An unprecedented state performance audit of TriMet agrees with the regional transit agency about a major source of its financial problem: unfunded employee health care costs and TRIBUNE FILE PHOTO - A state audit confirms TriMet's employee benefit problems but says rail maintenance is lagging, too.

“The most serious and looming concerns are the health benefit costs of employees and the $852 million unfunded liability to pay these benefits for current and future retirees, as well as their beneficiaries. TriMet also needs to fund an additional $274 million liability to pay retirees in its defined benefit plans, now closed to new hires,” according to the audit, which was released Jan. 29 by the Oregon Secretary of State’s office.

Among other major findings, the audit reported that on-time maintenance of the MAX light rail system has slipped in recent years. Although other maintenance tasks have only fallen slightly, the audit found that “on-time completion of preventive maintenance for tracks and signals appears to have decreased significantly since (fiscal year) 2004,” according to an excerpt. “Over the last 10 years, the percentage of track maintenance completed on time has dropped from about 92 percent to about 53 percent, and on-time signals maintenance declined from about 100 percent to about 72 percent.”

The audit also faulted TriMet management for not communicating more effectively with the union representing most of its employees, Amalgamated Transit Union 757, or the agency’s rank-and-file employees. It noted that a Joint Labor Relations Committee required in the union contract was not meeting.

The audit did not criticize TriMet on some of the issues that generated headlines in recent years, however. Among other things, it did not find that the agency’s financial problems were caused by its extensive involvement in regional MAX light rail projects. Nor did the audit mention the salary increases quietly given to managers while the agency was cutting service.

In fact, the audit found the earnings of general and administrative employees have fallen 7 percent since 2006, while the earnings of maintenance workers have grown 7 percent and the earnings of transportation workers have increased 10 percent.

Auditors repeatedly noted that TriMet and ATU 757 have been at loggerheads on their labor contract for years. It reported the two sides differ strongly about causes of the financial problems facing TriMet and their potential solutions.

“Since the contract expired in 2009, TriMet executive management has stated that reducing employee and retiree health care benefits is necessary to improve the district’s financial stability. Union leadership questions TriMet’s financial management,” read a passage from the audit.

The audit did not take sides in the dispute, but noted that TriMet has reduced employee costs despite the fractured process. And the audit noted, but did not criticize, service cuts TriMet made during the “Great Recession.”

“Financial trends indicate that TriMet worked through the difficulties of the recession, but will continue to face serious challenges. During the recession, TriMet’s main source of revenue, payroll taxes, dropped even as its expenses continued to climb. As a result, TriMet initiated substantial changes to its service by reducing the frequency on many bus routes and light-rail lines, delaying vehicle replacement, eliminating the free rail zone and increasing fares across the system,” according to the report.

Included in the audit were a series of recommendations for TriMet on a variety of issues, including improving communications with the union that represents most of its employees. In its response, TriMet officials agreed with all of the recommendations, and has begun implementing many of them. They include the recent creation of a new maintenance division to focus on maintenance work.

No big surprises

The audit was conducted at the direction of the 2013 Legislature for consideration by the session that starts Feb. 6. Although TriMet is created by state law, it had never before been audited by the Secretary of State’s office.

People expecting a hard-hitting exposé of TriMet could be disappointed by the audit. Much of it is an overview of the agency’s management structure, revenue sources, operations and long-term financial situation. Even when it noted problems, the audit found many were caused by the poor economy that only recently has begun to recover. It noted that payroll taxes, TriMet’s primary source of revenue, dropped during the downturn, a point TriMet officials have made repeatedly.

Perhaps the biggest problem noted in the audit is the poor relationship between TriMet and ATU 757, something that has been obvious to anyone who has followed their strained contract negotiations. After a labor contract expired in 2009, TriMet and the union negotiated for years on a new one without reaching agreement.

A state-approved mediator upheld TriMet’s 2012 decision to impose its last offer on ATU 757. The union has refused to accept the ruling, however, and is challenging it in court. In the meantime, negotiations on the next contract are proceeding at a slow pace.

The audit document explained: “We found that strained relations between TriMet management and the union are adversely affecting the organization and its operations.”

The audit noted that both sides have taken their cases to the public with news releases and paid newspaper advertisements. It finds fault with TriMet for doing this, but not the union.

“Interviews with TriMet employees indicate these public expressions may be adversely affecting TriMet’s relationship with its front-line employees,” according to the audit.

Better labor relations

The audit includes dozens of recommendations to improve labor-management relations, transparency and engagement practices, route planning, scheduling complexity, hiring practices and safety and accountability.

It noted that TriMet also has undertaken several initiatives to comply with recommendations, and urges the agency to complete them.

In a Jan. 27 letter to Secretary of State Kate Brown, TriMet General Manager Neil McFarlane thanked her for the audit and said the agency would implement all of the recommendations. He was quick to praise the audit’s findings about the employee health care cost issue.

“The audit did a notable job capturing the status of our financial condition and the need for continued reform in the area of union benefits,” McFarlane wrote.

McFarlane also admitted that TriMet needs to repair its relationship with ATU 757 and its members.

“Your report suggests the need for improvements in our communications and relationship with our frontline employees,” he wrote. “We know that to be successful, our employees must feel connected, valued and consulted.”

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