Tag Archives: Rail to Dulles

Who is Contractor A?

Contractor AAn audit of MWAA management practices found that a mysterious “Contractor A” charged more than other contractors for the same work — and kept getting business. Who is this company? Who got the money? And why doesn’t anyone seem to care?

by Bob Bruhns

At the request of Representatives Frank Wolf, R-VA, and Tom Latham, R-IA, the Office of the Inspector General of the U.S. Department of Transportation audited the management of the Metropolitan Washington Airports Authority last year. On November 1, 2012, the Inspector General issued the final report on its audit. The title said it all: “MWAA’s Weak Policies and Procedures Have Led to Questionable Procurement Practices, Mismanagement, and a Lack of Overall Accountability.”

Not only were high-priced contracts awarded improperly, the auditors found, but one particular contractor was winning an inordinate number of contracts despite the fact that it charged much more than other contractors.

MWAA mismanagement was endemic. States the report:

MWAA issued out-of-scope contract actions over $200,000 — including contract modifications and task orders — without required Board approval. From our statistical sample of 24 out of 343 active MWAA contracts, we identified 8 for which MWAA issued a total of 20 out-of-scope contract actions with a combined value of $57 million. Based on these findings, we project that MWAA has issued $107.6 million in out-of-scope contract actions on contracts active as of June 2011.

The report goes on to discuss an unidentified “Contractor A” that won a disproportionate number of contracts even though it charged more for its services:

Over the past 8 years, MWAA awarded more than 80 percent of work under three groups of multiple- award contracts to a single contractor (“Contractor A” in table 2). However, the contractor’s rates were often higher than the other multiple-award contractors’ rates. For example, the contractor’s rates in a 2012 contract were between 28 percent and 234 percent higher. While MWAA may have had non-price related reasons for selecting Contractor A, this unbalanced distribution of work to a single contractor with significantly higher rates appears contrary to the purpose of multiple-award contracts..

So, the inspector general’s report estimates that there was about $108 million in improper contracting — just in the contracts that happened to be active in 2011 – and that Contractor A benefited from eight years of contracts billed at a rate that the report typifies as 1.28 to 3.34 times what other contractors charged for the same work.

The report continues: “In addition, MWAA allowed Contractor A to add job categories to a contract but did not offer the other multiple-award contractors the same opportunity. Thus, when MWAA ordered work related to those additional job categories, they were effectively sole-source awards because only one contractor was able to accept the work.”


It is hard to avoid the appearance that MWAA was funneling multimillion-dollar contracts to Contractor A at higher-than-market rates.

The report continues: “In July 2012, MWAA’s Procurement and Contracts Department established guidelines requiring contracting officers to select contractors under multiple-award contracts for temporary staff. However, this policy only applies to temporary staffing contracts rather than to all multiple-award contracts.”

In other words, as of July 2012, MWAA policy apparently still allowed the selective multiple award contracting that it undertook for years with Contractor A. Read more.

First Phase 2 Rail-to-Dulles Bid Comes in Below Estimates

I didn’t get to this last week, but it’s too important to overlook… The low bid for half the work associated with Phase 2 of the Rail-to-Dulles project came in at $1,178,000,000 — seemingly way below the estimated $2.7 billion total cost for the project. The bid was submitted by Clark Construction Group.

The contract is for the largest of three design-build packages for Phase 2, representing about 50% of the work. The 11.4-mile extension of the Silver Line west of Tysons will have six Metro stations.

Clark Construction edged out Bechtel Transit Partners, which is finishing work on Phase 1. Bechtel had submitted a bid only $24 million higher. The bids clustered within a fairly narrow range. Of the five bids offered, the high was $1,378,000,000.

The Metropolitan Washington Airports Authority (MWAA) said it would not formally award the bid until after a review to validate that the proposal properly responds to the solicitation. That review was supposed to occur Friday.

Bacon’s bottom line: This appears to be very good news. The bid implies a total Phase 2 project cost of about $2.3 billion, or roughly $400 million lower than the official estimate. Perhaps the most notable aspect of the bid is that Clark Construction is an open-shop enterprise. Had MWAA imposed a Project Labor Agreement (PLA) requirement on the job, non-union companies might have been discouraged from bidding, making the process significantly less competitive.

The other good news is that the lower bid gives MWAA some breathing room on the setting of rates on the Dulles Toll Road, revenues from which comprise the single-largest funding source for Phase 2. Assuming the other two components of the project come in under estimate as well, this savings, combined with the $300 million contribution under the General Assembly’s transportation-funding plan, suggests that the toll rates will come in way below the worst-case projections.

— JAB

Conjuring Wealth out of Thin Air

Proposed air rights project in Boston.

by James A. Bacon

The Massachusetts Department of Transportation generated $40 million  from the lease of air rights over state transportation assets in FY 2011. Earlier this month, the state built upon that revenue stream by designating AG Scotia II as developer of air rights over two parcels above and along Interstate 90 in Boston. The 99-year lease agreement will yield the state a net present value of $18.5 million in rent.

