mitigate. Data from these documents form the basis for developing a risk mitigation and management plan as well as a means for tracking the success of mitigation efforts and the responsible staff assigned. In addition to project risk tracking, SANDAG could employ a risk based approach to the TransNet program as a whole to capture overarching risks to the program’s success such as available funding and adequate resources as well as document approaches taken to minimize any negative consequences that could occur.

Continuing existing SANDAG and Caltrans techniques employing similar risk assessment practices and ensuring the risk assessment approach is performed consistently on all projects. Moreover, SANDAG could merge risk assessment results from Caltrans highway construction projects with its own transit risk results, once identified, into an integrated risk plan as well as ensure lessons learned on the SPRINTER projects are incorporated and memorialized into SANDAG policies and procedures.

Ensuring project risk assessment processes include a periodic review and reassessment of project cost risks at contract milestone achievements. This requires a systematic risk analysis to continuously track progress and evaluate the risk exposure based on current factors.

Assessing technical capacity and adequacy of staff resources as part of a risk mitigation and management plan that could identify gaps in resource levels, training needs, additional staff needs, or staff reassignments.

Consistently using schedule forecasting techniques that allow evaluation of staff burn rates, anticipated completion time, and budgets to more closely monitor project costs against plans.

Using earned value calculations and percent of work complete to date, update monthly project forecasts of costs to complete. Although SANDAG has made strides toward implementing these methodologies in its Dashboard system that captures project percent of completion, the SPRINTER project employed efficiency analysis, manpower analysis, payment application analysis, trend analysis, and other analytical techniques to provide monthly forecasts and status.

Developing detailed sub schedules and report on all critical activities on key system components that are combined into an integrated schedule for all project activities. While similar project scheduling and reporting practices appear to be successfully employed and ongoing at SANDAG, it should ensure these practices are consistently employed on all projects, and formalize these procedures for continued agency-wide implementation.

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While several of these practices may have been informally shared, we suggest that SPRINTER project management conduct intensive, hands-on workshops with SANDAG and Caltrans executives where critical tool employed and practical experiences could be formally shared, specific implementation details deliberated, and benefits versus cost analysis reviews could be employed. These meetings could result in the establishment of more stringent project delivery tools and written policies and procedures to assure best practices are implemented.

Construction Cost Budgets Estimates were Generally Accurate Construction cost budget estimates are influenced by various factors including construction price index fluctuations, local market conditions, demand for contracted labor, economic conditions, project scope, and underlying assumptions used by estimators. The accuracy of these cost estimates are tested during the bid process where the engineer’s estimate is ultimately compared to bid estimates prepared by independent contractors. Comparing a contractor’s bids to the engineer’s estimate serve as a litmus test of the quality of the engineer’s estimate and how well the estimate reflected current market conditions, material costs, and the labor market. Our review revealed that both SANDAG and Caltrans have developed sound cost estimation practices and techniques for highway transportation projects that have proven generally accurate for the 21 contracts related to EAP projects totaling over $658 million put out to bid over the last three years. Specifically, in developing construction estimates, Caltrans engineers use various cost estimating techniques and assumptions to ensure that during the design phase of a project’s development cycle, construction cost estimates are continuously updated and refined to track market conditions. Engineers use industry indices for estimating materials costs and rely on experience and historical data for best approximating quantities needed. Other factors considered include such things as prices of crude oil, asphalt concrete, labor cost, equipment rental, and mobilization—all elements typically considered in the transportation industry. All construction estimates are reviewed by the Office of Engineer at Caltrans’ headquarters in Sacramento. Major construction projects also undergo additional cost review conducted by Federal Highway Administration. Even with several layers of reviews, construction cost estimates may still be significantly affected by unexpected fluctuations in market conditions which occurred in California, between 2001 and 2005. During this period, Caltrans and others in the industry reported unexpected construction cost increases exceeding 60 percent more than expected costs according to statewide data. Variances were so extreme during this period that Caltrans hired a third party to review construction cost estimates on all projects during that period. We compared engineer’s estimates to bids received for the 21 contracts advertised for bid over the last three years. On average, variances were 2.2 percent across all the contracts. Yet, our review revealed 13 of the engineer’s estimates were significantly different than bids received on individual projects as shown in Table 3.

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Table 3: Percent Difference between Engineer’s Estimate and Lowest Bid

Corridor

Segment

Engineer’s Estimate

Lowest Bid

Percent Difference

1 I-5 HOV (High Occupancy Vehicle) Ramp Modification $1,446,481 $1,842,913 27 %

2 I-5 HOV (High Occupancy Vehicle) $39,548,558 $32,821,953 (17 %)

3 I-15 South Unit 1 $67,607,450 $48,380,250 (28 %)

4 I-15 Middle Soundwall $3,543,735 $4,902,615 38 %

5 I-15 Middle Unit 2 $57,858,000 $67,837,529 17 %

6 I-15 Middle Unit 3 $96,435,000 $81,952,560 (15 %)

7 I-15 Middle Unit 4 $36,201,000 $32,228,492 (11 %)

8 I-15 Middle Unit 5 $35,628,960 $39,592,936 11 %

9 I-15 Middle Unit 1 Landscape $2,793,515 $2,446,027 (12 %)

10 SR-52 Ops East/ West Bound Auxiliary Lanes $25,160,521 $17,748,749 (30 %)

11 SR-52 Ops West Bound Truck Lane $4,220,645 $3,074,324 (27 %)

12 SR-52 Extensions Unit 4 $72,797,532 $56,821,094 (22 %)

13 SR-52 Extension Unit 5A $96,381,600 $66,359,459 (31 %)

Source: “Bid Summaries” from Caltrans Office Engineer Website While there were four contracts where the lowest bid was more than 10 percent greater than the engineer's estimate—in one instance the lowest bid was over 38 percent greater—we found these variances to be consistent with the condition of the construction market at the time the bids were advertised during the unusual construction cost inflationary period of 2004 to 2007. Other causes included contractors associating a higher complexity with these construction projects and consequently incorporated potential contractor error costs in their bid proposal. By contrast, we also noted instances where the bid was significantly lower than the engineer’s estimate—specifically, four bids were received that were at least 27 percent under engineer’s estimates. Again, the timing of those bids (three of them were received in 2008), suggest that the price fluctuations are closely tied to the trends in the economy overall. It appeared that when the economy was slow and work was scarce, contractors were more willing to lower profits in order to obtain work and, thus, bid at lower rates than they would in a thriving economy. When comparing the numbers of bids received during favorable construction industry times to bids received in slower economic times, we found that the number of bidders decreased when the economy was doing well. Specifically, for contracts awarded between 2004 and 2007 where the bids were much higher than the engineer's estimate, there were typically only two or three contractors submitting a bid on each project. Of those three bids received in 2008 that came in much lower than the engineer's estimate, there were seven contractors bidding on each project during the economic slowdown.

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Further, estimates can be significantly impacted by the length of time between the estimates and receipt of bids—much of which is largely under control of the estimating entity. However, we found the time lapse between the engineer’s estimate and bid receipt was not significant on any of the projects reviewed, and ranged from four to eight months. Specifically, for the seven construction contracts awarded in 2008, more than half of the contracts took seven months to award. Table 4: Comparison of Timeframe between Engineer’s Estimate and Bid Opening

Corridor

Segment

Length

Difference in Low Bid and Engineer’s

Estimate (Under)/Over

Number of Bids

Submitted

Low Bid Amount

1 I-15 South Unit 2 7 months (8 %) 3 $60,545,000

2 I-15 South Unit 3 7 months (9 %) 6 $66,868,627

3 SR-52 Extension Unit 5A 7 months (31 %) 6 $66,359,459

4 SR-52 Ops East/ West Bound Auxiliary Lanes

7 months (30 %) 6 $17,748,749

5 I-15 South Unit 1 7 months (28 %) 7 $48,380,250

6 I-15 North (BM Facility) 8 months 4 % 4 $5,464,905

7 I-15 North Unit 2 8 months (3 %) 7 $47,420,115

Source: “Bid Summaries” from Caltrans Office Engineer Website & Project Schedules from Dashboard Website As shown in the Table 4, the bid variance on one $66 million project was approximately 31 percent less than estimates, while the bid variance was not much lower (approximately 29.5 percent) for a $17 million project. Thus, there appears to be no direct correlation between the value of the project and the length of the bid process or the bid variance. Similarly, the bid variance for the two projects taking eight months to award ranged from less than 2.87 percent of estimates to nearly 4 percent over estimates. According to Caltrans, when bids started getting out of sync with engineer’s estimates in 2008, new policies were established to update estimates more frequently.

Process to Manage Project Cost Overruns and Delays was Reasonable To assess EAP project performance, we reviewed Dashboard data summarized at the corridor segment level for comparing budget to actual costs and baseline to actual schedules. At the summary level, projects seemed to be within authorized budgets. For instance, between 2006 and 2008, SANDAG and Caltrans had only expended approximately 12 percent of the total TransNet budget approved to date. However, since the vast majority of these projects were still in the early environmental and design phases, full projects costs have not yet been realized that would have allowed us to more conclusively assess whether projects will ultimately meet budget and schedule goals.

