Bad budget management and poor use of public money cause financial mess at Island Transit

July 30, 2014

New information from Island Transit shows a series of poor financial decisions made by local managers are the source of the district’s trouble, not lack of state money. Island Transit provides bus service and vanpools throughout Whidbey and Camano Islands, with routes connecting Skagit and Snohomish Counties. The agency is fully subsidized by taxpayers and doesn’t collect fares from passengers. Earlier this year, Island Transit officials announced plans to cut the Camano Island to Everett bus route, citing a lack of state tax money as the primary reason. Island Transit’s Executive Director Martha Rose called current levels of state funding, “shameful.” Yet new information reveals budget mismanagement and poor decisions may be the real reason bus service will be slashed.

According to an op-ed by State Representative Dave Hayes (R-Camano Island),the Camano to Everett route started when Island Transit officials successfully lobbied Olympia for “start-up funds” from a $1.9 million state grant in 2006. The grant required “other funding sources must ultimately replace” the temporary grant money. Yet Island Transit officials continued to apply and receive temporary grants for years.  Nearly $7 million in start-up grants and “legislative bailouts” kept the Camano to Everett route running, despite promises from Island Transit officials of their intent to secure local funding to maintain service.

Even worse, at the same time Island Transit officials are cutting bus service, the transit agency moved into a brand new $22 million office and maintenance building (equipped with an employee gym) without the funds to pay for it.

The Whidbey News-Times reports years of bad financial practices have drained the agency’s reserves intended to pay the $4.4 million in local funds required for the new building. According to the article, Island Transit hasn’t been producing monthly cash flow statements. These critically important statements for sound financial management have not been produced for years, during which time Island Transit’s Financial Director was selling off reserve investments to stabilize their budget.

Island Transit leaders have failed to perform their duty to run this agency responsibly. Rose was “blindsided” when she heard the news of financial mismanagement.  The article says the Island Transit Board also failed to review the financial statements. Both Rose and the Board assumed the agency had sound financial footing. However, Island Transit’s annual reporting to the Washington State Department of Transportation clearly show reserve funds being spent.

Additionally, yearly cash flow statements sent to the State Auditor’s Office also show the sale of investments outpacing the purchase of new investments, netting the agency millions of dollars in cash.

Island Transit’s former Financial Director said the financial mess could have been averted with monthly tweaks to bus service that would have appeared “invisible” to riders.

Bad financial decisions now require Island Transit to cut routes, lay off employees and even borrow money. Island Transit must take on $2.3 million in debt just to pay off the remaining balance on the new office building and to pay for bus operations.

More tax money from the state is not the solution to fix the financial mess at Island Transit. Better budget management and financial practices could have reduced the pain felt by communities across Island County. Many residents are rightfully upset their neighborhood bus service will be reduced or eliminated because of poor management of public money and a new “Taj Mahal” office building, as one commenter put it. Instead of trying to secure more money from state taxpayers, Island Transit officials should better manage public tax dollars to rebuild the public trust and restore reliable and efficient bus service.

Comments

I find it incredible that

I find it incredible that Rose & the entire Board are still employed at IT, while people are being laid off and routes cancelled. It is obvious to everyone that over the years the issues should have been spotted. Rose knew that the monthly cash flow statements would have shown there was an ongoing problem. The Board knew that these monthly cash flow statements would have shown the issues as well.

Is there a recall for the Board & when will Rose be fired? This is mismanagement of taxpayer funds. So far I see Rose & the Board more interested in pointing their fingers else where. Meanwhile no more Saturday routes and employees being fired.

When will we see heads roll?