Massachusetts is far ahead of Virginia in recognizing that the development of property above highways and rail lines is a win-win-win proposition. Air rights can generate lease revenue for the state, attract private investment, build the local property tax base and restore walkability to an urban fabric ripped apart by the highway or rail line. According to the Massachusetts DOT, here are the numbers for the AG Scotia project: 230 residential units, a 270-room hotel, 50,000 square feet of office space and $360 million in investment.

Virginia may be slow to learn, but it does learn. Last year the Office of Transportation Public-Private Partnerships (OTP3) began studying the use of air rights in connection with the Rail-to-Dulles project, with a particular focus on the four stations in Tysons.

States a OTP3 project screening report:

The vision is to transform Tysons Corner from suburban office park and activity center to an urban center that could include 200,000 jobs and 100,000 residents. The vision also calls for 75% of all development to be located within an easy walk (1/2 mile) of Metro. Such transit oriented development (TOD) might include a combination of commercial, office and/or residential projects as well as public amenities such as parks and green areas. The transportation benefits of the potential project will address travel demand management, vehicle trip reduction and improve mobility by building livable and sustainable communities.

A public-private partnership would net revenues to VDOT that could be used to fund other transportation projects in the region. Upgrading Routes 7 and 123 to accommodate the surge in traffic in and out of Tysons created by the massive increase in density there could cost billions of dollars.

A public-private partnership, states the OTP3 report, would “transfer the risk of engineering, design, construction, operations and maintenance to the private sector. The most likely scenario will be that VDOT collects royalties or payments for granting such leases.”

On the positive side, building offices, apartments and a hotel directly on top of a Metro station will encourage use of the Metro, which will need all the fare revenue it can generate in order to minimize ongoing subsidies. Because the train line is elevated, it is less clear to me what impact air rights would have upon walkability in Tysons, but the potential surely exists to improve the situation. A potential downside is that creating air rights would add to the potential glut of development rights in Tysons.

If I have any criticism, it’s that revenue from the air rights should have been applied to directly the project that made them possible — the Metro Silver Line — and the revenues used to offset the cost of that project to the public. But if air rights work in Tysons, they might work in Reston and other stops. Perhaps revenue from those stations could be used to buy down Dulles Toll Road tolls that will be used to finance Phase 2.

Northern Virginia isn’t the only place where air rights might apply. Two structures have been built over the Downtown Expressway in Richmond. Why not more?

The McDonnell administration deserves credit for looking into the idea. Now, let’s hurry things along. Let’s make the most of the opportunity.

Hat tip: Bob Bruhns. Bob, relax. This can be a very good thing… as long as the revenues aren’t co-opted by someone with no rightful claim to them.

— JAB

Lots of Competition for Phase 2 Rail-to-Dulles Contract

Photo credit: Bizjournals.com

The Metropolitan Washington Airports Authority (MWAA) has approved five construction consortia to bid on the estimated $2.8 billion Phase 2 of the Rail-to-Dulles project. According to Leesburg Today, the bidders include Bechtel Transit Partners, which is building Phase 1, and four other groups with lead players ranging from Clark Construction Group and Kiewit Infrastructure to Archer Western Contractors, Sanska USA and Fluor Enterprises.

Of those, only Bechtel is known to be likely to utilize a voluntary Project Labor Agreement with organized labor. The PLA has worked well for Bechtel in Phase 1 of the Rail-to-Dulles project, which is nearing completion pretty much on time and on budget. But according to my source, two of the bidders are highly unlikely to use a PLA and two are playing their cards close to their chest and not revealing whether they will or not.

Thus, of the five most qualified bidders for the massive contract, it is safe to say that at least two, and possibly four, would have been disqualified if the MWAA board had stuck to its intention to require PLAs for all bidders. Fortunately, after being bludgeoned by political pressure, the board dropped the requirement. As a consequence, there is greater competition for the project and Virginians can be assured that the winner, even if it is Bechtel, will submit a lower bid, potentially saving the public hundreds of millions of dollars.

There are still unresolved issues regarding the rail project — citizen activist Bob Bruhns has questioned why the official cost estimate contains such inflated costs for parking decks — but at least on this one matter, it appears that the interests of the public will be served.

If Bechtel wins and chooses to lock in its labor force through a PLA, I will be the first to applaud it. Bechtel’s PLA-based business model appears to work well for it. But Virginians can be assured that stiff competition from open shop contractors will keep the final price tag for Phase 2 lower than it would have been.

— JAB

Here’s a Novel Idea: Base Billion-Dollar Investment Decisions on Latest Data, Not Decade-Old Data

by James A. Bacon

In the 2000s, Loudoun County grew at a prodigious rate, averaging 6,000 housing starts yearly before the Great Recession. Construction took a dive during the recession and continues at only half the pace of a decade ago, contends Rob Whitfield with the Dulles Corridor Users Group and a long-time foe of the project. Those numbers should matter not only to home builders and local planners, he says, but to the commonwealth of Virginia, which is helping bankroll construction of Phase 2 of the Rail-to-Dulles project.