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Additionally, we examined performance on 22 highway and transit segments as well as assessed performance by project phase including environmental, design, right-of-way, and construction. Our review revealed 4 of the 22 segments had experienced cost-related or schedule delays in the right of way support area and another 5 of the 22 segments experienced similar issues in the environmental phase. In addition to historic construction cost increases in the early 2000s, causes for the overruns and delays included subpar consultant work, unexpected or unforeseen site conditions requiring rework, and additional unplanned activity to complete environmental studies. Nevertheless, reasons for the issues were tracked, vetted with management, and the processes to manage and address these changes were reasonable. For instance, the Mid-Coast project experienced delays of more than 12-months and required Board approval of $11 million to cover cost overruns in the environmental stage. Because the Mid-Coast project was initially envisioned for development and construction in the early 1990’s, an environmental study was completed at that time. Upon subsequent reprioritization processes, the project was placed on hold until 2005 when the TransNet extension program was launched. Because the initial environmental study had been completed more than 15 years prior, SANDAG had to revisit the concept plans to address changed conditions along the I-5 Corridor and adjust alignment design plans to accommodate appropriate train speed level. Although the project technically experienced budget overages, the reasons were justified and documented in project files and steps were taken to minimize the total impact of the overruns. In another example, we found budgeted costs were exceeded on the I-15 Middle Segment project due to various extraneous circumstances including construction cost escalation and events related to fire and flooding as well as combining portions of work on the North and Middle I-15 segments. While initial budgets on both of these projects were exceeded, the excess costs related to rework needed was justified based on project file documentation and approved by project executive and senior management. Moreover, as described throughout this report, SANDAG and Caltrans have several processes in place to monitor costs and schedule against planned targets and to minimize these overruns and delays and ensure projects and activities remain on schedule.

SANDAG and Caltrans Generally Employed Adequate Procurement Practices to Supplement Staff and Complete Project Activities For the EAP projects commenced over the last three years, SANDAG and Caltrans have primary responsibility for the majority of the TransNet program’s $160 million in contracting activities that are used to supplement limited staff and provided needed expertise. Based upon a cursory review of activities, we found that practices employed were adequate to afford sufficient competition to attract good prices and quality services, objectively select contractors, track and approve allowable contract expenditures, and monitor contractor skills and performance.

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Specifically, Caltrans relies on its contract compliance offices at Caltrans headquarters that have established contract solicitation, selection, and award processes that provide controls, objectivity, and fair competition. The contract award process is centralized, and all TransNet contracts awarded by Caltrans require approval of its Contract Monitoring Office and appropriate headquarters executives. Similarly, SANDAG’s procurement of consultant contracts follows a typical competitive procurement process whereas SANDAG’s Contracts Unit advertises and receives requests for proposals from different consulting firms. The responsive proposals are reviewed and scored based on pre-determined criteria by an independent review panel generally consisting of staff familiar with the solicited work. If warranted, the panel will conduct interviews before the final selection is made and the contract is awarded. We found SANDAG contract files to be well-organized and containing appropriate documentation to support a competitive process such as requests for proposals, responses, scoring sheets, and correspondence. To achieve synergies and avoid duplication of efforts in contracting, both entities utilize SANDAG’s established list of more than one dozen on-call consultants for engineering and architectural services. Each of the consulting on-call contracts had an initial value of $10 million with options for renewal of the term and increase of contract value—with a not-to-exceed cap of 25 percent of the contract value. Before work is performed on a contract, a task order must be issued detailing the scope of work as well as deliverables, costs, and deadlines. SANDAG’s TransNet Project Office tracks all task orders against the contract on a summary level and monitors the remaining contract amount in relation to the consultant’s commitments on other project task orders. Additionally, SANDAG and Caltrans have established project level processes to monitor and track procurement and contracting processes, including contract award and monitoring. Contract amendments, task orders, and change orders on construction projects are reviewed by designated staff, with project task managers having the responsibility for monitoring contractor performance by initially developing task orders and then managing against task orders and work deliverables. Moreover, project managers review consultant timesheets and invoices as well as approve payments. As part of SANDAG’s monitoring process over its consultants, mechanisms have been established for the early identification of contractor problems and to ensure that the most qualified consultant has been selected. Specifically, in using consultants as extension of in-house staff, project managers interact and supervise consultant work on a daily basis which allows for early detection of performance deficiencies or other obstacles that may affect the project delivery. For instance, project managers on the Mid-Coast project became aware of a problem related to the quality and effort of a consultant. During the consultant performance

Procurement Controls Include:

Competitive procurement practices to ensure objectivity and fairness

Detailed scope of work

Well-organized contract files

Close interaction with consultants and contractors

Monitoring of consultant work and invoicing

Contract performance evaluations completed

Internal audit function reviews contract and procurement area

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monitoring process, SANDAG project managers’ review of an invoice revealed inadequate work performed as compared to the amounts billed. After trying to resolve differences with the consultant, it was mutually decided to terminate the contract, and procure services from another firm. Currently, SANDAG has protocols in place to select and monitor engineering and architectural services work performed by outside consultants. Specifically, SANDAG relies on an on-call list of pre-selected firms who are authorized to perform work on as- needed basis. The consulting firm with a prior poor performance record, as indicated by the project manager, is no longer on the list of SANDAG’s on-call consultants. On a go-forward basis, to employ lessons learned from this experience, SANDAG may wish to consider establishing a formal project risk assessment analysis where cost impact is considered as part of the on-going efforts monitoring progress on a project. For example, the information about a consultant’s poor performance would be logged and considered as additional cost or risk factor that would be reviewed at a higher project, or potentially corridor level. Moreover, performance evaluations are completed on design consultants and contractors used by SANDAG or Caltrans at the close-out of the task order. Specifically, project managers and Corridor Director complete a “Quality Assurance” document which serves as the basis of the discussion between the Corridor Director and consultant/contractors. The Quality Assurance document is intended to provide constructive feedback to the consultants/contractors to improve their performance on future projects. If necessary, it would also state reasons that could prevent the consultant/contractor from being utilized again on TransNet projects. Construction contracts follow similar strong protocols although all individual projects are put out for competitive bid rather than selected from an on-call listing. Caltrans staff also monitors contractor performance. Besides the day-to-day interactions with contractor staff on a project or construction site, consultants are also part of the individual project development team meetings where SANDAG and Caltrans staff can closely monitor expertise and performance. Additionally, Caltrans’ online database of current contractors allows instant access to progress payments, contract amendment data, and other contract-related information. A final control in place over contract and procurement activities centers around SANDAG’s Internal Audit function established within the last year. Currently, there is one Principal Management Internal Auditor, reporting directly to the Deputy Executive Director, who is in charge of developing risk-based audit plans, conducting day-to-day audit activities, and working on assignments addressing the needs of the SANDAG executive team. A large portion of the audit year was consumed by efforts on a comprehensive audit of contract pre-award activities and task order processes. However, because the work was still in process and report still in development, we were unable to obtain the internal audit results. As a result, we would recommend that SANDAG report to the ITOC on its audit findings that relate to the TransNet program either directly on a project-specific basis or more globally related to SANDAG general operations. The ITOC may want to consider using its newly formed Audit Subcommittee as the information portal for these audit findings—especially those of a more sensitive nature—that could report back to the ITOC at large in the more public setting. Further, since SANDAG’s Internal Auditor anticipates conducting future

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additional audits on contract pre-award activities and general contracting practices and processes, the ITOC may want to have the Internal Auditor regularly appear before the Audit Subcommittee to share any TransNet related audit issues and corrective actions taken.

Task Order Amendments and Change Orders are Tightly Controlled, Although Minor Enhancements Could be Incorporated While the dollar value of task orders and construction contracts are significant for most if not all of the TransNet projects, it is typical in the industry to need amendments and contract change orders to increase the value or extend time. These modifications that can easily result in formal requests for budget increases, may be caused by unforeseen circumstances, weather, emergencies, inadequate service or quality, or insufficiently defined scope of work. While generally our review revealed that the task order amendments and change orders were properly managed and approved in a reasonable manner, SANDAG and Caltrans could improve its task order approval process by modifying delegated authority thresholds and improving documentation supporting reasons for granting time extensions on projects. Task Order Amendment Process Seems Reasonable; However Improvements are Needed

Since 2005, the SANDAG has issued nearly 377 task orders with 263 related task order amendments with a total value of nearly $100 million to 16 different architectural and engineering consulting firms, as shown in Table 5. According to SANDAG staff, over 90 percent of these task orders relate to TransNet funded projects. Our review of sampled amendments revealed that the procurements appeared to be justified, properly approved, and tracked. Based on our desk review of the sample of 12 task orders and 43 related amendments from seven different contracts, we found the scope, roles, responsibilities, project deliverables, and schedule milestones appeared to be reasonably defined in the task order—thus, insufficient scope did not seem to be the cause behind the needed amendments. Rather, we found that task orders were often amended to add funds for subsequent phases released and approved for work, due to unforeseen circumstances, or to account for additional required work or time needed to complete the deliverable. For instance, on the Super Loop EAP project, one task order reviewed was to design a bus transit project to the 60 percent design for the construction phase. When the designs were presented to stakeholders, they requested a modification to the stations which required a task order amendment to account for the additional costs associated with the re-design of those stations. Similarly, on the I-805 Managed Lane EAP project, only the current year budget was funded on the task order even though the money would only cover a portion of alignment studies needed for a particular segment. Thus, as more funding became available, the task order was amended to add additional scope and money to complete the studies.

