Did The MTA Board Fully Review NY Crossings Contracts — Including $100M Decorative “Gateway” Towers — Before Approving Them?

Jeffrey​ ​Pearlman

Director,​ ​New​ ​York​ ​State​ ​Authorities​ ​Budget​ ​Office
240​ ​State​ ​Street​ ​#2076
Albany,​ ​NY​ ​12220

September​ ​7,​ ​2017

Re:​ ​​Complaint​ ​alleging​ ​that​ ​the​ ​Metropolitan​ ​Transportation​ ​Authority​ ​Board​ ​of Directors​ ​did​ ​not​ ​meet​ ​its​ ​fiduciary​ ​duty​ ​when​ ​it​ ​approved​ ​components​ ​of​ ​the​ ​New​ ​York Crossings​ ​Initiative,​ ​including​ ​$42m​ ​in​ ​decorative​ ​towers​ ​at​ ​bridge​ ​and​ ​tunnel entrances,​ ​in​ ​accordance​ ​with​ ​Public​ ​Authorities​ ​Law​.

Dear​ ​Director​ ​Pearlman:

Reinvent​ ​Albany​ ​writes​ ​to​ ​request​ ​that​ ​the​ ​Authorities​ ​Budget​ ​Office​ ​determine​ ​whether board​ ​members​ ​of​ ​the​ ​Metropolitan​ ​Transit​ ​Authority​ ​(MTA)​ ​have​ ​fulfilled​ ​their fiduciary​ ​duty​ ​by​ ​undertaking​ ​adequate​ ​oversight​ ​of​ ​activities​ ​and​ ​expenditures​ ​for Governor​ ​Andrew​ ​Cuomo’s​ ​ongoing​ ​New​ ​York​ ​Crossings​ ​Initiative​ ​on​ ​the​ ​MTA’s​ ​bridges and​ ​tunnels.

Specifically,​ ​we​ ​ask​ ​the​ ​ABO​ ​to​ ​investigate​ ​the​ ​following​ ​five​ ​matters​ ​related​ ​to​ ​the​ ​MTA board’s​ ​fiduciary​ ​duty:

1. Determine​ ​whether​ ​the​ ​MTA​ ​board​ ​​fully​ ​examined​ ​and​ ​understood​ ​what​ ​it​ ​was funding​ ​before​ ​approving​ ​contract​ ​amendments​ ​for​ ​approximately​ ​$42.8​ ​million for​ ​decorative​ ​towers​ ​at​ ​bridge​ ​and​ ​tunnel​ ​entrances.​ ​​​Determine​ ​whether​ ​these contracts​ ​​fulfill​ ​the​ ​MTA’s​ ​mission​ ​or​ ​key​ ​performance​ ​indicators,​ ​or​ ​are​ ​part​ ​of any​ ​planned​ ​historical​ ​restoration.
2. Review​ ​whether​ ​large​ ​NY​ ​Crossings​ ​or​ ​MTA​ ​Bridge​ ​and​ ​Tunnel​ ​expenditures were​ ​lumped​ ​into​ ​other​ ​expenditures​ ​and​ ​approved​ ​by​ ​the​ ​MTA​ ​board​ ​without​ ​a project​ ​budget,​ ​spending​ ​cap,​ ​or​ ​task​ ​or​ ​project​ ​ID.
3. Examine​ ​whether​ ​the​ ​MTA​ ​board​ ​fulfilled​ ​its​ ​fiduciary​ ​duty​ ​by​ ​approving​ ​projects in​ ​a​ ​piecemeal​ ​fashion​ ​via​ ​a​ ​series​ ​of​ ​contract​ ​amendments​ ​without​ ​having​ ​a project​ ​budget​ ​that​ ​effectively​ ​establishes​ ​a​ ​spending​ ​limit​ ​for​ ​the​ ​project,​ ​as appears​ ​to​ ​be​ ​the​ ​case​ ​with​ ​the​ ​decorative​ ​towers.