While Phase 1 would extend the Metro Silver line to just beyond Tysons Corner, Phase 2 would run it to Loudoun County beyond Washington Dulles International Airport. The economic viability of the second leg depends in part upon continued residential development in southern Loudoun. If the anticipated number of passengers doesn’t materialize, revenues could come up short — requiring even greater subsidies than acknowledged at present.

Whitfield makes a modest suggestion: Before committing an additional $300 million in state funds on top of $150 million already granted, as Governor Bob McDonnell has proposed, the state should conduct an economic analysis of the project based on current economic conditions. That is the impetus behind a bill submitted by Sen. Dick Black, R-Leesburg. SB 1361 would add a paragraph to the section of state code outlining the responsibilities of the Department of Rail and Public Transit (DRPT). Prior to funding any rail or transit project, the DRPT should provide to the General Assembly an economic and financial analysis of the proposed project:

This analysis shall include an evaluation of feasible alternatives and projected transit service demand over a Twenty year term. The analysis shall demonstrate the reasonableness of all assumptions made and provide an analysis of the impact of variables such as inflation and other economic conditions. The analyses shall be based on current market conditions and projected operating revenues, costs and replacement costs for the rail or other proposed transit project based on data prepared during the preceding three years.

As I have documented endlessly on this blog, population growth and housing development hit an inflection point during the 2007-2008 recession. In metropolitan regions across the country, growth is gravitating back toward the urban core. Moreover, growth in the Washington metropolitan region, including communities in Fairfax and Loudoun counties served by the Silver Line, are slowing. After fueling the 2000s boom in defense, intelligence and homeland security spending, Pentagon spending will level off and possibly decline outright. Population and growth forecasts for Northern Virginia have been dramatically downgraded.

The double whammy of unfavorable national and local trends will devastate population projections underpinning mega-projects from Dulles Rail to the proposed north-south corridor west of Dulles.

The only complaint I have with Black’s bill is that it applies only to rail and transit. Every mega-project should be based upon reasonably recent data. Indeed, the Commonwealth Transportation Board and NoVa regional planning authorities should go back and take a fresh look at every major transportation project, whether rail or road, slated for state funding. But, without outside prodding, they won’t. Projects build up enormous bureaucratic inertia. As a consequence, Virginia will spend billions building a transportation system for the 20th century, not the 21st.

Update: Whoops. Looks like Black withdrew his bill today! Oh, well. My logic still applies. The bill never had a chance of passing, but it would have been nice if it had inspired a little debate.

The $300 Million Pork Product Stuffed into the Governor’s Tax Bill

Sausage grinder bearing an uncanny resemblance to the Virginia legislative process.

There’s been a lot of talk about the tax aspects of Governor Bob McDonnell’s restructuring of transportation revenue sources, with the latest wrinkle coming from the center-left Commonwealth Institute, which observes that the governor’s proposal to shift from the motor fuels tax to the sales tax would disproportionately hurt the poor. According to CI’s new report, “Hit and Run: Virginia’s Transportation Hike Hits Low-Income Virginians Hardest,” Virginians in the bottom income quintile would see their taxes rise by 0.21%, while Virginians in the Top 1% would see taxes rise only 0.05%. By and large, Republicans really won’t care, but if any Dems were inclined to support the governor’s bill, those numbers would put them in a real bind.

However, I have not seen anyone focus on the biggest spending component of the plan — $300 million dedicated to the Rail-to-Dulles project, provided that governance reforms for the Metropolitan Washington Airports Authority (MWAA) outlined by the U.S. Transportation inspector general are adopted. The long-term goal of the tax reform is to replenish funds distributed by formula to all corners of the state. But for the first three years, roughly half the new funds raised for construction would be funneled to Northern Virginia.

The governor’s press release describing that set-aside provided no details on  exactly how it would be used. But it’s a good bet that the funds would be applied to paying down the tolls charged to users of the Dulles Toll Road, the main piggy bank for the heavy rail project. That $300 million would be in addition to $150 in state funds — $100 million from the Virginia Department of Transportation and $50 million from the Department of Rail and Public Transit — allocated last year.

There’s a special irony here: Last year, state Senate Democrats demanded an additional $300 million in state funding for Dulles Rail and Republicans opposed it. Wouldn’t it be delicious if Republicans, lining up behind McDonnell’s bill, now favored the $300 million and Democrats, affronted by the regressive nature of the tax plan, decided to oppose it?

And that, my friends, is how legislative sausage is made.

— JAB

Addendum: Once again is demonstrated the irrelevance of the Commonwealth Transportation Board. If embedded in legislation, this earmark presumably would not require CTB review or approval.

The MWAA Contracting Scandal

by James A. Bacon

Thanks to the Inspector General’s report, we know that the Metropolitan Washington Airports Authority (MWAA) has played fast and loose with expense accounts and hiring practices.  Super Bowl tickets. Junkets to Europe. Relatives on the payroll. Sweetheart deals with former board members. It’s an ugly picture… but it’s not the real story.

