The MassDOT board of directors is now the public face of transportation reform in the Bay State. Board members’ reluctance to show their faces early on to lawmakers who are anxious to discuss transportation issues made for an inauspicious start. The recent board no-shows at legislative hearings no doubt had something to do with the chilly reception some board members would have received.
Expectations for the new department, a merger of nearly all the state’s transportation-related agencies, are running high. Worn-out roads, decrepit bridges, and almost daily snafus on bus, subway, and train routes have commuters at their wit’s end. Deferred maintenance and repairs are prompting big concerns about safety, especially at the debt-riddled MBTA. And Massachusetts doesn’t have enough money to deal with any of it.
The unpaid directors have their work cut out for them if they are going to help guide the Bay State out of this unprecedented infrastructure and finance crisis. Yet there are doubts about whether these people are the right people to handle this monumental job. Lawmakers made it clear they wanted to see fresh faces, well-versed in transportation issues, who could hit the ground running, exorcize the ghosts of Big Dig–era mismanagement, and help nurse the entire system back to good financial health. What they got was a board dominated by individuals with limited professional transportation experience.
Three of the five members are holdovers from boards that had been abolished during the restructuring: insurance executive John Jenkins, the new board chairman, who served on the Massachusetts Turnpike Authority Board; and corporate attorney Ferdinand Alvaro and hotel and food service workers union president Janice Loux, who both served on the old MBTA board. Only the two new appointees — MIT engineering professor Andrew Whittle, who worked on the safety review of the Big Dig tunnels, and Elizabeth Levin, a transportation consultant — have backgrounds related to transportation matters.
Not only did Gov. Deval Patrick bypass candidates proposed by the chairman of the Transportation Finance Commission (which produced a widely praised 2007 report on financing problems) and the T Riders Union (a group of Boston-area public transit advocates), he ignored specific warnings about appointing Loux and any other former board members. There was immediate fire from lawmakers on both sides of the aisle, the Massachusetts Taxpayers Foundation, and newspaper editorial boards.
A Boston Globe editorial scoffed at Patrick’s claim that his picks were drawing fire because “anything new draws critics.” “Actually, governor, it’s the prospect of the same old way of doing business that has people worried,” said the paper’s editorial. The Globe said Patrick could have avoided the worst of the controversy by not naming Loux to the new panel. Baddour went a stop further and called for her resignation.
“The fact that we got the board we ended up with, that was so disappointing to so many, unfortunately made it easy to criticize,” says Baddour.
Unlike many state agencies, transportation has a large reach. Walk out the front door and you’ll soon be on MassDOT’s turf. Walkers, bikers, drivers, bus, train, plane, and ferry passengers all rely on some segment of the state’s transportation network. Kevin Sullivan, secretary of transportation under former governor Paul Cellucci, says it’s up to the directors to show their mettle, especially because of the controversy over their qualifications. They have to “really put together a plan to show people that, notwithstanding the critics, this is a serious board that is looking out for both the riders and the taxpayers of the commonwealth and that they are not looking out to protect the status quo,” he says. “There’ll be a lot of people watching.”
Mergers and acquisitions
Public sector boards of directors usually don’t command the headlines. But the ongoing transportation missteps, from equipment breakdowns to a succession of short-lived transportation secretaries, have forced the MassDOT board of directors into the spotlight. Over the past 25 years, the state’s transportation-related departments have been plagued by mismanagement and financial woes. The MBTA’s finances have been on shaky ground; the understaffed highway department survived by pillaging its capital budget to pay for operations; and the Registry of Motor Vehicles succeeded in shortening wait times for its services only to have them creep upward again as the state’s budget crisis forced cutbacks. But it was the Turnpike Authority’s weak oversight of Big Dig costs and lack of accountability from its managers, culminating in 2006 when a woman was killed by a falling ceiling panel in the Ted Williams Tunnel, that finally destroyed any remaining public confidence in the system and forced the Legislature to act.
Some of the system’s problems were clearly financial. The various revenue streams — tolls, fares, and the state’s gas and sales taxes — no longer met the demands of a modern transportation network. At the same time, management and operations also needed a thorough shake-up, with the boldest idea being to merge all the state’s disparate transportation agencies. Initially, Patrick hitched his reform plan to a gas tax increase, arguing that it would pump much needed funds into the system. The Legislature coalesced instead around the idea of pushing a restructuring plan that became known through the shorthand expression, “reform before revenue.” Though all parties eventually agreed last year on a small sales tax increase, portions of which went to MBTA and the Turnpike Authority, there was no appetite for both a significant gas tax increase and a new transportation superagency.