4. Investigate​ ​whether​ ​the​ ​MTA​ ​board​ ​and​ ​staff​ ​approve​ ​contracts​ ​related​ ​to​ ​NY Crossings​ ​in​ ​a​ ​manner​ ​which​ ​is​ ​consistent​ ​with​ ​the​ ​MTA’s​ ​procurement​ ​rules. The​ ​Board​ ​may​ ​have​ ​violated​ ​MTA​ ​procurement​ ​rules​ ​by​ ​ignoring​ ​Article​ ​III​ ​part B5​ ​of​ ​the​ ​rules,​ ​which​ ​requires​ ​a​ ​resolution​ ​by​ ​the​ ​Board​ ​when​ ​a​ ​Rider​ ​is​ ​made​ ​to an​ ​existing​ ​General​ ​Contract,​ ​and​ ​a​ ​determination​ ​by​ ​the​ ​Board​ ​that​ ​includes​ ​the reasons​ ​why​ ​it​ ​is​ ​in​ ​the​ ​public​ ​interest​ ​to​ ​amend​ ​an​ ​existing​ ​contract​ ​instead​ ​of securing​ ​a​ ​service​ ​or​ ​product​ ​through​ ​a​ ​competitive​ ​process.
5. Determine​ ​whether​ ​the​ ​MTA​ ​contract​ ​amendments/riders​ ​are​ ​“competitively” awarded.​ ​​​The​ ​MTA’s​ ​own​ ​procurement​ ​rules​ ​recognize​ ​that​ ​contract amendments/riders​ ​are​ ​not​ ​considered​ ​competitive​ ​awards.​ ​In​ ​the​ ​attached spreadsheet,​ ​we​ ​document​ ​eight​ ​contract​ ​amendments​ ​that​ ​include​ ​tasks​ ​related to​ ​fabricating​ ​and​ ​installing​ ​the​ ​decorative​ ​towers​ ​that​ ​are​ ​completely​ ​unrelated to​ ​the​ ​deliverables​ ​in​ ​the​ ​original​ ​contract.​ ​All​ ​eight​ ​of​ ​those​ ​amendments​ ​appear to​ ​be​ ​misleadingly​ ​listed​ ​by​ ​the​ ​MTA​ ​as​ ​competitively​ ​bid.

New​ ​York​ ​Crossings​ ​was​ ​announced​ ​by​ ​Governor​ ​Cuomo​ ​on​ ​October​ ​5,​ ​2016​ ​and​ ​is​ ​the umbrella​ ​name​ ​for​ ​a​ ​wide​ ​range​ ​of​ ​capital​ ​expenditures​ ​on​ ​MTA​ ​Bridges​ ​and​ ​Tunnels centered​ ​around​ ​Open​ ​Road​ ​Tolling,​ ​but​ ​also​ ​including​ ​seismic​ ​and​ ​flood​ ​measures​ ​and decorative​ ​elements​ ​including​ ​Harbor​ ​Lights​ ​and​ ​art​ ​deco​ ​towers​ ​at​ ​bridge​ ​and​ ​tunnel entrances​ ​(“Towers.”)​ ​Based​ ​on​ ​MTA​ ​documents,​ ​we​ ​estimate​ ​that​ ​the​ ​total​ ​combined cost​ ​of​ ​the​ ​components​ ​of​ ​NY​ ​Crossings​ ​will​ ​exceed​ ​over​ ​a​ ​billion​ ​dollars​ ​in​ ​public​ ​funds.

According​ ​to​ ​press​ ​accounts,​ ​public​ ​records,​ ​and​ ​public​ ​statements​ ​by​ ​MTA​ ​board members,​ ​Governor​ ​Cuomo​ ​proposed​ ​the​ ​New​ ​York​ ​Crossings​ ​initiative​ ​with​ ​little​ ​or​ ​no review​ ​or​ ​comment​ ​by​ ​the​ ​MTA​ ​board.​ ​Based​ ​on​ ​our​ ​review​ ​of​ ​the​ ​minutes​ ​of​ ​MTA​ ​full board​ ​and​ ​committee​ ​meetings​ ​since​ ​the​ ​governor’s​ ​October​ ​5,​ ​2016​ ​announcement,​ ​we see​ ​no​ ​evidence​ ​that​ ​the​ ​MTA​ ​board​ ​reviewed​ ​or​ ​approved​ ​an​ ​overall​ ​budget​ ​for​ ​the​ ​New York​ ​Crossings​ ​initiative,​ ​or​ ​reviewed​ ​or​ ​approved​ ​budgets,​ ​or​ ​expenditure​ ​caps,​ ​for​ ​any of​ ​its​ ​component​ ​elements.​ ​Additionally,​ ​we​ ​see​ ​no​ ​evidence​ ​that​ ​the​ ​MTA​ ​board​ ​or​ ​staff clearly​ ​defined​ ​the​ ​component​ ​elements​ ​of​ ​NY​ ​Crossings,​ ​or​ ​large​ ​sub-components,​ ​and assigned​ ​them​ ​any​ ​form​ ​of​ ​unique​ ​identifier.