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Table 5: Consulting Contracts Issued Since 2005

Contract Number

Number of Task Orders

Value (incl. amendments)

Number of Task Order

Amendments

Amendment Value

Amendment Value %

Environmental On‐Call 5000261 29 $ 7,342,570 27 $ 1,120,377 15.3% 5000262 21 $ 12,189,350 37 $ 2,886,463 23.7%

Construction Management On‐Call 5000304 39 $ 6,399,439 36 $ 663,443 10.4% 5000305 40 $ 6,232,682 22 $ 1,996,355 32.0%

Engineering On‐Call 5000401 26 $ 11,331,969 13 $ 372,905 3.3% 5000402 77 $ 11,079,392 49 $ 3,464,101 31.3% 5000403 44 $ 11,936,314 40 $ 1,061,746 8.9% 5000404 40 $ 12,249,762 22 $ 524,301 4.3% 5000405 27 $ 6,272,938 17 $ 1,365,052 21.8%

Engineering/Environmental On‐Call (Highway/Transit) 5000921 0 n/a n/a n/a n/a 5000922 0 n/a n/a n/a n/a 5000923 25 $ 5,749,734 n/a n/a n/a 5000924 3 $ 2,721,733 n/a n/a n/a 5000925 1 $ 987,602 n/a n/a n/a 5000931 3 $ 218,620 n/a n/a n/a 5000932 2 $ 3,421,048 n/a n/a n/a

Totals: 377 $ 98,133,153 263 $ 13,454,743 14%

Note: While the vast majority of the on‐call consultant task orders were issued for TransNet funded projects, there is a number of task orders that were for other projects. However, since the number and value of task orders for non‐TransNet projects was minimal, we did not separate those task orders as they do not affect the overall analysis. In each instance, we found reasons and justifications for the increased budget to be well-documented and that the amendment was properly approved by several different SANDAG staff including the Contract Manager, Director of Engineering and Construction, Finance Director, and Office of General Counsel as well as Caltrans Corridor Directors and Caltrans Headquarter staff, where appropriate. With the large amount of people involved with task order approvals, we were informed that amendments can take two weeks to two months to process adding potential delays to a project. Thus, SANDAG should consider revising its delegated authority amounts for appropriate levels of staff where shorter timelines could be achieved when revising task order amendments of lesser value. Further, for the amendments that only extended time and did not increase task order funding, written justification of need did not have sufficient detail. Specifically, the standard task order amendment template used only requires checking a box indicating a “no-cost extension of time with no change to the scope of work.” In discussion with task order managers, we

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learned that although there were valid reasons for time extensions such as unforeseen events delaying the project or funding not readily available to complete the task within the originally allotted timeframe, such detail and justification is not provided in the amendment request. Without explanations why a project needs additional time to provide deliverables, information is insufficient for proper approvals, which may cause additional delays in the approval of the amendments and the start or continuation of scheduled work. Yet, both SANDAG and Caltrans task order managers did not appear overly concerned with the delay for time extension only amendments. In fact, they indicated that the time extension are easiest to process and usually are much quicker than requests for more funding that require modifications to the scope of work. Ultimately, while amendments processed increased initial task order amounts by approximately 14 percent and extended time beyond several months in some instances, it appears that SANDAG and Caltrans have the requisite processes in place to control unwarranted or unnecessary increases. One Task Order Manager indicated that it can be difficult to determine how large a task order should be—if a task order value is too low and covers individual discrete activities, there could be numerous task orders or amendments needed which is time-consuming; however, if a task order value is too high and encompasses many activities, then it could be difficult to manage. Thus, Task Order Managers must strive to reach a balance in the number of task orders and amendments that are created. As mentioned in the previous section, SANDAG’s internal auditors are in process of conducting an in-depth review of the task order process. Although those efforts have not been finalized and made available to us, the Internal Auditor should report findings and corrective actions planned to the ITOC. Construction Change Orders Follow a Similar Controlled Process and Were Justified

Caltrans typically anticipates a five to ten percent contingency range for roadway construction projects that is consistent with targets used at other public works department in San Francisco, Los Angeles, Long Beach, and Oakland. Over the three-year period of our review, SANDAG and Caltrans awarded 21 construction contracts for EAP projects worth over $658 million, and processed 920 contract change orders valued at approximately $44.5 million. Of those, 511 change orders worth $24 million were issued for projects that have been fully completed. In total, these change orders were 13 percent of total construction payments or 14 percent of the original contract bid value. While the 13 to 14 percent range is higher than the 10 percent target total, in the end, contractors were only paid 7.6 percent more than the initial contract bid amount. Thus, while the change order reporting by itself appears somewhat higher than benchmarks, it is not as significant if put in perspective with the overall payment amounts. Generally, both SANDAG and Caltrans follow similar procedures to control and monitor change orders. For transit projects, SANDAG maintains change order data in its cost management system and informally uses Caltrans procedures as a guide in handling change orders. Similarly, Caltrans employs a statewide, public database known as “Major Construction Payment & Information System” or “Progress Pay.” While the system allows contractors to track progress payments, it also provides detailed information regarding

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payments resulting from change orders, total extra work paid to-date, and details of the original contract such as approval date, start of construction, and estimated completion dates. Based on this information, the system also calculates the percent completed and percent time elapsed to determine whether the project is on time and on budget. The Progress Pay system eliminates the need for contractors to submit invoices to Caltrans for their monthly progress pay since Caltrans employees or Caltrans-hired field inspectors determine the project progress and the associated payment amounts each month. To examine reasonableness of construction contract change orders and adherence to procedures, we reviewed a sample of change orders from four construction contracts where work was either complete or nearing completion, total payment amounts exceeded the original contract value, and change orders constituted at least 11 percent of the contract value. The contracts were from three different corridors where construction work was most advanced and reported a total of 288 change orders worth $21 million as shown in Table 6 below. Table 6: Analysis of Change Orders Reviewed

Segment/ ProjectContract Number

Contract Bid/Value

Total Payment% Paid Over

Contract Value

Work Complete

Status

No. of COs

Total CO ValueCO % of

Total Payment

CO % of Contract

Bid/Value

I‐5 HOV (High Occupancy Vehicle) Ramp Modification

11‐279604 1,842,913$ 1,861,914$ 1.0% 100% 7 331,076$ 17.8% 18.0%

I‐15 Middle (Unit 1) 11‐080904 51,545,000$ 56,708,928$ 10.0% 100% 154 9,883,933$ 17.4% 19.2%

I‐15 Middle (Unit 3) 11‐080924 81,952,560$ 89,131,356$ 8.8% 96% 114 10,140,504$ 11.4% 12.4%

SR‐52 Ops (West Bound Truck Lane)

11‐2T0204 3,074,324$ 3,812,917$ 24.0% 100% 13 656,236$ 17.2% 21.4%

Totals: 138,414,797$ 151,515,115$ 9.5% 288 21,011,749$ 13.9% 15.2%

Contract Change Orders

Overall, our review revealed that these change orders were reasonable, properly approved, and diligently tracked. For instance, one change order on an SR-52 contract to extend a freeway lane was needed to relieve increased levels of congestion for commuters while construction was on-going that was greater than initially envisioned. In another example, concrete barriers had to be modified after the completion of the design, since due to the design-sequencing delivery approach employed, the design was not fully complete at the time the contract was awarded. In each instance, we found reasons and justifications for the increased contract amounts to be well-documented and that the amendment was properly approved by several different Caltrans staff including the construction engineer, project engineer, project manager, and Corridor Director if needed. Moreover, the overall anticipated impact from these amendments and change orders on the continuation of a corridor segment or entire project is informally considered and discussed— project managers at both SANDAG and Caltrans meet regularly with consulting staff to communicate any budget, schedule problems, or delays and discuss impacts at the weekly project development team meetings. Any significant budget or schedule changes affecting the critical path are elevated to Executive

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Management, who presents the issues and alternative solutions along with Corridor Directors to the SANDAG Board. While the amendment and change order process employed has integrity, practices could be enhanced by SANDAG tracking change orders and contract amendments overall for the TransNet program to facilitate management and oversight functions at the program level. This data could be used to develop and trend performance indicators and provide another tool to gauge project and program status or level of success. A more detailed discussion of performance measures as well as our recommendations can be found in Chapter 2 of this report.

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Chapter 5: Conclusion and Recommendations

Because the TransNet program is in its preliminary stages with many projects in the early environmental or design planning phases, project data were not yet available at the time of our audit to allow a full assessment of project performance for overall conclusions to be drawn. For example, although it is reasonable that cost overruns in an early design phase could be managed and brought back in line with the overall project budget through cost containment activities in subsequent project phases, we could not conclude with certainty whether appropriate steps were taken since these projects were in progress. As such, while this audit could only focus on the framework and foundation established by SANDAG and Caltrans to guide project efforts, there may be other improvements needed that will be revealed as more projects are completed. Nonetheless, SANDAG and its partners have taken strong initiatives and aggressive steps to create many practices and tools over the last three years allowing for the acceleration of promised projects and achievement of early program success. Based on our review of progress on the EAP projects, the TransNet program operates with well-defined processes to plan, develop, and deliver projects. Good working relationships have also been established between SANDAG and Caltrans to coordinate their efforts among multiple stakeholders and other transportation and transit entities in addition to strong project management practices to track and discuss project cost, schedule, and scope. Other elements necessary for a successful program delivery are in place including governance and oversight as well as project monitoring and accountability. Over the last three years, SANDAG and Caltrans have built a solid foundation and should continue to ensure that actual practices follow established procedures as well as focus post-project discussions on maximizing benefits and cost savings for future projects. Moreover, SANDAG and Caltrans need to maintain integrity of the program controls with a flexible structure to accommodate different situations that will occur over the successive decades that cannot be foreseen at this time. Toward this end, we recommend a series of actions that would strengthen and enhance the groundwork for future development. Specifically:

Recommendation Report Reference

Priority

To assist management and oversight bodies in deliberating project activities, weighing options before making decisions, and strengthening general levels of oversight, SANDAG should work in conjunction with Caltrans to:

1.

Develop and deliver a brief, high-level summary, or “Report Card,” to the ITOC and other oversight bodies for each transportation project describing project budget and schedule by phase, project performance, project benefits and risks, financial assumptions, project cost range, and highlights of project changes to scope, schedule and cost as well as budget-to-actual and project-to-date information.

Chapter 1, pages

32 & 33 High

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Recommendation Report Reference

Priority

Also, consider summarizing Report Card performance on a monthly, quarterly, or annual basis, as appropriate, to identify trends or systemic issues.

2.

Summarize and distribute data reflecting key project milestones and performance indicators where period-to-period trends for the program overall, as well as at a corridor or segment level, could be analyzed. Statistics should include budget and schedule targets compared to actual performance, as well as progress towards meeting program objectives such as reducing levels of congestion and travel times, minimizing project cost per mile, and increasing the percentage of projects completed on time and on budget.

Chapter 1, page 34 High

3.

