GVRD - Council of Councils Meeting
September 8, 2001
Address by the Auditor General
Wayne K. Strelioff, CA
Good morning and thank you for providing me with this opportunity to speak to you about our recent examination and report on Transportation in Greater Vancouver. As you know, our work focused on Agreements Between the Province and TransLink, and on the Governance Structure.
I think your meeting topic this morning fits well with the issues we examined. Questions of service levels and funding sources need to be properly addressed if the planned expansion of transportation service is to take place. I hope our conclusions, findings and recommendations will help in your deliberations.
I know the choices facing you are complex. In addition, you have the difficult responsibility of explaining your choices to the public and gaining public support for your decisions on the level of service needed and on the best way to pay for those services. I wish you all of the best in carrying out your responsibility.
I will start with a brief overview of what is in our report, covering our main findings and recommendations, and thereafter I will be happy to answer any questions.
Our review started last April with the provincial government asking us to examine certain issues arising since TransLink was set up. Our first step was to discuss the request with key stakeholders to determine whether the request needed our input.
We decided to carryout the review for two reasons. First, the transfer of responsibility for regional transportation services from the provincial government to TransLink involves significant public resources and public services that affect many BC citizens.
Second, provincial government officials and other key stakeholders including officials of TransLink expressed concern to us that the transfer of responsibility was not unfolding as expected.
Following our consultations, we decided to focus on three questions.
The first question is whether service and financial expectations for regional transit are being met.
The second question is whether rapid transit expansion in Greater Vancouver is occurring as planned. This question has three parts:
The third question is whether the governance structure now in place promotes good governance, accountability and decision-making.
With me this morning is Endre Dolhai. Endre led this examination. His project team included several very knowledgeable, able and experienced professionals within my Office.
By the way, I became the Auditor General of British Columbia about 16 months ago. My appointment is for six years and is the result of a unanimous recommendation to the Legislative Assembly of an all-party standing committee. Prior to that, I was the Provincial Auditor or Auditor General of Saskatchewan for nearly ten years. In addition, I worked in Toronto, Victoria and Saskatoon. I am a chartered accountant.
I will now briefly review our conclusions, findings and recommendations.
Our conclusion on the first question is that TransLink’s service and financial expectations are not at this time being met, because TransLink has been unable to raise the extra revenue required to do so.
To efficiently collect the vehicle levy that TransLink chose as its preferred revenue source, TransLink needs the support of the provincial government, support the government initially gave but later rescinded. In response, TransLink has stopped its service growth and reduced its recently expanded service to avoid running a deficit — deficits are not allowed — and, the financial dilemmas faced by TransLink are real.
We recommend the province act on its commitment to help TransLink efficiently collect the revenue it needs to maintain and expand its service levels.
The answer to the second question is that the Rapid transit expansion in Greater Vancouver is occurring as planned.
Construction of the first stage of expansion — the Millennium line — is very close to schedule and budget, as are preparations for start-up of the first part of the line. Planning and other preparatory work for subsequent phases of the SkyTrain expansion are proceeding at a reasonable pace, and generally in accordance with the cost-sharing agreement.
However, the provincial government’s lack of support for the vehicle levy has hindered settlement of two issues concerning the SkyTrain expansion -- who should pay the start-up costs for the Millennium Line and - - who should operate and maintain the SkyTrain system.
The question of who should pay for the start-up costs has not yet been settled although the parties have agreed that the costs will be approximately $26 million. The provincial government has advanced $9.7 million to pay for the most immediate start-up activities so that debate over who will pay will not delay the opening of the first section of the Millennium line.
In an effort to resolve the issue of who should pay, the Province hired a consultant engineer to examine the costs and recommend an appropriate allocation. The consultant’s report sets out five start-up cost allocation principles that we think provide a reasonable basis for negotiation.
To resolve this issue we recommend that the Province and TransLink use the start-up cost allocation principles proposed by the consultant. If unable to reach timely agreement on the allocation of start-up costs, the arbitration provisions set out in the cost-sharing agreement should be used.
One issue that needs to be resolved is whether Bombardier should be contracted to operate and maintain the SkyTrain system.
In 1998, the provincial government agreed to negotiate a long-term contract with Bombardier Inc. to have that company operate and maintain the new SkyTrain systems being planned for Greater Vancouver.
Bombardier, in return, undertook to establish a research and manufacturing facility in Greater Vancouver and create at least 165 full-time jobs for five years.