Despite​ ​not​ ​having​ ​individually​ ​identified​ ​the​ ​components​ ​of​ ​NY​ ​Crossings​ ​or​ ​approved budgets​ ​for​ ​them,​ ​the​ ​MTA​ ​board​ ​has​ ​approved​ ​hundreds​ ​of​ ​millions​ ​of​ ​dollars​ ​worth​ ​of contracts​ ​for​ ​NY​ ​Crossings​ ​expenditures.​ ​Among​ ​these​ ​expenditures,​ ​the​ ​MTA​ ​board approved​ ​eight​ ​separate​ ​contract​ ​amendments​ ​worth​ ​$42.8​ ​million​ ​at​ ​three​ ​board meetings​ ​in​ ​April,​ ​May​ ​and​ ​June​ ​2017​ ​to​ ​fabricate​ ​and​ ​install​ ​decorative​ ​Towers​ ​at​ ​the entrances​ ​to​ ​all​ ​MTA​ ​bridges​ ​and​ ​tunnels.​ ​​​According​ ​to​ ​page​ ​115​ ​of​ ​the​ ​April​ ​24,​ ​2017 minutes​ ​of​ ​the​ ​MTA​ ​Bridge​ ​and​ ​Tunnel​ ​Committee,​ ​the​ ​“​Towers​ ​will​ ​be​ ​installed​ ​at​ ​all nine​ ​B&T​ ​facilities​ ​in​ ​order​ ​to​ ​create​ ​a​ ​unifying​ ​theme​ ​for​ ​the​ ​various​ ​bridges​ ​and tunnels.​”

Yet,​ ​despite​ ​an​ ​aggregate​ ​cost​ ​of​ ​$42.8​ ​million,​ ​nowhere​ ​are​ ​the​ ​Towers​ ​assigned​ ​a unique​ ​identifier​ ​by​ ​the​ ​MTA​ ​and​ ​designated​ ​as​ ​a​ ​“Project”​ ​or​ ​“Task”​ ​for​ ​budgeting​ ​and contracting​ ​purposes.​ ​This​ ​is​ ​important​ ​because​ ​it​ ​means​ ​the​ ​Towers​ ​essentially​ ​do​ ​not exist​ ​in​ ​MTA​ ​Capital​ ​Tracking​ ​documents.​ ​Not​ ​assigning​ ​the​ ​Towers​ ​a​ ​project​ ​ID​ ​is​ ​very odd​ ​because​ ​the​ ​Towers​ ​cost​ ​far​ ​more​ ​than​ ​the​ ​average​ ​MTA​ ​Bridge​ ​and​ ​Tunnel “Project”​ ​or​ ​“Task.”

Based​ ​on​ ​the​ ​tables​ ​included​ ​in​ ​the​ ​​MTA​ ​Bridge​ ​and​ ​Tunnel​ ​Capital​ ​Projects​ ​Milestones in​ ​the​ ​January​ ​2017​ ​committee​ ​minutes​ ​(p.54)​ ​​​the​ ​average​ ​Bridge​ ​and​ ​Tunnel​ ​“Project” costs​ ​$18​ ​million​ ​and​ ​the​ ​average​ ​“Task”​ ​costs​ ​about​ ​$2.4​ ​million.​ ​(Tasks​ ​are​ ​elements of​ ​Projects.)​ ​​​Thus,​ ​the​ ​expenditures​ ​the​ ​MTA​ ​board​ ​approved​ ​for​ ​the​ ​Towers​ ​cost​ ​more than​ ​three​ ​times​ ​what​ ​the​ ​average​ ​project​ ​cost​ ​and​ ​close​ ​to​ ​eighteen​ ​times​ ​what​ ​the average​ ​“Task”​ ​cost.