The heart of the MWAA scandal is the breakdown in procurement and contracting policy. That’s where the big money is. That’s where potentially tens of millions of dollars  have been squandered at the expense of those who fly in and out of Dulles and Ronald Reagan airports and those who will be wind up paying higher tolls to underwrite the cost of extending Metrorail to Dulles.

The IG’s report contains damning detail after damning detail. Herewith are some of the highlights…

MWAA has frequently missed opportunities to maximize competition for contracts over $200,000, as it is required to do under its own Contracting Manual. Between 2009 and 2011, the authority awarded 190 such contracts. Only 68 were awarded openly. Five were sole-source awards. The other 117, amounting to $225 million in business, used categorical exceptions to limit competition.

MWAA employees have not always obtained Board approval for high-value contracts. Extrapolating from their findings, the auditors project that MWAA spent $83.6 million on contracts without Board approval — 14% of all contracts awarded between January 2009 and June 2011, the time period studied.

Because of poor planning, MWAA has extended existing contracts rather than award new ones on a competitive basis, missing yet more opportunities to obtain competition and better prices. Even when soliciting competitive bids, MWAA board members sometimes divulged non-public information that gave particular bidders an edge. “One MWAA Board member … disclosed in an email to a potential contractor another contractor’s pricing.”

MWAA lacks basic controls to ensure that contract policies are followed. The authority frequently allowed work on contracts to begin prior to the award dates — before the contracting officer completed and signed the contract documents. In some instances, work began before the contracting officer even knew of the contract.

So, what has been the result of all this sloppiness?

In one example, states the IG report, “the expansion and renovation of the Dulles Airport main terminal, an $8 million contract awarded in 1989, ballooned to $147 million. From 2003 to 2011, MWAA issued 10 contract modifications at a cost of $36 million to add design and construction management services for integrating the Transportation Security Administration’s (TSA) luggage screening equipment and the airport’s baggage handling system.”

Another example:  “Over the past 8 years, MWAA awarded more than 80 percent of work under three groups of multiple-award contracts to a single contractor. … However, the contractor’s rates were often higher than the other multiple-award contractor’s rates” — between 28% and 234% higher in one particular 2012 contract.

A third example: In another set of contracts, one of five participating firms received more than 38% of the work. As it happened, a former MWAA board member was an owner of the firm. That, says the IG report with considerable under-statement, “could create the appearance of favoritism.”

Bacon’s bottom line: Once the MWAA board has reformed itself — as it seems to be doing — the next job is to reform procurement and contracting. Heads should roll. Especially critical, new board members appointed by Governor Bob McDonnell should keep an eagle eye on every step in the process for selecting a contractor for the $2.7 billion Phase 2 of the Rail-to-Dulles project.

MWAA: Even Worse than We Thought

The interim Inspector General’s audit of the Metropolitan Washington Airports Authority, issued earlier this year, was scathing, documenting the abuses of a runaway board of directors. The final report, issued yesterday, is even more devastating. You know it’s bad when the title of the report — “MWAA’s Weak Policies and Procedures Have Led to Questionable Procurement Practices, Mismanagement, and a Lack of Overall Accountabilty” — reads like a yellow journalism newspaper headline.

The report, prepared by the U.S. Transportation Department’s Office of Inspector General, documents that the abuses permeated the organization’s management as well, especially in the areas of hiring practices and procurement. Call it trickle-down corruption. Key conclusions:

  • First, MWAA’s contracting policies and practices are insufficient to ensure compliance with the Airports Act and the lease agreement between DOT and MWAA. The Act and the agreement require the authority to competitively award contracts over $200,000 to the maximum extent practicable. However, for the period we reviewed, MWAA used categorical exceptions to limit competition for almost two-thirds of MWAA’s contracts that exceeded $200,000. … These weaknesses are exacerbated by ineffective contract management and oversight and a lack of adequate procurement integrity policies to ensure impartiality when awarding and administering contracts. …
  • The code of ethics and related MWAA policies and procedures in place at the time of our audit lacked the rigor needed to ensure credibility and the integrity of management and employee decisions. … The Authority’s existing ethics-related procedures have been insufficient to detect violations of anti-nepotism and gift provisions and to identify potential conflicts of interest. For example, the Vice President of Human Resources indirectly supervised relatives, despite the code’s explicit provision prohibiting such relationships. In addition, employees regularly accepted inappropriate gifts from an MWAA contract — including Super Bowl tickets, travel, and accommodations worth almost $5,000. …
  • MWAA’s hiring and compensation practices lack oversight and accountability. MWAA’s standard hiring process for filling vacancies or creating new positions has not been formally documented as an official policy, which has allowed senior officials to place candidates into new or existing positions without job descriptions, competition, or completed background checks. In some cases, senior officials abused MWAA’s student program to hire employees who were not students, using personnel documentation that falsely showed student status. MWAA’s lack of oversight also resulted in employees with known criminal convictions working at the Authority in sensitive and management positions for more than a year. In addition, MWAA managers awarded excessive salaries, unjustified hiring bonuses, questionable cash awards, and ineligible benefits. …
  • MWAA’s policies and processes have not ensured accountability and transparency for activities conducted by its Board of Directors. … Without such controls, MWAA has not been able to hold its Board accountable to the same standards it holds its employees. Specifically, MWAA could not ensure that relatives and friends of Board members did not receive preferential treatment in hiring or contract.