Provide status information regarding existing audit requirements and status updates on internal and external audits in progress or completed of SANDAG, Caltrans, or other transportation partners outlining scope of audit work, results of audit efforts, corrective actions planned or taken, and outstanding findings and unresolved issues as they relate to the TransNet program. In particular, the SANDAG Internal Auditor should report to the ITOC, or its newly formed Audit Subcommittee, once the current in-process audit of contracting and task order practices is completed.

Chapter 4, page 86 Medium

4. Work collaboratively with the ITOC to identify other type of oversight data needed from SANDAG, Caltrans, or other transportation partners where appropriate and within reason.

Chapter 1, pages

31 & 35 Low

To monitor overall program adherence with the Ordinance and assess the overall program impacts resulting from project budget and schedule deviations, the ITOC should:

5.

Analyze suggested Report Card data and performance indicator data provided looking for trends, issues, and progress toward overall TransNet goals as well as consider the multi-faceted project performance details impact on travel time and congestion as well as project performance in terms of schedule and budget adherence. Moreover, the data could be used to monitor effectiveness of operational strategies and the success of SANDAG in meeting targets.

Chapter 1, pages 32-34

High

6.

Work collaboratively with SANDAG to identify other type of oversight data needed from SANDAG, Caltrans, or other transportation partners that can be captured in matrices or other formats enabling a period-to-period review of data and results over time.

Chapter 1, pages

31 & 35 Low

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Recommendation Report Reference

Priority

7.

Develop matrices or tracking documents to summarize critical ITOC concerns, issues, and decisions resulting from discussions at monthly meetings, as well as to memorialize resolutions or action items carried forward to subsequent meetings complete with owners assigned and timeframes for completion established. Progress and actions taken could be tracked and progress updated at subsequent meetings, and the matrices could serve as an institutional transfer of knowledge as new ITOC members are appointed.

Chapter 4, page 35 Medium

8.

Identify additional entities, positions, or individuals to regularly provide status reports and data to the ITOC (such as the SANDAG Internal Auditor), and incorporate standard monthly meeting agenda categories to address the new areas and ensure all critical TransNet program areas also receive an oversight focus in addition to project-specific activities. Refer to suggested categories in Chapter 1. Also, consider protocols regarding specified time allocations allowing for adequate deliberation prior to decisions rendered for the more critical areas with high-dollar or high-profile impact.

Chapter 1, page 36 Low

9.

Consider using the newly formed ITOC Audit Subcommittee as the information portal for audit status updates, especially those of a more sensitive nature. The Subcommittee could report back to the ITOC at large in the more public setting.

Chapter 4, page 86 Low

To refine its existing Dashboard integrated budget and schedule tool, SANDAG should:

10.

Revisit its intent and vision for the Dashboard to determine whether it should include all EAP projects and report on all Ordinance programs, as well as determine whether the Dashboard is meant to function as an “in-progress” management tool for current projects or should be established as a comprehensive historical data warehouse for the 40-year duration of the TransNet program. Also, use the Dashboard data to summarize performance indicators and monitor progress of indicators such as “percent of work completed compared to total costs” and “support costs as a percent of capital construction costs.”

Chapter 2, pages 44-46

Medium

11.

Add an explanatory note to better clarify cumulative data presented or isolate and remove the pre-2005 expenditures to more accurately reflect the TransNet program costs.

Chapter 2, page 45 Medium

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Recommendation Report Reference

Priority

12. Develop a mechanism to report project budget and schedule history and key changes over the course of the TransNet program.

Chapter 2, page 45 Medium

13.

Ensure all Dashboard views and tables are complete and accurate such as “percent of completion” data by clearly identifying and communicating to project managers responsible for the data, the assumptions and definitions behind the percent complete calculations as well as monitoring the indicator for reasonableness. Additionally, reassess the need and use of the “Trends, Risks, and Issues” section in the Dashboard to ensure complete and current information or eliminate the section and capture similar data through a different vehicle.

Chapter 2, pages 45-46

Medium

Building upon strong existing protocols related to transparency holding project owners accountable and economical to demonstrate performance results to the public, SANDAG should work in conjunction with Caltrans to:

14.

Develop and define concrete performance goals and targets to measure project outcomes as well as performance efficiencies as part of a comprehensive performance monitoring system linking goals with strategic planning, specific goals, and resource allocations and evaluating progress toward objectives such as levels of reduced congestion, project cost per mile, and percent of projects completed on time and budget. Performance measures should track program and project delivery effectiveness and efficiency indicators related to hitting targets on meeting delivery milestones, staying within certain percentages of cost estimates, and reducing support costs and overhead by prescribed amounts. Performance measures should be challenging yet attainable targets used to assess timelines and cost-effectiveness of projects. Once program-wide performance data is collected, it should be made available to the ITOC and other oversight bodies through the Quarterly Report process whereby program level milestones could be communicated and success or struggle with meeting benchmarks could be discussed to highlight accomplishments or improvements needed as well as month-to-month changes to identify trends and patterns. Indicators that could be measured include the following hypothetical examples:

Chapter 2, pages 46-49

High

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Recommendation Report Reference

Priority

Each fiscal year, meet XX percent of project delivery milestones

By XXXX, reduce the support-to-capital ratio to XX percent and reduce overhead cost to XX percent

Each year, keep the total of all low bids within X percent of the total of all engineers’ estimates

15.

Consider using baseline data available in other models, such as the Caltrans California Life-Cycle Benefit/Cost Analysis Model that considers items including travel time savings and reduced emissions, to compare expected project benefits against actual results once projects are completed. Similarly, performance could be weighed against quantitative criteria and calculations used during the regional transportation planning process whereby projects are ranked and prioritized based on estimated cost per person-miles traveled and cost per travel time savings calculations. SANDAG could perform these calculations after project completion to identify variances from anticipated cost-effectiveness measures, discuss reasons for the differences, and use results to adjust future modeling or trend and compare projects against each other.

Chapter 2, page 48 Low

16.

Once a comprehensive performance monitoring system is designed as discussed above and performance data is captured, designate individual staff to monitor follow-up on missed targets, assure corrective actions where needed, or assess the impact of any shortfalls on the TransNet program. Such monitoring should be routinely conducted to assess the impact of performance not meeting target goals.

Chapter 2, page 49 Medium

As funding is an ongoing challenge and projects are continually shifted and reprioritized to stretch limited resources, to monitor financial risks and availability of funds to complete projects as well as increase accountability, SANDAG should:

17.

Continue to regularly monitor and review the debt-to- revenue ratio as well as total financing costs to ensure it meets short- and long-term obligations as well as analyze projected debt service costs and compare planned program financing costs to track any higher than expected bond issuance and debt services costs. Further, SANDAG should determine whether the POF strategies should be modified in the long-term, and report to the ITOC on the status of the debt-to-revenue ratio on a regular basis.

Chapter 3, page 54 Low

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Recommendation Report Reference

Priority

18.

Establish a mechanism to link and track the Ordinance planned projects and amounts with current plans and budgets for all TransNet projects to reduce confusion and better justify to the public how project promises from the Ordinance were amended to result in actual projects delivered. Such on-going tools should specifically identify and document the history or evolution of a project’s budget over time by tracking all significant changes to project funding, prioritization, and scope over the life of the TransNet program. Moreover, the data should be shared with the ITOC and other oversight bodies to better oversee and understand the cumulative impact of recommendations related to TransNet funding. Other data that would be valuable for the ITOC to receive is the quarterly data related to sales tax revenue collected in the particular quarter, collected to date, and distributed amongst the various Ordinance projects, programs, and entities.

Chapter 3, pages 65-67

High

To expand and enhance the current project management and delivery practices, SANDAG and Caltrans should consider the following:

19.

Ensure post-evaluation forms are consistently used and completed for all highway construction and transit projects after each project phase to ensure appropriate changes are made mid-stream rather than waiting until a project is formally closed-out. Communicate key results to the ITOC as appropriate. Additionally, consider capturing various process best practices in shared databases that can be easily accessed and considered for application across all TransNet projects as well.

Chapter 4, pages 75-76

Medium

20.

Build upon, improve, and formalize transit project documentation of current SANDAG processes and procedures to better ensure long-term continuity of in-house expertise. Towards this end, SANDAG should consider establishing working-level policies and procedures to ensure the uniform application of project delivery and management techniques and make such documentation of practices, controls, and preferences available to SANDAG staff for reference and training purposes. At a minimum, SANDAG should consolidate Board policies into a comprehensive delivery manual where further defined procedures could be established and practices memorialized.

Chapter 4, pages 77-78

Medium

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Recommendation Report Reference

Priority

21.

Create a uniform filing system to strengthen transit project management where critical project documentation such as cost estimates, project budget history, project development team meetings, change orders, and other data are organized and located under a similar numbering system to ensure consistency and availability of important project data. Further, SANDAG may want to create a shared database to house the electronic copies of project documentation.

Chapter 4, page 78 Low

22.

Conduct an intensive, hands-on workshop in which SPRINTER project management could formally share critical lessons-learned and practical experiences with SANDAG and Caltrans executives including discussing specific implementation details deliberated and benefits versus cost analysis employed. These meetings could result in the establishment of stronger project delivery tools and written policies and procedures to assure best practices are implemented such as:

Using risk mitigation registers evaluating project risks related to cost, scope, and schedule including descriptions, cause, potential impact, likelihood of impact materializing, mitigation strategy and costs to mitigate.

Merging highway construction and transit risk assessment results into an integrated risk plan that can be overseen for the entire TransNet program.

Chapter 4, pages 79-80

Medium

23.

Revisit the task order approval process to identify which individuals are needed for approvals or consider implementing a higher delegated authority level for certain types of amendments wherein a streamlined process could be employed on lower value amendments to ensure approval protocols are not causing unnecessary delays on projects.

Chapter 4, page 88 Low

24.

Ensure task order amendments for time extension have sufficient written justification explaining why a project needs the extension and assessing the impact of the delay on other project activities and downstream project phases.