Restructuring ultimately won out, with Patrick signing legislation last June creating the state’s new Department of Transportation. The department has already saved millions: $261 million as a result of a deal with UBS, releasing the Bay State from ill-advised financial agreements between the company and the former Turnpike Authority, and another $40 million annually by transferring turnpike and MBTA employees into the state health insurance system. Other moves, such as consolidating Registry of Motor Vehicles office space and integrating information technology systems, are shaving off millions more. The savings are all helpful, but they won’t be enough to address fully all the department’s finance and maintenance problems and offset the eventual need for new revenues.
The merger brought together the former Executive Office of Transportation and Public Works, the MBTA and regional transit authorities, the Turnpike Authority, the state highway department, the Massachusetts Aeronautics Commission, the Registry of Motor Vehicles, the Tobin Bridge, and some Department of Conservation and Recreation–managed bridges and parkways. (Lawmakers adopted an “if ain’t broke, don’t fix it” attitude toward Massport, which successfully resisted being included in the new structure and was therefore left alone as an independent authority.)
Disappearing with the old regime were the MBTA and the Turnpike Authority boards of directors, as well as several other governing bodies and advisory boards. For some, the old boards were synonymous with failure: that is, failure to ride herd on the Big Dig in the case of the Turnpike Authority, and failure to come to terms with a funding structure that crippled the agency in the case of the MBTA board.
In the past, the MBTA’s advisory board had the power to veto the MBTA budget. Although the reform law left the advisory board in place, the group lost that veto power under the restructuring, so there is no longer an outside entity to cry foul if the MBTA’s numbers don’t add up; nor do cities and towns who pay MBTA assessments have any say. This change only adds to the responsibility of the MassDOT board. But the board’s Ferdinand Alvaro, who now chairs its finance and audit committee, is prepared to make sure the numbers add up. “I will be having candid conversations with people before the budget is officially presented to the board, and I will not recommend any budget I think is foolhardy,” he says.
In terms of governance structure, transportation reform has produced a hybrid entity, with features of both an independent authority and a state agency. Massachusetts lawmakers did this for several reasons. In a pure state agency, the Legislature would be in charge of tolls and fares, and the department budget would undergo the normal appropriations process. But a Deloitte and Touche analysis of possible governance scenarios found that “having fare and toll-raising decisions subject to approval of the Legislature will make it impractical to finance against those revenues.” Under an authority structure, which lawmakers put in place for revenue matters, those decisions are made by the board of directors, not the Legislature.
In addition, according to state law and administrative policies, Massachusetts can only absorb so much new debt. Transforming the transportation department into a pure state agency would have meant that lawmakers would have to sanction taking on more than $2 billion in debt from the Turnpike and $5 billion from the MBTA, pushing the state well beyond those limits. Though the Patrick administration believed that the state could have taken on more debt, lawmakers did not want to take the risk.
At least one potential problem is on the horizon. The staggered terms put in place for board members set up the system for the kind of confrontations that plagued the Turnpike Authority board between new governors and their old appointees — such as Romney appointee Mary Connaughton’s various squabbles with Patrick’s former secretary of transportation, James Aloisi, or the battles Cellucci appointees Christy Mihos and Jordan Levy had with Gov. Jane Swift over Turnpike toll increases.
If Patrick wins a second term, this problem won’t be apparent for a number of years (unless board members end up disagreeing with the governor over an issue, which poses a different set of problems). If he loses, a new governor won’t have a majority on the board until three years into his or her term. Stephen Silveira, the chairman of the transportation finance commission, favored having incoming governors appoint his or her own board. “It’s really going to be a big problem sooner rather than later,” he says of the staggered-term structure.
If MassDOT were a mature bureaucracy with established policies, procedures, and relatively stable finances, Patrick’s board appointees probably would have met with little resistance. However, because of the turmoil of the past two decades, there is a keen appetite for independent directors with transportation-related experience who won’t blindly march in lockstep with management. Elizabeth Levin and Andrew Whittle came closest to the types of directors the lawmakers envisioned: experts in transportation finance, planning and policy, and civil engineering.
But the other picks have sparked outrage, especially Janice Loux, the politically connected president of “Unite Here! Local 26,” the Greater Boston hospitality workers union, who was dubbed two years ago by Boston magazine one of the city’s the 50 most powerful people. Lee Matsueda, the T Riders Union’s program director, says Loux’s actions didn’t match her words when she served on the MBTA board for more than a decade. “We heard a lot of talk about her members who use public transit, [but] when it came to making sure those folks had the service they needed or dealing with the fare increases or speaking out and finding out legislative solutions, I felt like [the actions] were missing.”