Response from Board Chairman Michael Curto: “We take all the issues and concerns cited in the report very seriously and will respond to all of the report’s recommendations. We are examining today’s report with a particular focus on items that were not discussed in the Interim Report.”

Response from Governor Bob McDonnell: “Unfortunately, actions on the part of certain members of the MWAA Board of Directors, a general lack of transparency and accountability, and employee misconduct have jeopardized the public’s confidence in the Authority’s ability to ethically manage its critical assets and complete the Dulles Rail Project. The concerns that I have expressed over the past two years are, unfortunately, validated by the US DOT Inspector General.”

The governor said that he hopes that the seating of five new Virginia board members by November will “usher in a new era of leadership and governance.”

Time for follow up. Having turned up so many issues in its inspection of MWAA, the Inspector General’s office would be well advised to turn its attention to that other unaccountable interstate compact in the region, the Washington Metropolitan Area Transit Authority (WMATA). As documented by a recent Washington Times series, WMATA’s management deficiencies are even more manifestly evident than MWAA’s. Perhaps Rep. Frank Wolf, R-10th, the impetus behind the IG report, could push a bill through Congress requiring the Department of Transportation to take a look at WMATA as well.

— JAB

McDonnell to MWAA: Cut More Costs from Dulles Rail

In a letter sent yesterday to Metropolitan Washington Airports Authority (MWAA) Chairman Michael A. Curto, Governor Bob McDonnell pressed for further actions to drive down costs of the Rail-to-Dulles project, with the ultimate goal of keeping tolls low for Virginia taxpayers and Dulles Toll Road commuters.

McDonnell said that MWAA should reevaluate the bond financing of current projects “to see if better deals can be reached to drive down debt service costs,” and that the authority should “continue to evaluate the scope and expense of Phase II.”

The letter offered no specific suggestions on how the scope and expense of Phase II, currently estimated to cost $2.8 billion, might be modified. However, Virginia Highway Commissioner Gregory A. Whirley has floated a proposal to restructure the project’s debt service by tapping excess reserve funds set aside for the bond financing as a way to offset some of the projected toll increases projected for the Dulles Toll Road. Toll road revenues will cover roughly half the cost of the total cost of the rail project. (For details on Whirley’s proposal, see, “Hey, It’s Worth a Look.”)

While acknowledging progress in addressing abuses raised in an interim federal Inspector General’s report, McDonnell urged the MWAA board to continue to address issues such as non-competitive contracts with former board members, strengthening the board’s code of ethics, implementing greater transparency and improving construction planning and oversight.

With the recent amendment of the Virginia-Washington, D.C., bi-state compact governing the MWAA, which expands Virginia’s board representation and forces off the board directors whose terms have expired, McDonnell finally has an opportunity to put his stamp on the board. “It is my hope,” he wrote, “that we are at a turning point in the history of MWAA.”

— JAB

Brown Blasts LaHood over Fed Role in Rail-to-Dulles

Robert Clarke Brown, an outgoing board member of the Metropolitan Washington Airports Authority, unloaded with both barrels today in a letter addressed to U.S.  Transportation Secretary Ray LaHood. The recent fixation on MWAA’s governance issues, he charged, was a distraction from far more important issues — the minimal contributions to the Rail-to-Dulles project by the federal government and the commonwealth of Virginia.

“The criticisms of the Airport Authority have not been without merit. They have revealed real governance deficiencies. But the Authority is addressing those deficiencies,” wrote Brown, Treasurer of Case Western Reserve University who serves on the WMAA board as a presidential appointee. “I urge you now to turn your efforts on behalf of the Silver Line … [toward] securing federal and state funding resources to alleviate the terrible burden the current plan of finance places on the local community.”

Brown’s cannonade is in marked contrast to the reticence of other MWAA board members, who have largely refrained from responding publicly to their many critics, who include Rep. Frank Wolf, R-10th, many Northern Virginia politicians, citizen activists and the media.

The federal government will contribute only one-sixth of the roughly $6 billion cost of  extending METRO rail to Washington Dulles International Airport, a far smaller share than most other federally funded transportation projects. The state contribution will amount to only $350 million, or 6%. The state share compares to a 21% share of the Interstate 495 expressway project, 28% for Midtown-Downtown tunnel project in Hampton Roads, and 26% for the I-95 HOT lanes project, according to data attached to Brown’s letter.

As a consequence, the burden of financing the rail line will fall upon Fairfax County, Loudoun County and commuters on the Dulles Toll Road, whose tolls will be jacked up to pay off Rail-to-Dulles bonds. “If nothing changes in the Silver Line’s plan of finance, northern Virginia will soon be paying double-digit tolls on Dulles Toll Road,” he wrote.