Chapter 4, pages 88-89

Low

25.

Enhance practices by tracking change orders and contract amendments for the TransNet program overall and developing and trending performance indicators to provide another tool to gauge project and program status or level of success.

Chapter 4, page 91 Medium

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Appendix A: TransNet Highway Construction and Transit Projects (Estimated Amounts in Millions, 2002 dollars)*

Segment # Corridor

EAP 1) Cost Non‐EAP Cost

1 North Coast (Phase 1 ‐ Environmental Document)

$ 79 Managed Lanes (Leucadia Blvd to Vandegrift Blvd)

$ 291

2 Managed Lanes (Merge I‐5 & I‐805)

$ 30

3 Managed Lanes (SR‐56 to Leucadia Blvd)

$ 400

4 HOV (SR‐905 to SR 54) $ 130 5 HOV (SR‐54 to I‐8) $ 600 6 HOV (I‐8 to I‐805) $ 193 7 Lomas Sante Fe Interchange $ 75 HOV (I‐5 to I‐805) $ 105 8 I‐5 to SR‐56 $ 140 9 I‐5 to SR‐78 $ 150

10 Rt 398/Rt 472 Coaster/BRT $ 400

11 Blue Line Trolley $ 270

I‐5

I‐5 EAP Sub‐Total: $ 424 I‐5 Non‐EAP Sub‐Total: $2,439

12 Mid‐Coast Light Rail Transit (Old Town to UCSD)

$ 670

13 Super Loop (UTC to UCSD) $ 30

Mid‐Coast 2)

Mid‐Coast EAP Sub‐Total: $ 700

14 Managed Lanes (SR‐163 to SR‐56)

$ 220

15 Managed Lanes (SR‐56 to Centre City Pkwy)

$ 430

16 Managed Lanes (Centre City Pkwy to SR‐78)

$ 120

17 HOV (SR‐94 to SR‐163) $ 200 18 HOV (I‐15 to SR‐78) $ 200 19 HOV (I‐15 to SR‐94) $ 150 20

SR‐94 HOV (I‐5 to I‐15) $ 80

21 BRT Rt 610 Phase 1 (Escondido to Downtown)

$ 118 BRT Rt 610 $ 252

22 BRT Rt 470 $ 60

I‐15

I‐15 EAP Sub‐Total: $ 888 I‐15 Non‐EAP Sub‐Total: $ 942

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Segment # Corridor

EAP 1) Cost Non‐EAP Cost

23 BRT Rt 628 Phase 1 (Otay Mesa to Downtown)

$ 72 BRT Rt 628 $ 428

24 BRT Rt 680 (San Ysidro to Sorrento Mesa)

$ 70

25 HOV (SR‐905 to SR‐54) $ 150 26 SR‐94 HOV (I‐805 to I‐15) $ 70 27 SR‐52 HOV (I‐15 to I‐805) $ 70 28

HOV (I‐805 to SR‐52) $ 150

29 Managed Lanes (Environmental for North, Middle, South segments

$ 14 Managed Lanes (SR‐54 to I‐8) $ 436

30 Managed Lanes (Mission Valley Viaduct)

$ 250

31 Managed Lanes (I‐8 to I‐5) $ 380 32 SR 54 Interchange $ 10

I‐805

I‐805 EAP Sub‐Total: $ 86 I‐805 Non‐EAP Sub‐Total: $ 2,014

33 Extension ‐ New Freeway (SR‐125 to SR‐67)

$ 200 New Freeway (SR‐125 to SR‐67) $ 40

34 Widening ‐ Managed Lanes (I‐15 to SR‐125)

$ 170

SR‐52

SR‐52 EAP Sub‐Total: $ 370 SR‐52 Non‐EAP Sub‐Total: $ 40

35 Interchange (SR‐94 and SR‐125)

$ 110

36 Widening (SR‐125 to Steele Canyon)

$ 90

37 HOV (I‐805 to I‐8) $ 350

38 Orange Line Trolley $ 70

SR‐94/ SR‐125

SR‐94/SR‐125 EAP Sub‐Total: $ 70 SR 94/SR 125 Non‐EAP Sub‐Total: $ 550 39 HOV & Widening (I‐805 to SR 94) $ 140

SR‐54/ SR‐125 SR 54/SR 125 Non‐EAP Sub‐Total: $ 140

40 Widening (Mapleview St to Dye Rd)

$ 240

SR‐67

SR‐67 Non‐EAP Sub‐Total: $ 240

41 Widening (Second St to Los Coches)

$ 30

I‐8

I‐8 Non‐EAP Sub‐Total: $ 30

42 SPRINTER Completion $ 60

43

SR‐78

SPRINTER Extension $ 200

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Segment # Corridor

EAP 1) Cost Non‐EAP Cost

44 HOV (I‐5 to I‐15) $ 500 SR‐78 EAP Sub‐Total: $ 60 SR‐78 Non‐EAP Sub‐Total: $ 700

45 Widening (Melrose Dr to I‐15) $ 180

SR‐76

SR‐76 EAP Sub‐Total: $ 180 46 Widening (I‐5 to I‐15) $ 100

SR‐56 SR‐56 Non‐EAP Sub‐Total: $ 100

47 Rapid Bus Purchase $ 22 BRT Rt 611 (SDSU to Downtown San Diego)

$ 68

Mid‐City

Mid‐City EAP Sub‐Total: $ 22 Mid‐City Non‐EAP Sub‐Total: $ 68

48 Tunnel Construction Match (Glorietta Blvd to Alameda Blvd)

$ 25

Coronado Tunnel

Coronado Non‐EAP Sub‐Total: $ 25

49 Miscellaneous improvements to Enhance the Border Access

$ 25

Border Access

Border Access Non‐EAP Sub‐

Total: $ 25

Total 17 EAP: $2,800 Total 32 Non‐EAP: $7,313

Total TransNet Program (2002 dollars): $10,113

Source: TransNet Extension Ordinance, 2004; 2005 Plan of Finance; and SANDAG Capital Improvement Program (CIP) Budget, Fiscal Year 2007 Note 1: EAP project designation is per the 2005 Plan of Finance and 2008 TransNet Factsheet.

Note 2: Mid‐Coast Corridor projects were part of the I‐5 Corridor in the Ordinance but then were split into a separate Mid‐Coast Corridor in 2005.

*When 2002 amounts could not be clearly identified, updated amounts were used.

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Appendix B: Audit Interviews Conducted As part of this audit, our contract required we conducted on-site and phone interviews with certain individuals and entities as identified to us by the TransNet program management. During the course of the audit, we also met or inquired about the TransNet program with other individuals and stakeholders. While we conducted at least one interview with each individual listed below, on many occasions we had follow-up conversations either in person, over the phone, or via email.

Stakeholder Entity Name Title/Position

TransNet Program Management 1 SANDAG Charles “Muggs” Stoll TransNet Program Manager

Executive Management 2 SANDAG Gary Gallegos Executive Director 3 SANDAG Diane Eidam Chief Deputy Executive Director 4 Caltrans Will Kempton Director 5 Caltrans Gregg R. Albright Deputy Director, Planning & Modal Programs 6 Caltrans Pedro Orso‐Delgado District 11 Director

7 Caltrans Laurie Berman Chief Deputy District 11 Director, Project Delivery

Corridor Director 8 SANDAG Leslie Blanda Corridor Director, Mid‐Coast 9 Caltrans Allan Kosup Corridor Director, I‐5 & SR‐76

10 Caltrans Gustavo Dallarda Corridor Director, I‐15 11 Caltrans Joel Haven Corridor Director, I‐805 & SR‐52 TransNet Project Offices 12 SANDAG Richard Chavez Principal Engineer 13 SANDAG Dean Hiatt Senior Transportation Engineer 14 Caltrans Christine Valle TransNet Program Manager 15 Caltrans Ann Fox TransNet Program Engineer 16 Caltrans Nadine Danjou TransNet Program Analyst Mobility Management and Project Implementation

17 SANDAG Jack Boda Department Director, Mobility Management and Planning

18 SANDAG Jim Linthicum Division Director, Engineering and Construction

19 SANDAG Dan Martin Project Implementation Program Manager 20 SANDAG William A. Prey Construction Engineer Project Managers 21 SANDAG Frank Owsiany Senior Transportation Engineer 22 SANDAG Barrow Emerson Senior Transit Planner 23 SANDAG Jennifer Williamson Senior Transportation Planner 24 SANDAG Eric Adams Senior Project Manager 25 SANDAG Keith Greer Project Manager 26 SANDAG Edward Schafer Senior Planner 27 Caltrans Cory Binns Corridor Project Manager

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Stakeholder Entity Name Title/Position

28 Caltrans Arturo Jacobo Project Manager, I‐5 Corridor 29 Caltrans John Rieger Project Manager, I‐5 North & SR‐52 30 Caltrans Andrew Rice Project Manager, I‐15 Managed Lanes 31 Caltrans David Stebbins Design Manager, I‐15 Managed Lanes 32 Caltrans Roger Carlin Design Manager, SR‐52 Corridor 33 Caltrans Majid Kharrati Senior Transportation Engineer, I‐5 Corridor 34 Caltrans Jayne Dowda Senior Transportation Engineer 35 Caltrans Kelly Finn Chief, Environmental Analysis Branch A 36 Caltrans Chris White Chief, Environmental Resource Study Construction 37 Caltrans Armando Garcia Deputy District Director, Construction 38 Caltrans Marla Deyou Construction Claims Chief 39 Caltrans Faridun Javed Senior Resident Engineer 40 Caltrans Rahim Akhondzadeh Resident Engineer 41 Caltrans Dung Tran Resident Engineer Finance 42 SANDAG Renee Wasmund Department Director, Finance 43 SANDAG Susan Brown Manager, Financial Planning & Project Control44 SANDAG Lauren Warrem Manager, Finance 45 SANDAG Lisa Kondrat‐Dauphin Associate Accountant 46 SANDAG Sookyung Kim Staff Accountant 47 SANDAG Jose Nuncio Program Manager 48 SANDAG Marney Cox Chief Economist Contracts and Procurement 49 SANDAG Elaine Richardson Manager, Contracts and Procurement 50 SANDAG Louise Torio Contracts & Procurement Specialist 51 SANDAG Emilio Rodriguez Senior Engineer/Contracts Manager 52 Caltrans America Hernandez Contracts Manager 53 Caltrans Jared Lakis Consultant Contracts Audits 54 SANDAG Steve Castillo Principal Management Internal Auditor 55 Caltrans Laurine Bohamera Manager, Internal Audits & Investigations

