The San Diego Association of Governments is collecting far less revenue from a sales tax hike than it told voters it would, but the watchdog group created to oversee the tax says that’s not its problem.
When voters in 2004 approved the half-cent sales tax TransNet, they also approved the creation of an oversight group called the Independent Taxpayer Oversight Committee. It was intended as a sweetener so voters could be sure the new money would be spent efficiently.
But the growing shortfall between the $14 billion forecast when voters approved the 40-year tax and the actual revenue SANDAG has collected hasn’t drawn the attention of that group.
No one on the oversight committee asked SANDAG staff any questions on the shortfall at a meeting this month when the group discussed the document in which the shortfall was disclosed.
Nor was the shortfall mentioned anywhere in ITOC’s annual report to SANDAG’s board of directors, delivered in a presentation Friday. The elected officials from around the county on the board didn’t ask a single question about ITOC’s annual review – not on TransNet’s revenue shortfall, or any other topic.
The chair of the committee, Stewart Halpern, says the group’s responsibilities don’t include monitoring the growing disparity between the projected revenue and the actual revenue it’s brought in so far.
He said he was not aware of the discrepancy between the revenue SANDAG anticipated and the revenue it’s actually collected.
“To put it succinctly, the concept of comparing current revenues to the revenues that were forecast in 2004, that actually isn’t really our mandate,” said Halpern, whose expertise is in municipal finance.
He said the group is primarily focused on making sure the money collected is spent expeditiously and responsibly and on the projects promised to voters.
“Most of our time goes into monitoring expenditures,” Halpern said.
Halpern said it’s more important to oversee whether the tax revenue – combined with additional funds from state and federal sources – is expected to be sufficient to cover all the projects promised in the ballot measure.
“In the end, SANDAG collects and has available money from a wide array of sources,” Halpern said. “So I think we’re less concerned by the mix of where that money is coming from and if it’s foreseeable to get these projects completed.”
He said ITOC, like SANDAG staff itself, remains confident all of the promised projects will be completed.
Halpern is right when he describes ITOC’s written mandate. Its instructions are mostly focused on monitoring spending – making sure costs don’t get too far out of whack, that things are happening on schedule and that the projects SANDAG invests in are the ones included on the ballot.
But outside experts said that set of priorities leaves San Diego voters without a meaningful level of oversight and transparency.
Martin Wachs, professor of urban planning at UCLA, said oversight committees like ITOC that monitor transportation taxes are primarily built to oversee spending, not revenue – but there’s also nothing that would preclude them from taking that step.
“There is no reason why a monitoring group, a taxpayer group that’s supposed to be responsible for oversight, shouldn’t be monitoring and reporting the shortfall,” Wachs said. “It’s fair to say there is uncertainty in all of this because we can’t see the future in 100 percent clarity – I don’t think I would indict them for falling short – but I do think the public has the right to see a report that includes a factual accounting for what happened.”
He also said groups could monitor whether projects are fulfilling their promises – whether a transit facility is serving as many riders as expected, for instance.
Since SANDAG started collecting the tax in 2008, its initial projections have outpaced actual collections by about 25 percent, or $500 million adjusted for inflation. If the tax revenue keeps growing at the average rate it has since the end of the recession, it would bring in just over $9 billion, about $5 billion short of the $14 billion promised on the ballot. SANDAG said it does not have an updated forecast for the revenue generated over the life of the tax.
A number of independent experts have said the revenue shortfall calls into question SANDAG’s claim that it’ll still be able to pay for all of its projects.
One reason SANDAG said it’s still on track to build all its projects is because it received more money from state and federal grants than it initially anticipated.
But counting on outside sources going forward is risky, Wachs said.
“The overarching issue is, state and local agencies are desperate to find money anywhere they can find it, because the federal government is making less money available to states and states are making less money available to local agencies,” he said. “It’s part of a national trend.”
Nonetheless, Halpern is confident SANDAG will complete the TransNet projects, despite lower-than-anticipated revenue. He said he doesn’t consider the revenue shortfall itself particularly relevant.
Even if the agency is confident it can build everything it promised voters, it should nonetheless disclose the lower-than-anticipated revenue to the public as clearly as it can, Wachs said, because it’s an indication that those expectations are uncertain.