The federal inspector general revealed extensive questionable board practices, such as filing lavish expenses accounts for travel and the issuance of no-bid contracts. (See “The Most Dysfunctional Board in the Country?“) But Brown was withering in his criticism of LaHood’s intrusion into MWAA’s affairs. Although the federal government can be described as a stakeholder, Brown argued that the airports authority is a bi-state compact between Virginia and Washington, D.C., an arrangement that gives the feds no power of regulation or supervision. He was particularly critical of the appointment of a federal Inspector General to probe charges of irregularities in MWAA governance.

Not only have your repeated encroachments on MWAA’s independence been of questionable lawfulness, they have also gone far beyond the traditional role of U.S. DOT in local project development and execution. The level of hands‐on secretarial involvement in the Silver Line project during your Administration is highly unusual, perhaps unprecedented.  You have injected yourself into decisions about project scope, project management, Authority personnel, and local legislation to a degree seldom – if ever – seen in the execution of U.S. transportation projects.

There is no legal basis, Brown insisted, for LaHood’s appointment of an “accountability officer” for MWAA, which he described as a “coercive federal oversight authority.” He added: “The precedential mischief that DOT’s heavy-handed oversight has created should not be lightly regarded. Already, Fairfax County is advocating a role for itself in MWAA appointments.”

Brown also chastised Congressman Wolf, who championed legislation that was passed by Congress and enacted by Virginia and Washington, D.C., to reform MWAA’s governance structure. Among other measures, the amendments to the compact expanded the board from its “currently cumbersome” 13 members to 17. That change is more likely to hinder effective decision-making than help it, Brown said. The change in board composition, he added, will barely even increase Virginia’s representation, bumping up the state’s proportion of appointees from 38.5% to 41.2%.

LaHood should draw upon the “fruitful” relationship he has established with Gov. Bob McDonnell to persuade him to come up with additional funding for the Silver Line, Brown said.

— JAB

D.C. Council Passes MWAA Reform

The Washington, D.C., City Council has adopted changes to the bi-state compact governing the Metropolitan Washington Airports Authority that allow for Virginia to seat two new members, while Maryland and D.C. get to appoint one new member each. The legislation must be signed by Washington Mayor Vincent Gray to become law.

Gov. Bob McDonnell, who had backed the change, said this in a prepared statement: “The taxpayers of Northern Virginia, and all Virginians, rely on the critical transportation infrastructure managed by MWAA. I look forward to MWAA seating our appointees at its next board meeting, so that the interests of all Virginians will be fully represented. This is another in a series of necessary steps, with more to come, to improve public confidence in the MWAA Board as it manages billions in public assets and projects for the people of Virginia and the region.”

It will be interesting to see what additional “necessary steps” are in the works.

— JAB

Union Executive Resigns from MWAA

Slowly but surely, Governor Bob McDonnell is establishing more authority over the unruly Metropolitan Washington Airports Authority board of directors. Dennis L. Martire, a thorn in McDonnell’s side for more than a year, has announced his resignation from board effective October 17 in a deal reached with the administration.

Said McDonnell in a press release: “I am pleased that all parties agreed to immediately stop the litigation and pursue dismissal of Martire’s lawsuit and MWAA’s action, both with prejudice.  We are happy to put this unnecessary and expensive distraction behind us and look forward to continuing to improve the accountability of the Metropolitan Washington Airports Authority. …  I will ensure that all of my appointed board members are dedicated to finding ways to improve efficiency, cost control, and customer service for all our citizens.”

Martire, a senior executive in the Laborers International Union of North America (LiUNA), had been appointed by former Gov. Tim Kaine. Mame Reiley, an appointee of former Gov. Mark Warner, also resigned recently, for medical reasons. After her departure, a board decision  to award her a three-year consulting contract paying $180,000 a year ignited a firestorm of controversy. Both Reiley and Martire had worked at cross-purposes with the McDonnell administration by pushing proposals that would have run up the cost of the estimated $2.8 billion METRO project.

The union executive reportedly had hired two law firms and run up a $75,000 bill to block Governor Bob McDonnell’s attempt to oust him on the grounds that he had improperly billed MWAA thousands of dollars for a European junket. Martire also had been a thorn in the administration’s side, working behind the scenes to get MWAA to make a union Project Labor Agreement (PLA) a requirement for any company bidding on Phase 2 of the Rail-to-Dulles project. Critics say the measure could have added hundreds of millions of dollars to the cost while feathering the union’s nest.

“While I remain confident about the litigation in which I was involved, there are reasons why resolving those lawsuits was worthwhile,” Martire told the board, according to an MWAA press release. “First, the lawsuits threatened to be disproportionately expensive for MWAA, for me personally and for the taxpayers of Virginia. Second, the Authority needs the litigation resolved so that it can continue with the important work that it does. Operating Reagan and Dulles airports and overseeing the Silver Line construction are among the most important jobs in the region.”