56 Caltrans Maryann Campbell‐Smith

Manager, External Audits

Transportation Consultants 57 CH2MHill Hany Haroun Design 58 Boyle Engineering Clark Fernon Design 59 HNTB Bart Desai Dashboard Design 60 LAN Christopher Mockus Construction Management Transit Operators 61 MTS Sharon Cooney Director of Government Affairs 62 MTS Clifford Telfer Chief Financial Officer 63 MTS Linda Musengo Finance 64 MTS Tom Lynch Controller

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Stakeholder Entity Name Title/Position

65 MTS Michael Daney Senior Transportation Planner 66 MTS Brent Boyd Senior Transportation Planner 67 NCTD Tom Lichterman Director of Operations 68 NCTD Diane Hessler Chief Management Accountant 69 NCTD Steven Hoyle Project Officer Local Jurisdictions

70 City of San Diego Deborah Van Wanseele Deputy Director, Transportation Engineering & Capital Projects

71 City of San Diego Marnell Gibson Deputy Director, Right‐of‐Way, Engineering & Capital Projects

72 City of San Diego Dave Zoumaras Deputy Director, Field Division 73 City of San Diego James Nagelvoort Deputy Director, Planning & Technical Services 74 City of San Diego Linda Marabian Senior Traffic Engineer 75 City of San Diego Wendy Morrow Senior Management Analyst

76 County of San Diego

Mohamad Fakhrriddine Deputy Director, Engineering Services

ITOC 77 ITOC John Meyer Chair – Municipal/Public Finance 78 ITOC Hamid Bahadori Traffic/Civil Engineering 79 ITOC Jesus Garcia Engineering 80 ITOC Jim Ryan Construction Project Management 81 ITOC Valerie Harrison Organizational Development 82 ITOC Kevin Cummins Biology/Environmental Science 83 ITOC Ron Gerow Real Estate/Right‐Of‐Way Acquisition Transportation Committee 84 City Council Jim Madaffer Transportation Committee Representative Other Stakeholders

85 Associated General Contractors

Brad Barnum Vice President, Government Relations

86 Building Industry Association

Matt Adams Vice President, Government Affairs

87 Endangered Habitats League

Michael Beck Planning Commissioner, EHL Board Member

88 San Diego County Taxpayers Association

Gordon Lutes Project Design Consultant

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Appendix C: Amendments and Change Orders Reviewed

As of October 2008, when we performed our testing of contract amendments, SANDAG had entered into 16 consulting contracts with A&E (architectural and engineering) firms. Seven of those contracts did not have any task order amendments and an additional two contracts were for non-EAP projects—thus, we excluded them from our detailed testing. For the seven remaining A&E contracts, we reviewed each task order issued and noted those with amendments that significantly increased the initial task order value or extended the task order time frame—both instances that could increase the risk of project delay or budget overrun. As a result, we identified 12 task orders to review that had a combined total of 43 amendments worth over $16 million. For these amendments, we reviewed supporting documentation and interviewed the responsible task order managers to assess the reasonableness of justifications supporting the amendments and potential impact on project schedules and costs. The following table summarizes the task orders and amendments selected for review: Task Orders and Amendments Reviewed

# Contractor Contract Number

Task Order Number

Number of Associated

Amendments

Original Task Order Value

Amended Task Order Value

5 3 $1,425,520 $2,129,5221 EDAW 5000261

7 5 $253,000 $304,662

2 6 $2,022,565 None, amendments were for time only.2 URS 5000262

11 2 $539,101 $3,486,780

3 PGH Wong Engineering

5000305 10 5 $37,457 $1,943,220

4 Boyle Engineering

5000401 13 1 $1,965,317 None, amendment was for time only.

8 3 $50,000 $296,428

32 6 $1,146,200 $2,886,0895 Bureau Veritas

5000402

47 1 $40,000 None, amendment was for time only.

12 4 $103,258 $191,0116 CH2MHill 5000403

31 3 $25,771 $885,206

7 Kimley‐Horn 5000405 2 4 $44,698 $278,996

Total Reviewed: 12 43 $7,653,387 $16,429,796

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Similarly, over the three-year period of our review, SANDAG and Caltrans awarded 21 construction contracts for EAP projects—of which, eight contracts were either complete or nearing completion. Using “progress pay reports” from Caltrans’ Office Engineer and information from SANDAG project managers, we identified the contract value, payment amounts, and work complete status, as well as number and value of contract change orders. To identify any unusual or larger-value change orders in addition to excessive contract change order payments, we calculated the total amount and percentage paid in excess of the contract value as well as the change order value as a percentage of total payment and contract value. We identified four contracts whose change orders constituted at least 11 percent of the contract value or where the total payment was above the original bid amount. From each of the four construction contracts selected, we reviewed two change orders from each contract for a total of eight change orders totaling more than $7.2 million. We interviewed the contract resident engineers as well as reviewed supporting change order documentation to assess the justification supporting the change order and the potential impact of those changes on the project. The following table summarizes the change orders selected for review: Change Orders Reviewed

# Contractor Contract Number

Segment/Project Change Order

Number Change Order

Amount

2 $65,0001 L B Civil Construction 11‐279604

I‐5 HOV Ramp Modification 6 $50,000

9 Change order did

not add cost.2 Coffman Specialties 11‐080904 I‐15 Middle Unit 1 100 $555,101

49 $5,423,4283 FCI Constructors 11‐080924 I‐15 Middle Unit 3

86 $318,416

1 $25,0004 Hazard Construction 11‐2T0204

SR‐52 Ops West‐Bound Truck Lane 15 $831,494

Total Reviewed: 8 $7,264,439

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Response to Audit Recommendations

Recommendation Report Reference Priority Response/Action Plan

To assist management and oversight bodies in deliberating project activities, weighing options before making decisions, and strengthening general levels of oversight, SANDAG should work in conjunction with Caltrans to:

1. Develop and deliver a brief, high-level summary, or “Report Card,” to the ITOC and other oversight bodies for each transportation project describing project budget and schedule by phase, project performance, project benefits and risks, financial assumptions, project cost range, and highlights of project changes to scope, schedule and cost as well as budget-to-actual and project-to-date information. Also, consider summarizing Report Card performance on a monthly, quarterly, or annual basis, as appropriate, to identify trends or systemic issues.

Chapter 1, pages 32 and 33

High The TransNet program team intends to work with the ITOC to develop a reporting mechanism that is responsive to this recommendation and meets the ITOC needs for timely and appropriate information. Much of this information exists in both organizations and on the Dashboard. Therefore, we will work with the ITOC to determine how to consolidate the information and present it in the most useful manner – possibly through the use of an ITOC subcommittee. The added cost of creating and maintaining the new Report Card also will be assessed.

2. Summarize and distribute data reflecting key project milestones and performance indicators where period-to-period trends for the program overall, as well as at a corridor or segment level, could be analyzed. Statistics should include budget and schedule targets compared to actual performance, as well as progress towards meeting program objectives such as reducing levels of congestion and travel times, minimizing project cost per mile, and increasing the percentage of projects completed on time and on budget.

Chapter 1, page 34

High The setting of performance targets for program, corridor, and segments within the TransNet program is something that the TransNet program team has been and will continue to develop. To a large extent, these early years of the program have effectively served to establish a baseline of project development performance. Much of the data on actual performance and some analysis of budget and schedule targets are currently collected and reported through the Dashboard and other methods. Like recommendation no. 1, this is another area that TransNet program team will work with the ITOC to address. The added cost to develop performance targets and track progress against them will be assessed as well.

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Recommendation Report Reference Priority Response/Action Plan

3. Provide status information regarding existing audit requirements and status updates on internal and external audits in progress or completed of SANDAG, Caltrans, or other transportation partners outlining scope of audit work, results of audit efforts, corrective actions planned or taken, and outstanding findings and unresolved issues as they relate to the TransNet program. In particular, the SANDAG Internal Auditor should report to the ITOC, or its newly formed Audit Subcommittee, once the current in-process audit of contracting and task order practices is completed.

Chapter 4, page 86

Medium Due to the ITOC lead role in the annual fiscal audits beginning in FY 2009, a regular reporting process has been developed and will be refined with the ITOC input.

SANDAG will apprise the ITOC of the task order process audit results upon its completion.

4. Work collaboratively with the ITOC to identify other type of oversight data needed from SANDAG, Caltrans, or other transportation partners where appropriate and within reason.

Chapter 1, pages 31 and 35

Low See response to recommendation no. 1 – this should be addressed as part of that process.

To monitor overall program adherence with the Extension Ordinance and assess the overall program impacts resulting from project budget and schedule deviations, the ITOC should:

5. Analyze suggested Report Card data and performance indicator data provided looking for trends, issues, and progress toward overall TransNet goals, as well as consider the multi-faceted project performance details impact on travel time and congestion as well as project performance in terms of schedule and budget adherence. Moreover, the data could be used to monitor effectiveness of operational strategies and the success of SANDAG in meeting targets.

Chapter 1, pages 32-

34

High Related to recommendation no. 1 and no. 2 above.