If the parties did not enter into a contract by a certain date, Bombardier would have the right to sell its facility to the government at a price determined in accordance with the agreement.
The question of who will operate and maintain the SkyTrain system has not yet been settled. TransLink agreed to negotiate an operations and maintenance agreement with Bombardier so long as TransLink would not have to pay more than it would cost to perform the same service itself.
By mid 2000, it advised the Province that it had been unable to reach an agreement with Bombardier. TransLink has concluded that the cost of the Bombardier proposal would be $4.5 million per year higher than the cost of its subsidiary doing the work.
A consulting firm hired by the provincial government confirmed TransLink’s costs and pointed out that the Bombardier offer includes additional value to TransLink in the form of warranties and protection.
In our opinion, the onus lies on the Province to resolve this issue. We recommend the Province analyze its options of dealing with its commitment to offer Bombardier a SkyTrain operating and maintenance contract, and work with TransLink to reach agreement on the option that offers best value for money to all taxpayers.
Notwithstanding these disputes, it is likely that the Millennium line will go into operation close to schedule and budget. Progress on the proposed Coquitlam and Western extensions is continuing, and all parties appear to be proceeding in accordance with the intent of the agreements.
The last question we looked at is whether the current governance structure promotes good governance, accountability and decision-making. We conclude that the governance structure needs a number of improvements.
The need for adjustments to the governance structure should not be surprising. TransLink started its operations little more than two years ago; its governance structure is complex; and the issues it deals with are not always easy to resolve.
Many of our recommendations focus on governance matters. In part this is because our recommendations are aimed at three bodies: GVRD, TransLink and the provincial government. The legislation basically sets up a shared governance structure, but one where the TransLink board has the primary responsibility for setting strategic direction and for seeing that it is implemented. In such an environment, it’s not surprising there are opportunities for improvement.
I hope all three bodies will work together to ensure that the problems identified in my report are addressed in an integrated and agreed-upon manner.
I won’t go into the recommendations in depth. Instead, I’d like to look forward – how to progress from here, by looking at several recommendations that I think all or you have a direct interest in.
As municipal politicians you will want TransLink to perform effectively. It’s from your membership that the GVRD board is formed and it is the GVRD board that appoints the majority of TransLink’s board members. That’s a significant role and responsibility.
We think there should be a clearly defined process for doing that, one that ensures TransLink’s board needs are met in the best way possible.
We make recommendations surrounding that role. Our recommendations are based on the view that fundamental principles of good governance should be adhered to in establishing the board and in setting out board policies and procedures. This is something that GVRD and TransLink need to work on together.
We also recommend the province eliminate the need for provincially appointed board members. We think there is no need for the province to be represented on the board. The province’s legitimate interests can be met through an appropriate mechanism that allows the Province to participate in transportation planning and information sharing.
Our recommendation is based on the premise that the provincial government is transferring responsibility for regional transportation to regional government.
We do think TransLink’s board membership should be drawn from a wider pool of people. Thus, we recommend that legislation be amended to allow non-elected members onto the board.
I am comfortable with this recommendation for several reasons.
First, the GVRD has significant veto powers over strategic direction and financing issues. For example, the strategic plan needs GVRD approval and TransLink has no sole taxing powers but must rely on GVRD.
As well, it is clear that, occasionally, there are difficulties about which hat a board member wears and whom he or she represents.
In addition, It is difficult for the GVRD board to provide an oversight role when membership overlaps to the degree that it does now.
My report also looks at other accountability matters and I’d like to end by commenting on some of my observations. Our findings in this area can be viewed as contradictory. On the one hand, we observed that TransLink and GVRD operate in an open and public manner, more so than the provincial government agencies I typically examine.
I applaud this positive feature of good accountability.
On the other hand, the lack of an annual report is a matter that needs to be addressed. TransLink is legislated to produce one and is in the process of doing so. There is no such requirement for the GVRD. I would urge the GVRD to consider an annual report that compares performance against plans in a very clear way. Similarly, holding an annual public meeting to focus on annual performance would enhance accountability to taxpayers.
In conclusion, you face significant challenges. You must address many competing demands:
Reconciling the service levels needed with the public’s willingness to pay and, determining which the available revenue sources should be used is an immense challenge.
However, I think the time is right to make the changes required. TransLink has a new CEO and the province has a new government. Both can look forward to rebuilding the trust and cooperation needed to make regional transportation work and to overcome some of the past difficulties.
I wish you well in your deliberations today and in the future.
I will now be happy to answer any questions.