In its Wednesday meeting the MWAA board also approved a new ethics policy that covers travel policy, sole-source contracting and other ethical issues. Said Chairman Michael Curto: “This policy is designed to keep us free of conflicts of interests, so the public can be assured that our decisions are based on the best interests of the Authority and the region we serve.”

The next milestone will be the Washington City Council’s decision either to approve or deny an amendment to the bi-state compact governing MWAA that would increase board representation.

That measure, backed by Rep. Frank Wolf, R-10, would give Virginia two additional seats on the board, while giving one more each to Maryland and Washington, D.C. The impact would be mostly symbolic, boosting Virginia’s representation only slightly: from 38.5% of the representation to 41.2%. Although that bill was passed into law by Congress, it has no legal effect until Virginia and Washington both approve it. Meanwhile, Wolf has introduced a second measure to shrink the size of the board and give Virginia an outright majority.

— JAB

The Most Dysfunctional Board in the Country?

by James A. Bacon

Talk about a crazy situation… After months of delay, the Washington, D.C., City Council is scheduled October 2 to approve amendments to a bi-state compact with Virginia that would expand the board of the Metropolitan Washington Airports Authority (MWAA), giving the Old Dominion greater representation. The amendments were based upon legislation passed by Congress and signed by President Obama at the behest of Rep. Frank Wolf, Va-10.

Assuming the council acts as expected, it still will be behind the curve. Frustrated by “appalling decisions” made by the MWAA board, Wolf has submitted a new bill that would shrink the board and give Virginia representatives an outright majority. The board, which worked actively to block implementation of the previous changes is “dysfunctional,” he says.

The current board lacks transparency and accountability, said Wolf in an August  press release, pointing to a series of “appalling” decisions over the past two years, including a $200,000 confidential settlement with an unsuccessful candidate to run the authority and sweetheart deals for former board members and board staff. He also cited lavish travel by board members.

“MWAA used to have a well-functioning and highly successful board,” Wolf said. “Now it has just dissolved into bitter acrimony. Board members are subpoenaing each other. It is internecine warfare. This cannot stand. It is time to give Virginia control.”

Last week the MWAA board did adopt a new travel policy and hiring policies, as the new chairman, Michael A. Curto, sought to re-establish credibility with the authority’s stakeholders.

After the MWAA board’s session last week, Curto stated:

As I started my tenure as chairman, I laid out three priorities for the organization: increased cooperation with our partners, especially the Commonwealth of Virginia, greater transparency for management and board operations, and the timely and cost-effective completion of the rail project. While it is true that the Authority has made its share of mistakes, and there are a number of issues that have yet to be adequately addressed, I think our harshest critics would also acknowledge that we have made significant progress on those key objectives.

President and CEO Jack Potter reported last week that the Authority was closing out all “sole source” professional services contracts that had been exempted from competitive bidding. In effect, that meant firing former director Mame Reiley, whom he had hired under a multi-year contract for a $180,000-a-year job. Her contract still called for a one-year severance.

The new travel policy would preclude any more junkets, such as one in which then-board member Dennis Martire, a a senior executive with the Laborers International Union of North America (LiUNA) charged MWAA for a nine-day trip to Europe with his girlfriend on the pretext of attending a 36-hour  conference on by the Airports Council International.

At least two other former board members – and a former staff member of the board – have been beneficiaries of sweetheart deals, Wolf said, citing exposes by the Washington Examiner. Last year the board awarded a $100,000 contract to a law firm where a board member’s wife works.

In other questionable activities, the board paid $200,000 to an individual who was “all but promised” – but never offered – the CEO position. The deal was struck to avoid a potential lawsuit.

One issue yet to hit the media involves the confiscation of a board member’s papers left at his seat after a recent meeting, Wolf said. The Congressman stated in the press release that “it was his understanding that” a board member left the July session for a lunch meeting, fully intending to return. The board meeting adjourned, however, before he came back and board staff collected his things. “Instead of just putting the documents in an envelope, the staff read through them and then passed them onto the board secretary, who, I understand, also went through them,” Wolf said. “Believing the documents could be pertinent to litigation involving MWAA, the board secretary turned them over to the authority’s general counsel. This incident has led to series of subpoenas being issued to several board members and others, including me and my chief of staff.”

Another incident revolves around the attempted removal of a Virginia board member — Martire, the labor executive — for cause by Governor McDonnell, Wolf said. The board member has challenged his removal in court and MWAA is paying his legal fees.

“I suspect MWAA will have to start paying the legal fees of other board members who have now been subpoenaed in the case,” Wolf said. “Knowing how fast legal fees can accumulate, I am deeply troubled by these latest turn of events, especially considering taxpayers are footing the bill.”

The problems do not end here, Wolf said.

The terms of all three of the federal appointments have expired and finding replacements continues to drag on and on. The District left an appointee on the board for nearly two years after his term has expired, despite being under house arrest in the Ivory Coast and attending only one meeting between 2009 and 2011. It was going to be that member’s proxy vote to hire the unsuccessful CEO candidate who received a $200,000 settlement. Board members also used to meet with the former chairman the night before meetings to plot strategy for the next day’s meetings, Wolf said.