The ITOC intends to appoint a subcommittee to review this recommendation in conjunction with several others. The subcommittee will have the ability to work independently and with TransNet program staff on an as-needed basis and will develop a reporting process to the full ITOC. An assessment of the costs and benefits will be made by the subcommittee for any proposals developed to address this recommendation.

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Recommendation Report Reference Priority Response/Action Plan

6. Work collaboratively with SANDAG to identify other type of oversight data needed from SANDAG, Caltrans, or other transportation partners that can be captured in matrices or other formats enabling a period-to-period review of data and results over time.

Chapter 1, pages 31 and 35

Low Same as recommendation no. 4 above.

7. Develop matrices or tracking documents to summarize critical ITOC concerns, issues, and decisions resulting from discussions at monthly meetings, as well as to memorialize resolutions or action items carried forward to subsequent meetings complete with owners assigned and timeframes for completion established. Progress and actions taken could be tracked and progress updated at subsequent meetings, and the matrices could serve as an institutional transfer of knowledge as new ITOC members are appointed.

Chapter 4, page 35

Medium The ITOC considers this recommendation to be of high priority. SANDAG staff is willing and able to develop historical records of ITOC actions that could be used for continuous updates for future actions. Development of example format alternatives will be presented to the ITOC for consideration.

8. Identify additional entities, positions, or individuals to regularly provide status reports and data to the ITOC (such as the SANDAG Internal Auditor), and incorporate standard monthly meeting agenda categories to address the new areas and ensure all critical TransNet program areas also receive an oversight focus in addition to project-specific activities. Refer to suggested categories in Chapter 1. Also, consider protocols regarding specified time allocations allowing for adequate deliberation prior to decisions rendered for the more critical areas with high-dollar or high-profile impact.

Chapter 1, page 36

Low Although the ITOC believes much of this recommendation is already being done, they will have the subcommittee referred to in no. 5 above review these issues for potential improvements and/or efficiencies.

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Recommendation Report Reference Priority Response/Action Plan

9. Consider using the newly formed ITOC Audit Subcommittee as the information portal for audit status updates, especially those of a more sensitive nature. The Subcommittee could report back to the ITOC at large in the more public setting.

Chapter 4, page 86

Low See response to no. 5 above.

To refine its existing Dashboard integrated budget and schedule tool, SANDAG should:

10. Revisit its intent and vision for the Dashboard to determine whether it should include all TransNet Early Action Program (EAP) projects and report on all Extension Ordinance programs, as well as determine whether the Dashboard is meant to function as an “in-progress” management tool for current projects or should be established as a comprehensive historical data warehouse for the 40-year duration of the TransNet program. Also, use the Dashboard data to summarize performance indicators and monitor progress of indicators such as “percent of work completed compared to total costs” and “support costs as a percent of capital construction costs.”

Chapter 2, pages 44-

46

Medium All EAP projects are being added to the Dashboard. The Environmental Mitigation Program and Goods Movement Program are being added to the Dashboard. Staff will discuss options with ITOC for adding other programs to the Dashboard. The Dashboard is intended to be a comprehensive historical data warehouse. The Dashboard currently compares percent work complete to total cost. There is some concern with the proposal to track support costs at the project level that need to be discussed with the ITOC.

11. Add an explanatory note to better clarify cumulative data presented or isolate and remove the pre-2005 expenditures to more accurately reflect the TransNet program costs.

Chapter 2, page 45

Medium A note will be added to the Dashboard to better explain the data presented.

12. Develop a mechanism to report project budget and schedule history and key changes over the course of the TransNet program.

Chapter 2, page 45

Medium Staff will begin to compile the history of changes to budget and schedule from this point forward. Staff will make this available in the Dashboard. Staff needs to discuss with ITOC the effort to compile the history of previous changes and the costs and benefits of doing so.

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Recommendation Report Reference Priority Response/Action Plan

13. Ensure all Dashboard views and tables are complete and accurate such as “percent of completion” data by clearly identifying and communicating to project managers responsible for the data, the assumptions, and definitions behind the percent complete calculations as well as monitoring the indicator for reasonableness. Additionally, reassess the need and use of the “Trends, Risks, and Issues” section in the Dashboard to ensure complete and current information or eliminate the section and capture similar data through a different vehicle.

Chapter 2, pages 45-

46

Medium Staff will modify the “Trends, Risks, and Issues” section in the Dashboard. New tools to help provide better consistency in the “percent of completion” data for the Dashboard are being rolled out to the project teams. Additional training efforts are also being deployed to improve accuracy and consistency.

Building upon strong existing protocols related to transparency holding project owners accountable and economical to demonstrate performance results to the public, SANDAG should work in conjunction with Caltrans to:

14. Develop and define concrete performance goals and targets to measure project outcomes as well as performance efficiencies as part of a comprehensive performance monitoring system linking goals with strategic planning, specific goals, and resource allocations and evaluating progress toward objectives, such as levels of reduced congestion, project cost per mile, and percent of projects completed on time and budget. Performance measures should track program and project delivery effectiveness and efficiency indicators related to hitting targets on meeting delivery milestones, staying within certain percentages of cost estimates, and reducing support costs and overhead by prescribed amounts. Performance measures should be challenging yet attainable targets used to assess timelines and cost-effectiveness of projects. (Continued on the following page)

Chapter 2, pages 46-

49

High Related to recommendation no.2 above – more specificity in this recommendation on developing goals/targets.

The topic of performance goals, targets, and project/program monitoring provides a key recommendation that the TransNet program team believes may best be addressed by establishing an ITOC subcommittee and a regular reporting process to advance ideas to promote better accountability. This process will allow the ITOC and the TransNet program team to fully assess the costs and benefits of any proposals that are developed.

ITOC believes that carpool and FasTrak® usage data should be included in developing the goals and performance measures referred to in this recommendation.

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Recommendation Report Reference Priority Response/Action Plan

14. Once program-wide performance data is collected, it should be made available to the ITOC and other oversight bodies through the Quarterly Report process whereby program level milestones could be communicated and success or struggle with meeting benchmarks could be discussed to highlight accomplishments or improvements needed as well as month-to-month changes to identify trends and patterns. Indicators that could be measured include the following hypothetical examples:

Each fiscal year, meet XX percent of project delivery milestones

By XXX, reduce the support to capital ratio to XX percent or lower and reduce overhead cost to XX percent

Each year, keep the total of all low bids within X percent of the total of all engineers’ estimates

Chapter 2, pages 46-

49

High

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Recommendation Report Reference Priority Response/Action Plan

15. Consider using baseline data available in other models, such as the Caltrans California Life-Cycle Benefit/Cost Analysis Model that considers items including travel time savings and reduced emissions, to compare expected project benefits against actual results once projects are completed. Similarly, performance could be weighed against quantitative criteria and calculations used during the regional transportation planning process whereby projects are ranked and prioritized based on estimated cost per person-miles traveled and cost per travel time savings calculations. SANDAG could perform these calculations after project completion to identify variances from anticipated cost-effectiveness measures, discuss reasons for the differences, and use results to adjust future modeling or trend and compare projects against each other.

Chapter 2, page 48

Low Related to recommendation no. 14. This recommendation appears to be a longer-term action plan versus a shorter-term action plan for recommendation no. 14.

Regarding the longer-term, the process for the next Regional Transportation Plan (RTP) will have to incorporate much of what is suggested here to conform to new state laws. The TransNet program team suggests that the TransNet program coordinate and incorporate the appropriate new processes developed in the upcoming RTP cycle.

16. Once a comprehensive performance monitoring system is designed as discussed above and performance data is captured, designate individual staff follow-up on missed targets, assure corrective actions where needed, or assess the impact of any shortfalls to the overall TransNet program. Such performance monitoring should be routinely conducted to assess the impact of performance not meeting target goals.

Chapter 2, page 49

Medium The TransNet program team generally concurs with this statement, to the extent that it refers to new performance monitoring systems and/or procedures. The team believes that this kind of accountability has been and will continue to be the routine responsibility of the Corridor Project Directors and the TransNet Project Offices.

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Recommendation Report Reference Priority Response/Action Plan

As funding is an ongoing challenge and projects are continually shifted and reprioritized to stretch limited resources, to monitor financial risks and availability of funds to complete projects as well as increase accountability, SANDAG should:

17. Continue to regularly monitor and review the debt-to- revenue ratio as well as total financing costs to ensure it meets short- and long-term obligations as well as continue to consistently analyze projected debt service costs and compare planned program financing costs to track any higher than expected bond issuance and debt services costs. Further, SANDAG should determine whether the POF strategies should be modified in the long-term, and report to the ITOC on the status of the debt-to-revenue ratio on a regular basis.

Chapter 3, page 54

Low We concur with the recommendation. SANDAG updates the Plan of Finance on an annual basis or more frequently, if necessary. As part of the update, some of the key metrics that are analyzed include the debt coverage ratio and the debt service costs as well as the assumptions underlying sales tax revenue growth and cost escalation factors. In addition, actual debt service costs are monitored on a weekly basis. Regular reports will be provided to the ITOC on the debt coverage ratio.

18. Establish a mechanism to link and track the Extension Ordinance planned projects and amounts with current plans and budgets for all TransNet projects to reduce confusion and better justify to the public how project promises from the Extension Ordinance were amended to result in actual projects delivered. Such on-going tools should specifically identify and document the history or evolution of a project’s budget over time by tracking all significant changes to project funding, prioritization, and scope over the life of the TransNet program. Moreover, the data should be shared with the ITOC and other oversight bodies to better oversee and understand the cumulative impact of recommendations related to TransNet funding. (Continued on the following page)

Chapter 3, pages 65-

67

High The budget tracking mechanism recommendation is something that the project teams are committed to developing for projects in the TransNet program. May have some concern for the implementation of this for all projects – particularly those in the program that are not actively being worked on. Cost information for those projects are at a planning level. Also see responses to recommendations nos. 12 and 14.