During the October ITOC presentation, SANDAG disclosed the shortfall but it did so through a convoluted description.
Instead of showing a straightforward comparison between the projected revenue and what’s actually been collected, the document explained that if you account for lower-than-expected construction costs, then TransNet is short by a smaller amount than if you do a straight comparison between the forecast approved by voters and actual collections. The document didn’t include the raw data necessary for someone do the math themselves.
In its presentation to ITOC, SANDAG staff did not explain how it made the adjustment – or even state it still showed TransNet revenues were coming up short. It simply said that the paragraph had been updated for the most recent year.
No one asked any questions, and nothing else was mentioned about the shortfall.
Had anyone on the committee asked, they might have learned that even by SANDAG’s way of adjusting for the shortfall, the problem was getting worse, from a 7.4 percent shortfall last year to an 11.7 percent shortfall this year.
Carole D’Elia, executive director of the Little Hoover Commission, a state entity that provides independent government oversight, said voters deserve more transparency than a convoluted description buried hundreds of pages in an obscure document.
“This just makes you wonder what else they’re trying to obscure,” she said. “In an ideal world, they’d have this information in an easy-to-understand chart on their website that says clearly, ‘This is what was enacted, this is what’s been collected.’”
The state is pushing its agencies in that direction, she said, citing a report her group did last year on the topic.
“There still seems to be a lack of transparency on local bond measures, whether transportation taxes or local school construction bonds,” she said. “The state may want to consider coming up with a way for voters to know what they’re voting for, and better understand the role of these oversight committees created to make voters confident that the projects listed will actually occur.”
SANDAG’s revenue shortfall evaded scrutiny in another recent meeting too.
On Friday, Halpern presented ITOC’s annual review to SANDAG’s board. That annual review still said TransNet is expected to generate $14 billion. Halpern said an emphasis for his group this year was ensuring that each city that receives TransNet funds were spending it effectively.
He commended SANDAG staff’s working relationship with his group.
“I’d like to say that the spirit of cooperation and transparency from SANDAG staff is truly extraordinary,” Halpern said.
SANDAG chair Ron Roberts then opened it up for questions from the board. There were none. The meeting ended.
After the meeting, Halpern reiterated that he didn’t think comparing actual revenue to what was originally forecast is a relevant measure.
Nonetheless, he said he planned to talk to SANDAG staff about including a comparison between forecast and actual revenues in next year’s long-term outlook on TransNet’s performance.
Despite Halpern’s confidence that SANDAG is on track to build everything included in the 2004 bond measure, he acknowledged one way the revenue shortfall could be relevant.
“If you were to make the argument that it proves SANDAG’s forecasts can’t be relied on and calls into question future forecasts, I guess you could have that argument,” Halpern said. “I understand that philosophically. But everyone knows there are likely going to be significant differences to any forecast.”
Voters happen to be relying on another SANDAG forecast next week when they vote on Measure A, another 40-year, half-cent tax increase that voters are told will bring in $18 billion of new spending.
Beyond the low revenue returns from TransNet so far, there are other reasons to suspect Measure A won’t raise that much. The forecast relies on San Diegans spending more than they ever have before to reach that number.
Measure A has nonetheless been endorsed by the San Diego County Taxpayers Association, a nonprofit group that bills itself as a taxpayer advocate.
Haney Hong, president and CEO of the group, said he was not aware of TransNet’s revenue shortfall when the group endorsed Measure A.
Like Halpern, he said his staff is more focused on how the agency spends the money it collects.
“The important thing to take into account when you look at the Taxpayer Association analysis of Measure A is, how do they perform with the resources they do ultimately get?” he said. “What voters ought to expect is that agencies are reasonable in their assumptions, and as the funds come in that they exercise good governance in the usage of such funds,” he said.
The assumptions underlying Measure A’s revenue forecast, he said, are reasonable.
“SANDAG has a history of taking the resources voters have given them and doing projects well while leveraging other resources,” he said.
He said it was a “good question” whether SANDAG’s adequately disclosed to the public that revenues were coming in below initial expectations, but he didn’t know enough about how the disclosure played out to say any more.