P.O. BOX 942849
SACRAMENTO, CA 94249-0115

California Legislature

August 15, 2007

The Honorable Nell Soto, Chair
Joint Legislative Audit Committee
1020 N Street, Room 107
Sacramento, CA 95814

Dear Assemblywoman Soto,

We write to respectfully request the Joint Legislative Audit Committee to authorize an audit of the Santa Clara Valley Transportation Authority (VTA). The audit should focus on the areas of governance structure, strategic planning, and financial viability.

The VTA is an independent special district responsible for bus and light rail service, congestion management, specific highway improvement projects, and countywide transportation planning. The VTA partners with systems for bus and rail service between Santa Clara County and the counties of Alameda, Santa Cruz, San Mateo and San Francisco.

The VTA provides critical transportation services to more than 1.7 million constituents and is responsible for an annual budget of $731 million (FY 2008 Recommended Operating & Capital Budget).

Currently, the VTA faces significant financial challenges. In May 2004, the Santa Clara County Civil Grand Jury raised numerous issues regarding short-term shortfalls in revenues. The Grand Jury also cited high costs for services rendered and raised serious concerns about the VTA's ability to build and operate a BART extension to San Jose.

A more recent report by a consultant commissioned by the VTA raised additional concerns regarding the agency's governance structure and financial capacity. Further, the report brought to light issues regarding the capital projects undertaken by the VTA; their funding as well as focus.

Since this report was released in March 2007, the VTA reports making progress in implementing the consultant's recommendations, emphasizing the areas of organizational structure and financial management. They cite progress in putting in place a new organizational structure to support improvements in financial outlook and operating efficiencies; adoption of a biennial budget that maintains an operating reserve; implementation of cash management procedural improvements and restructuring of outstanding debt to reduce risk and achieve cost savings. Concurrent with these changes the agency's credit rating has been upgraded by two national credit rating services.

To support further progress and in light of the seriousness of issues facing the agency, we believe that an audit and evaluation by the State Auditor is necessary to bring clarity and recommend needed action. We request that the audit focus on the following areas:

Governance Structure

Review the VTA's governance structure to determine whether roles and responsibilities are clearly defined and communicated. Is it comparable to other transportation authorities, and is it effective for fulfilling VTA's responsibilities? The audit should include an evaluation of the effectiveness of the current statutes and practices governing board member selection and tenure.


Review and assess the VTA's strategic planning and project planning efforts. This should include determining how the VTA (and its Board) sets goals, objectives and priorities; and how they ensure goals are achieved and performance is measured. The State Auditor should review projects approved over the last two years, including the BART extension, to determine what analyses were prepared and reviewed in approving the projects and if the analyses considered all relevant factors - costs, benefits, and alternatives. The audit should also compare actual costs to projected costs and determine if the goals were achieved.

Financial Viability

Review the financial reporting structure to determine if there is adequate review of quarterly reports to ensure forecasts such as revenues, expenditures, and ridership are on track and determine what action is taken when actuals deviate from forecasts. Trend the revenues, expenditures, and ridership for the last three years---comparing actual to forecast--and determine reasons for fluctuations. Review the VTA's financial plans for the next 5 and 10 years to determine whether they considered relevant factors.

Fiscal Oversight

Review Board and management oversight and capacity to exercise prudent and appropriate oversight over the agency's funds. Do the board and management monitor VTA's performance as a transit operator on a regular basis and is this review adequate to make fiscal decisions?

Thank you for your attention to this request.


SALLY J. LIEBER, 22nd District Assembly Speaker pro Tempore

ELAINE ALQUIST, 13th District Senator

JIM BEALL, Jr., 24th District Assemblymember