Regarding the recommendation for “other data,” we concur. SANDAG will provide a quarterly report to the ITOC containing components such as total TransNet revenue collected and the distribution of the revenue among the programs, as well as the status of spending the bond proceeds.

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Recommendation Report Reference Priority Response/Action Plan

18. Other data that would be valuable for the ITOC to receive is the quarterly data related to sales tax revenue collected in the particular quarter, collected to date, and distributed amongst the various Extension Ordinance projects, programs, and entities.

Chapter 3, pages 65-

67

High .

To expand and enhance the current project management and delivery practices, SANDAG and Caltrans should consider the following:

19. Ensure post-evaluation forms are consistently used and completed for all highway construction and transit projects after each project phase to ensure appropriate changes are made mid-stream rather than waiting until a project is formally closed-out. Communicate key results to the ITOC as appropriate. Additionally, consider capturing various process best practices in shared databases that can be easily accessed and considered for application across all TransNet projects as well.

Chapter 4, pages 75-

76

Medium The concept of informal post-evaluation for project development has been and will continue to be encouraged for all projects in the program. However, formal processes are not encouraged until a project is formally closed-out due to potential project claim issues.

20. Build upon, improve, and formalize transit project documentation of current SANDAG processes and procedures to better ensure long-term continuity of in-house expertise. Towards this end, SANDAG should consider establishing working-level policies and procedures to ensure the uniform application of project delivery and management techniques and make such documentation of practices, controls, and preferences available to SANDAG staff for reference and training purposes. At a minimum, SANDAG should consolidate Board policies into a comprehensive delivery manual where further defined procedures could be established and practices memorialized.

Chapter 4, pages 77-

78

Medium While we concur with the many of the specific issues contained within this recommendation, SANDAG is considering a more comprehensive management review of the Transit planning and project development processes it is responsible for. It would be appropriate to assess these recommendations in light of that management review in order to determine the best course of action.

sjobergevashenk TransNet Performance Audit-2008

120

Recommendation Report Reference Priority Response/Action Plan

21. Create a uniform filing system to strengthen transit project management where critical project documentation such as cost estimates, project budget history, project development team meetings, change orders, and other data are organized and located under a similar numbering system to ensure consistency and availability of important project data. Further, SANDAG may want to create a shared database to house the electronic copies of project documentation.

Chapter 4, page 78

Low We concur and will develop this as part of our document control improvements.

22. Conduct an intensive, hands-on workshop in which SPRINTER project management could formally share critical lessons learned and practical experiences with SANDAG and Caltrans executives including discussing specific implementation details deliberated and benefits versus cost analysis employed. These meetings could result in the establishment of stronger project delivery tools and written policies and procedures to assure best practices are implemented such as:

Using risk mitigation registers evaluating project risks related to cost, scope, and schedule including descriptions, cause, potential impact, likelihood of impact materializing, mitigation strategy, and costs to mitigate.

Merging highway construction and transit risk assessment results into an integrated risk plan that can be overseen for the entire TransNet program.

Chapter 4, pages 79-

80

Medium It is anticipated that the North County Transit District (NCTD) will convene detailed lessons learned workshop with NCTD, SANDAG, and FTA staff in the spring of 2009, pending the resolution of potential contractor claims and/or litigation. The ITOC is interested in exploring how to involve the public in this process. Staff will communicate this feedback to NCTD staff and report back to the ITOC on the process.

It is the intent of the TransNet program team to conduct formal risk analyses during the development of the major corridor projects such as the Mid Coast Transit project and the Interstates 5 and 805 corridor projects. This will include risk identification and mitigations.

A Risk Registry is being added to the Dashboard to identify and monitor risk for TransNet program projects.

Once the risk registry is added to the Dashboard, an evaluation can be made regarding the value of conducting a program-level risk assessment.

sjobergevashenk TransNet Performance Audit-2008

121

Recommendation Report Reference Priority Response/Action Plan

23. Revisit the task order approval process to identify which individuals are needed for approvals or consider implementing a higher delegated authority level for certain types of amendments wherein a streamlined process could be employed on lower value amendments to ensure approval protocols are not causing unnecessary delays on projects.

Chapter 4, page 88

Low As part of ongoing efforts to streamline procurement processes, these issues will be reviewed.

24. Ensure task order amendments for time extension have sufficient written justification explaining why a project needs the extension and assessing the impact of the delay on other project activities and downstream project phases.

Chapter 4, pages 88-

89

Low We concur and have taken steps to strengthen the documentation required for time extensions.

25. Enhance practices by tracking change orders and contract amendments for the TransNet program overall and developing and trending performance indicators to provide another tool to gauge project and program status or level of success.

Chapter 4, page 91

Medium This information is currently gathered and may have value in being reported at a program level. The TransNet program team would like to engage the ITOC in how to implement this process.

San Diego Association of Governments – TransNet Program

INDEPENDENT TAXPAYER OVERSIGHT COMMITTEE

May 13, 2009 AGENDA ITEM NO.: 9

Action Requested: DISCUSSION

DISCUSSION OF RECENT TransNet-RELATED REPORTS PRESENTED TO THE TRANSPORTATION COMMITTEE AND BOARD OF DIRECTORS File Number 1110200 An overview will be presented by staff regarding two TransNet-related reports recently presented to the Transportation Committee and SANDAG Board of Directors. The first report was presented on April 10, 2009, to a joint meeting of the Transportation Committee and the Board of Directors. A follow-up report was presented to the Board of Directors on April 24, 2009. The ITOC will have an opportunity to discuss the results of the presentations and current status of the issues addressed.

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TDA/TransNetBicycle and Pedestrian ProgramTDA/TransNetBicycle and Pedestrian ProgramTransNet Bicycle and Pedestrian Accommodation Consistency Finding – City of PowayTransNet Bicycle and Pedestrian Accommodation Consistency Finding – City of Poway

Board Policy No. 031, TransNet Ordinance and Expenditure Plan Rules

Board Policy No. 031, TransNet Ordinance and Expenditure Plan Rules

Rule #21: Accommodation of Bicyclists and Pedestrians (Routine Accommodations)Rule #21: Accommodation of Bicyclists and Pedestrians (Routine Accommodations)

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Pedestrian FacilitiesPedestrian Facilities

May be excluded when:May be excluded when:• No existing curb and gutter• No adjacent pedestrian oriented land

uses• Improvements would require additional

• No existing curb and gutter• No adjacent pedestrian oriented land

uses• Improvements would require additional

right-of-wayright-of-way

Bicycle FacilitiesBicycle Facilities

May be excluded when:May be excluded when:• Improvements would require additional

right-of-way (Lane widths could not be reduced to less than 12 feet due to speed and topography)

• Improvements would require additional right-of-way (Lane widths could not be reduced to less than 12 feet due to speed and topography)

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Poway Road

Poway Road

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Bicycle-Pedestrian Working Group Recommendations

Bicycle-Pedestrian Working Group Recommendations

• If lanes cannot be narrowed then install• If lanes cannot be narrowed then install• If lanes cannot be narrowed, then install “Share the Road” signs

• If lanes cannot be narrowed, then install “Share the Road” signs

RecommendationRecommendation

The Transportation Committee is asked to find that the decision by the City of PowayThe Transportation Committee is asked to find that the decision by the City of Powayfind that the decision by the City of Poway not to provide bicycle or pedestrian facilities on the project referenced in Attachment 2 is consistent with the provisions of the TransNet Ordinance as well as with the provisions of Board Policy

find that the decision by the City of Poway not to provide bicycle or pedestrian facilities on the project referenced in Attachment 2 is consistent with the provisions of the TransNet Ordinance as well as with the provisions of Board Policywell as with the provisions of Board Policy No. 031, TransNet Ordinance and Expenditure Plan Rules, Rule #21.

well as with the provisions of Board Policy No. 031, TransNet Ordinance and Expenditure Plan Rules, Rule #21.

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TDA/TransNetBicycle and Pedestrian ProgramTDA/TransNetBicycle and Pedestrian ProgramTransNet Bicycle and Pedestrian Accommodation Consistency Finding – City of PowayTransNet Bicycle and Pedestrian Accommodation Consistency Finding – City of PowayConsistency Finding City of PowayConsistency Finding City of Poway

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Lake Hodges Bicycle and Pedestrian Bridge Status Reportg p

Bill Prey, Principal Engineery p g

SANDAG

May 13, 2009

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Lake Hodges Bicycle and Pedestrian Bridge Status Report

Designed by T Y Lin InternationalDesigned by T Y Lin InternationalThree span “stressed ribbon” bridge 990 ft long x 14 ft wide x 16 in thickPrecast concrete deckProject budget approx. $10.3 million

Lake Hodges Bicycle and Pedestrian Bridge Status Report

Phase 1 – South AbutmentAmount - $2.1 MillionContractor – FCI Constructors, Inc.Completed - May 15, 2007

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Lake Hodges Bicycle and Pedestrian Bridge Status Report

Phase 2 - Bridge, Piers & North AbutmentPhase 2 Bridge, Piers & North AbutmentAmount - $6.6 Million Contractor – FCI Constructors, Inc. Began - September 16, 2007Scheduled Completion – May 15, 2009

Lake Hodges Bicycle and Pedestrian Bridge Status Report

March 2007$1.875 Million TransNet funds added$600,000 shortfall remainedSDRP committed to raise additional fundsITOC requested SDRP provide progress reports and SANDAG staff provide project oversight

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Lake Hodges Bicycle and Pedestrian Bridge Status Report

May 2009May 2009$675,000 raised by SDRP

$400,000 in donations$275,000 in loans

Work is being completed on time and within budgetwithin budgetDedication ceremony, Friday, May 15 at 10:00 AM

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Lake Hodges Bicycle and Pedestrian Bridge Status Reportg p

Bill Prey, Principal Engineery p g

SANDAG

May 13, 2009

10

Hodges Bridge\g gMay 13, 2009 ITOC AI\Slide Show Lake Hodges ITOC 5-13-09.ppt

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