“All this points to a board that is totally dysfunctional, fiscally irresponsible and tone deaf,” Wolf said.

MWAA’s actions last week come too little and too late for Wolf. “The Congressman’s new bill will “give Virginia complete control” over the MWAA board, Daniel Scandling, Wolf’s chief of staff, told me.

Scandling acknowledged the political difficulties in persuading Maryland and Washington to agree to an arrangement that would further diminish their power on the board, but he noted that the bill enjoyed bipartisan support among Virginia’s congressional delegation and has been backed by leading business lobbies in Northern Virginia. “Never say never.”

McDonnell spokesman Jeff Caldwell did not respond to two phone calls and an email from Bacon’s Rebellion to address the Washington City Council’s action, or lack of it, on the bi-state compact.

“Value Capture” as Rail-to-Dulles Financing Tool

Station site plan for Silver Line METRO station on Route 772 in Loudoun County. (Click for larger image.)

The decision of the Loudoun County Board of Supervisors to fund its $270 million share of the Rail-to-Dulles project by taxing landowners around its two METRO stations could create a prototype for financing transportation projects in the future, argues Jay Corbalis, regional coordinator of LOCUS at Smart Growth America.

“The importance of the vote — and particularly the use of a funding concept called value-capture — goes far beyond Northern Virginia, and could have implications for how transit projects nationwide are funded in coming decades,” writes Corbalis in the D.C. Streets Blog. LOCUS is a national network of real estate developers and investors who advocate sustainable, walkable urban development.

Corbalis touts the potential for the Silver Line to re-shape the auto-oriented pattern of development in Loudoun County into mixed-use, walkable transit districts but acknowledges the difficulty in raising money for Phase 2, which is estimated to cost $2.7 billion. He writes:

The cost of Loudoun County’s contribution to the extension… as well as ongoing contributions to the line’s operations of around $17 million a year starting in 2019, made the vote especially contentious to fiscally conservative county officials. Ultimately, what broke the deadlock amongst commissioners, who were evenly split on the decision until the vote, was the structure of the financing the county would use to fund the project. Rather than increase taxes on all county residents and businesses, the county adopted an innovative funding structure that seeks to capture the value created along the rail line.

To achieve this, the Loudoun Board of Supervisors established special tax districts of commercial and undeveloped properties surrounding the future stations. Properties within a half-mile of the stations would pay a tax of 20 cents per $100 of assessed value. Properties further out would pay less. As noted by the Washington Post, most current residential properties would be excluded from the district. Future residential development would be subject to the tax though.

As Corbalis points out, value-capture financing aligns the costs and benefits of transit funding better than general tax funding. Landowners near transit stations enjoy a big spike in valuations of their property, reaping an economic windfall. Why not tap some of that increased value to help cover the capital costs of building the transportation asset? “Politically, value capture impacts fewer people than broad-based taxes like sales and gas taxes, and those who are affected stand to benefit directly from the investment, making it an easier sell.”

That is precisely the case I have been making on Bacon’s Rebellion for years. I just didn’t call it “value capture.” I’ll have to start doing so from now on.

I do have some quibbles with Corbalis’ piece. He neglects to mention that roughly half the cost of building Phase 2 of the Silver Line will be borne by riders on the Dulles Toll Road — many of whom may never use the METRO at all. The funding structure for the project is still inequitable, creating a massive transfer of wealth from middle-class commuters to well-positioned property owners, construction contractors and METRO riders. Also, he doesn’t acknowledge the risk that the hoped-for development may never occur, with the result that the hoped-for property tax revenue may not materialize.

But his larger point is well taken. Virginia should employ “value capture” financing more aggressively as a tool to finance needed transportation projects — not just transit but roads and highways — in the commonwealth.

— JAB

Equal Opportunity Cronyism

From Liz Essley in yesterday’s Washington Examiner:

The day after Mame Reiley resigned for health reasons from the airports authority overseeing the $6 billion Dulles Rail project, the authority quietly created a full-time job for her as a “senior adviser” to authority CEO Jack Potter and agreed to pay her $180,000 a year. …

Reiley, a longtime Democratic activist from Virginia, left the Metropolitan Washington Airports Authority on Feb. 15 after serving 10 years as the state’s representative. The next day the authority, which recently drew a rebuke from federal investigators for wasteful spending and questionable contracting practices, hired Reiley to consult with it on issues she helped oversee as a board member, authority officials said.

Reily, who is fighting cancer, had been donating between 75 to 100 hours per month to MWAA. When she she could no longer afford the volunteer time, airport officials suggested that she become a full-time employee. Potter defended the decision, citing her “invaluable” skills, professional contacts and institutional knowledge.

Well, at least you can’t say Virginia isn’t changing with the times. MWAA isn’t an old boy’s club anymore. It’s an old boy’s and girl’s club.

— JAB