It​ ​is​ ​also​ ​odd​ ​that​ ​the​ ​decorative​ ​Towers​ ​were​ ​not​ ​flagged​ ​by​ ​the​ ​staff​ ​or​ ​board​ ​for special​ ​attention​ ​and​ ​review.​ ​The​ ​Towers​ ​do​ ​not​ ​help​ ​fulfill​ ​the​ ​MTA’s​ ​mission​ ​or​ ​key performance​ ​indicators,​ ​and​ ​are​ ​not​ ​part​ ​of​ ​any​ ​planned​ ​historical​ ​restoration.​ ​Yet,​ ​the $42.8​ ​million​ ​spent​ ​to​ ​date​ ​on​ ​the​ ​Towers​ ​was​ ​approved​ ​without​ ​any​ ​presentation​ ​from the​ ​MTA​ ​staff​ ​to​ ​the​ ​board,​ ​without​ ​any​ ​discussion​ ​by​ ​the​ ​board​ ​and​ ​without​ ​a​ ​budget line​ ​item,​ ​spending​ ​limit​ ​or​ ​a​ ​competitive​ ​bidding​ ​process.

In​ ​the​ ​Authorities​ ​Budget​ ​Office’s​ ​March​ ​2014​ ​review​ ​of​ ​a​ ​complaint​ ​against​ ​the​ ​Town​ ​of Montgomery​ ​IDA,​ ​the​ ​ABO​ ​wrote​ ​that​ ​the​ ​“failure​ ​to​ ​fulfill​ ​fiduciary​ ​duties​ ​can​ ​include: “not​ ​examining​ ​issues​ ​fully.”​ ​​​In​ ​the​ ​case​ ​of​ ​the​ ​decorative​ ​Towers,​ ​MTA​ ​board​ ​minutes suggest​ ​the​ ​MTA​ ​board​ ​did​ ​not​ ​“examine”​ ​them,​ ​does​ ​not​ ​know​ ​how​ ​much​ ​the​ ​“Towers” will​ ​ultimately​ ​cost,​ ​and​ ​may​ ​not​ ​even​ ​know​ ​what​ ​the​ ​Towers​ ​are.

The​ ​Towers​ ​are​ ​not​ ​among​ ​the​ ​largest​ ​NY​ ​Crossings​ ​expenditures,​ ​but​ ​they​ ​are​ ​a documented​ ​example​ ​of​ ​the​ ​MTA​ ​board​ ​approving​ ​piecemeal​ ​expenditures​ ​worth​ ​tens​ ​of millions​ ​of​ ​dollars​ ​that​ ​are​ ​subsumed​ ​in​ ​larger​ ​contracts​ ​for​ ​unrelated​ ​tasks,​ ​without competitive​ ​bidding,​ ​without​ ​explanation​ ​and​ ​without​ ​any​ ​approved​ ​project​ ​budget.​ ​The Towers​ ​contracts​ ​also​ ​suggest​ ​that​ ​the​ ​MTA​ ​board​ ​is​ ​not​ ​following​ ​the​ ​MTA’s​ ​own procurement​ ​rules,​ ​which​ ​require​ ​an​ ​explanation​ ​of​ ​why​ ​it​ ​is​ ​in​ ​the​ ​public​ ​interest​ ​to amend​ ​an​ ​existing​ ​contract​ ​rather​ ​than​ ​undertaking​ ​a​ ​competitive​ ​bidding​ ​process.

Thank​ ​you​ ​for​ ​acting​ ​on​ ​our​ ​concerns.​ ​We​ ​are​ ​happy​ ​to​ ​further​ ​explain​ ​our​ ​concerns​ ​and provide​ ​additional​ ​information​ ​via​ ​phone​ ​or​ ​email.

Thank​ ​you,

John​ ​Kaehny
Executive​ ​Director