Money laundering at SamTrans from the BART

In the 2007 Metropolitan Transportation Commission (MTC)-orchestrated divorce agreement between feuding BART and its jilting partner San Mateo County Transportation District (SamTrans), the District signed a bizarre agreement to get out from under operating expenses for BART to the SFO Airport.

It looked good for SamTrans to be relieved of future BART operating expenses that had eaten a $40 million hole in its budget. But SamTrans had to forgo a previous $72 million loan to BART for earlier cashflow problems from increased construction costs. And SamTrans essentially signed over a State Transit Assistance (STA) entitlement beginning in Fiscal 2008 worth $32 million in what the Agreement called a capital "swap." It doesn't sound legal but here's how it works (quoting the document):

"SamTrans will identify capital projects in an amount to be no less than $16 million in Fiscal Year 2008 and Fiscal Year 2009, and shall "swap" an equal amount of SamTrans funds to BART..." This is a transit capital "swap" where SamTrans is given state funds for a capital project (approved of course by the MTC) and then swaps those funds for laundered ones from SamTrans' coffers to give BART the now-cleaned money. Further, the parties agreed to work cooperatively (conspire together) to identify the projects. Of course, SamTrans will have to make up the difference by funding the paid-for state-approved projects internally.

It sounds like Hollywood fiction but it is right there in Section 2a of the three-party Agreement (MTC, BART, SamTrans) attached as Exhibit A. The MTC brokered this deal and as written and signed, planned to be a co-conspirator by approving the state funds to SamTrans. All this in an apparent effort to hush SamTrans about the lower ridership and poor economic performance of the SFO extension that in turn might jeopardize the Warm Springs and San Jose BART extensions.

So under the terms of this bizarre agreement, SamTrans loses another $72 million in loans to BART and a further $32 million in transit "swaps." But it's not over yet. SamTrans also gives up 2% of voter-approved sales tax income to BART for 25 years (around $1.374 million a year and it goes up with inflation) and $801,024 annually from funds the MTC would normally supply to SamTrans until the $145 million owed BART under the original agreement is paid (that should take about 180 years unless there is an operating surplus). Oh, and there's another $200,000 for a bike path that SamTrans pays, but with these numbers who would notice?

SamTrans propelled itself into the premier Peninsula transit agency by stepping to the plate in 1991 and finding the money to buy the CalTrain corridor from the Southern Pacific Railroad in 1991. They crowed in their annual report how they had grown from a county bus line into a major regional operator, with the operating responsibility for CalTrain (and to their credit they have operated CalTrain extremely well).

But this set the stage for them to be lured into a lead position in BART to SFO and judging how it has turned out, they were in way over their heads.