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TriMet audit: Fix labor relations, improve maintenance

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 pensions.

"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," reads the audit, which was released by the Oregon Secretary of State's Office on Wednesday.

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, it says, "On-time completion of preventive maintenance for tracks and signals appears to have decreased significantly since [Fiscal Year] 2004. Over the last ten years, the percentage of track maintenance completed on time has dropped from about 92% to about 53%, and on-time signals maintenance declined from about 100% to about 72%," the audit said.

The audit also faulted TriMet management for not communicating better 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 even 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 that 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.

And the audit did not raise the issue of TriMet operators driving back-to-back shifts, a practice that was halted within the past year.

The audit repeatedly noted that TriMet and ATU 757 have been at loggerheads over their contract for years. It said 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 healthcare benefits is necessary to improve the district’s financial stability. Union leadership questions TriMet’s financial management," the audit says.

The audit did not take sides in the dispute, however, but noted that TriMet has been reducing employee costs despite the fractured process.

And the audit noted, but did not criticize, the 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," the audit says.

The audit included a series of recommendations to TriMet on a variety of issues, including improving communications with the union that represents most of its employees. In its response, TriMet said it agrees 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.

Legislature asked for audit

The audit was conducted at the direction of the 2013 Oregon Legislature for consideration by the session that starts on Feb. 6. Although TriMet is created by state law it has never been audited by the Secretary of State's Office before.

Those expecting a hard-hitting expose of TriMet are going to be disappointed by the audit. Much of it is an overview of the agency's management structure, revenue sources, operations and longterm financial situation. Even when it noted problems, the audit many were caused by poor economy that has only recently begun to recover. It noted that payroll taxes, TriMet's primary source of revenue, dropped during the downturn, a point TriMet has repeatedly made.

Perhaps the biggest problem noted in the audit is the poor relations between TriMet and ATU 757, something that has been obvious to anyone who has followed their strained contract negotiations. After the contract expired in 2009, TriMet and the union negotiated on a new one for years without reaching agreement. A state-approved auditor finally upheld TriMet's decision to impose its last offer on ATU 757 in 2012. The union has refused to accept the ruling, however, and is currently challenging it in court, however. In the meantime, negotiations on the next contract are proceeding at a snail's pace.

"We found that strained relations between TriMet management and the Union are adversely affecting the organization and its operations," the audit says.

The audit notes that both sides have taken their cases to the public with press 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 frontline employees," the audit says.

TriMet agrees with recommendations

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

In a Jan. 27 letter to Oregon 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," the letter said.

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

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

The audit notes that because of the relatively short time required to evaluate such a large and complicated agency, some of the findings may be incomplete and not entirely verified.