Loux, Jenkins, and Whittle all declined to comment or failed to respond to multiple requests for interviews.
The Patrick administration has argued that picks from the prior boards offer institutional memory. Moreover, according to Jeffrey Mullan, who took over in November as Patrick’s new transportation secretary, two of the holdovers, Alvaro and John Jenkins, were only in their positions for short periods of time and were brought in as “change agents.” Bringing on people with 10, 20, or 30 years’ transportation experience was not the goal, he says. “When you have a mandate to change the status quo, you are not going to see some of the usual suspects in transportation, and that’s the balance we’ve struck here,” he says.
Start them up
Mullan and his senior staff handle the daily chores of implementing the massive reform effort. But unlike the structure of some public authorities, where the chief executive also serves as board chairman, Mullan has no seat on the transportation board. That lets him focus on the weighty task of managing the huge transportation bureaucracy. But the lack of a board seat clearly diminishes the power of the secretary. Ideally, the relationship is a collaborative one, but at the end of the day: Management proposes, the board disposes.
The board of directors is expected to focus on long-range policy and planning, such as strategies to generate new revenues and to fund rail expansion, as well as performance benchmarks. Though directors can delegate some powers to the secretary, they retain responsibility for charging and collecting tolls, developing long-term capital plans, approving budgets, and issuing bonds and refinancing debt for all the transportation departments.
So where to begin? The board needs to come to grips with the “traditional make or buy” decisions, according to Silveira. That is, the department must make a choice between what it can do on its own and the services it must contract out for. There are also big decisions regarding what can be done feasibly to enhance the system versus what needs to be done to simply maintain it.
Election year realities, however, could put a lid on any discussions with lawmakers about the need for new revenues. Fred Salvucci, who was transportation secretary under Gov. Michael Dukakis, believes the new transportation board shouldn’t accept that outcome.
“In the abstract, of course, no one wants to raise taxes,” he says. “The question is, in comparison to what? In comparison to a chunk of concrete on your lap? If they make the case graphic enough, they can get some movement.”
Thinking big about transportation is complicated by the need to shore up MBTA finances. With the Turnpike’s financial meltdown arrested for the short term (thanks to the UBS agreement) and the other divisions unlikely to cause major problems, the board’s first real test comes when the MBTA budget lands on their plates. One-time federal stimulus funds helped plug the fiscal 2010 deficit, but the T’s projected gap for fiscal 2011 is approaching $100 million.
Last fall, Patrick declared any MBTA fare increases or service cuts off the table until safety issues are addressed. So if the new board insists on cutting services or raising fares, those decisions may put the group at odds with Patrick and Mullan and force the Legislature to once again confront the issue of new revenues to prop up the T.
Surprisingly, neither Alvaro nor Levin believe that MBTA issues are paramount, nor do they think they should be. “Unless there is some catastrophe, I don’t see that any one department is going to overwhelm us and cause us to focus away from all the other issues we have to deal with,” says Alvaro.
“The board shouldn’t be engaged in the challenge of the minute,” says Levin, the only director who rides the T regularly, adding that the board has to keep tabs on Turnpike toll rates, funding for the highway program, and accelerated bridge repair projects.
Yet, with the MBTA budget due this spring, the board members have to figure out how to make it work. And here’s where getting off on the wrong foot with lawmakers may come back to haunt them. “The biggest problem with having a bad working relationship between the transportation leaders in the Legislature and the T is that [legislators] are not going to be inclined to provide any additional resources to the T, possibly even if the T has implemented all of the reforms,” says Stephanie Pollack, associate director of the Dukakis Center for Urban and Regional Policy at Northeastern University.
Swimming in contracts
Though big-picture solutions are what everyone is looking for, what often dominates the board’s work is the discussion of detailed contracts, and there are plenty of them. If the board is going to consider other pressing issues in its portfolio, it has to free up time. So the directors voted unanimously to review only major highway, Registry of Motor Vehicles, and aeronautics contracts exceeding $25 million — as well as “change orders” exceeding $5 million for work not outlined in an original contract. At the MBTA, however, the general manager can only approve contracts up to $500,000, so the board must sign off on most T contracts.
From January to October of last year, the now-disbanded MBTA board considered almost 100 financial agreements, discussions that ate up the greater part of its two-hour meetings. “Why on the highway side [staff members] can make $25 million decisions and on the transit side they can only make $500,000 decisions has never been explained to me,” says Silveira, the transportation finance commission chairman.
Mullan says the $500,000 limit is “historical” and may increase after some study so the board can concentrate on major transit concerns. “I don’t think the board is interested in spending a lot of time on relatively minor activities, small dollar contracts,” he says. The downside is a loss of transparency, as members of the public won’t be able to appear before the board to raise issues about medium-sized contracts for the smaller projects that get done in-house.
Meanwhile, the board could work more efficiently on multimillion dollar deals if the department supplied more details about them. Heated discussions regularly take place at board meetings about the inadequacy of background materials provided by staff members. At a December board meeting, members cited this in voicing misgivings about three separate $500,000 MBTA engineering services contracts. Loux complained that she’d been asking for better information “for years.” Alvaro cut to the chase. “The financial impacts we get on every single project are almost useless,” he said. Despite their objections, the board approved the contracts.
Striking a balance
To satisfy lawmakers and the public that old ways of doing business are finished once and for all, the board has to hold MassDOT accountable. It’s a delicate balance. If the department provides insufficient data and the board members approve contracts anyway, they’ll be perceived as rubber stamps rather than overseers. If they drill down into the bureaucracy to get answers, they risk being labeled micro-managers by lawmakers like Baddour, who want them to focus on solving key problems and stay out of day-to-day operations.
There are cautionary tales everywhere. At the former Turnpike Authority it was difficult for anyone, including Turnpike board members, to obtain information. James Kerasiotes, the Turnpike Authority executive director in the late 1990s, was especially secretive. Kerasiotes ultimately resigned in the wake of a federal audit that found he hid a cost overrun of more than $1 billion.
The board has to ask the right questions and not take management’s views at face value, since managers are going to do what they need to do to get a job done, says Connaughton, the former Turnpike board member, who is now a Republican candidate for state auditor. “This new board has to be, or should be, extremely skeptical of what comes before it and approach it from the public’s perspective rather than management’s perspective,” she says.
In the end, the job may be simply too big for a five member volunteer board with significant day jobs. Though the Senate favored an 11-member board, the smaller number prevailed because of concerns about factions forming in a larger group. Alvaro is surprised that so many people are skeptical about the panel. “Do I think we have the firepower to take on these issues?” he asks. “Absolutely.”
Even so, the biggest problem for the board is the tremendous amount of information they must master in wide variety of areas where management and staff currently have the upper hand. Of the MassDOT board members, Alvaro has the best grasp of the T’s financial problems, but he says he is still “on a learning curve” with respect to the other divisions as well solutions to the system’s financial troubles. At a November board meeting, Whittle said he’s trying to “catch up” on MBTA issues. During a discussion at one recent meeting about the wisdom of $17 million in improvements to the Fairmount commuter rail line in the current fiscal climate, Mullan patiently had to explain that the project was a Central Artery mitigation requirement, so there would be serious legal consequences with not moving forward with it.
The department plans a retreat for board members to get them up to speed on the vast portfolio they now oversee. Transportation officials also are trying to familiarize board members with agencies they supervise outside Greater Boston like the Worcester Regional Transit Authority, whose administrator gave an overview of the agency at a recent board meeting.
Initially, the state auditor will also provide some additional eyes and ears. The auditor’s office is in the process of conducting close-out audits of all the former stand-alone agencies and authorities that have been folded into MassDOT. Meanwhile, Patrick established a 20-member advisory council headed by the Massachusetts Business Roundtable’s Alan Macdonald, who served on the earlier transportation finance commission.
The board clearly needs extra support. “It is impossible for five members who are unpaid to give the level of scrutiny that the T board or the Turnpike board traditionally did,” says Salvucci. Of the country’s 10 largest transit agencies, the MBTA is now one of only two without a dedicated board of directors. (Metro Seattle’s mass transit agency is the other.)
The MassDOT board of directors has considerable leverage in the new transportation bureaucracy. Connaughton hopes that one or two of the new directors “really step up” as true public advocates who aren’t afraid to challenge management, when necessary. But she has her reservations. “I don’t know if that’s going to happen,” she says, “given that all the board members are appointed by the same official at this particular point in time, which is a such a critical point in time.”
Five people certainly cannot save the day. A lot of dust has been kicked up by the furor over the qualifications of the new board. But that controversy will fade to a dim memory if the MassDOT directors propose credible, and politically feasible, remedies for an ailing transportation network in need of more than just a tune-up.