By Alberto Garcia
The staff and executive director of San Diego’s regional transportation planning agency failed to disclose to its board of directors and the public that it had discovered fundamental errors in its economic forecasts for transportation funding.
SANDAG, the San Diego Association of Governments, is the regional agency responsible for planning and building out the county’s roads, highways, and public transportation systems. Its 21-member board of directors is made up of mayors and councilmembers from all 18 cities in the county, in addition to members of the County Board of Supervisors.
Earlier this month, Voice of San Diego, a local digital news outlet, revealed that SANDAG economists and staff had discovered a fundamental error in their modeling that meant sales tax revenues for November’s Measure A ballot measure would fall billions of dollars short of previous projections. Measure A asked voters to approve a ½ cent sales tax increase to fund local transportation projects.
During the campaign for Measure A, SANDAG estimated the sales tax increase would generate $18 billion over the next 40 years. Those local dollars would have been leveraged to draw billions more in state and federal funds, netting enough money for a list of new highway, public transit, and environmental projects throughout the county.
But internal SANDAG emails revealed that staffers became aware of the faulty economic model nearly a year before the November election. SANDAG’s own internal presentations showed the sales tax revenue projections of $18 billion could be billions of dollars short, meaning the funding could not pay for all the proposed transportation projects.
Nevertheless, SANDAG staffers failed to alert the elected officials on its Board, and many of those board members were out drumming up support for Measure A, not knowing their promises to the public could never be fulfilled.
Last week, seven SANDAG board members wrote a letter to County Supervisor Ron Roberts, who serves as SANDAG’s Board Chairman, asking for an independent examination into the issue of the revenue projections. The letter asks for answers as to who in SANDAG knew about the error, and when they knew it.
“SANDAG’s credibility relies on its accountability,” the letter states. “Therefore, we believe it is imperative for the Board of Directors to commission an independent examination of all materials and personnel relevant to the issue.”
The letter is signed by seven board members: Steve Vaus, Mayor of Poway; Dianne Jacob, County Supervisor; Richard Bailey, Mayor of Coronado; Catherine Blakespear, Mayor of Encinitas; Bill Wells, Mayor of El Cajon; Kristine Alessio, La Mesa Councilmember; and Jerry Jones, Councilmember from Lemon Grove.
“Such a review may be inconvenient; time-consuming and expensive,” the letter states. “But the need to restore confidence in the agency is of the utmost importance.”
In internal SANDAG emails, it’s clear staff members, including chief economist Ray Major, became aware their revenues projections were wrong as early as November 2015.
In an email exchange where SANDAG modeling staffer Dmitry Messen explains their exceedingly optimistic forecasts misrepresent expected revenues, Major responds “OMG”. Messen then writes, “I can think of another popular 3 letter acronym.”
Major’s response? “Wtf.”
The flaw in the projections stems from an aggressive model for future spending by San Diego County residents. Past economic models pegged income growth at only .69% per year, with five cyclical increases and decreases over the past 40 years. SANDAG’s new model, however, used 1.3% annual income growth with no ups and downs over the next 40 years. When compounded over 40 years, the revenue shortfall could be more than $10 billion.
Although SANDAG staffers became aware of the potential multi-billion revenue shortfall, they did not inform its board of directors.
Instead, they continued using the flawed projections in the campaign to pass Measure A. The faulty data was also used to project revenues from the 2004 ballot measure known as TransNet. That 1/2 cent sales tax is still funding transportation projects throughout the county.
In April 2016, several months after SANDAG staff knew about the faulty projections, the Board of Director voted to put Measure A on the ballot.
During the election cycle, more than $2.1 million was raised by a campaign called Citizens for a Better San Diego, funded primarily by construction companies that would have benefited from the billions spent on projects for the next 40 years.
The political campaign, along with SANDAG’s public information campaign, promoted a list of desirable projects to voters in trying to garner the necessary support to pass the measure.
In the end, Measure A failed at the November election because it did not gain the necessary two-thirds voter support needed to pass. Had it passed, though, the new revenues would not have been enough to fund the list of projects used to entice voters.
Measure A’s new revenues also would have help cover the shortfalls in TransNet’s revenues, which also used the same flawed projections. So far, TransNet revenues are over $5 billion lower than projected.
SANDAG Executive Director Gary Gallegos has commented to Voice of San Diego that the flawed projections were not disclosed because then-chief economist Marney Cox maintained the revenues were aggressive, but not impossible. Cox has since become SANDAG’s Director of Special Projects.
The issue of the forecast model is on the agenda for SANDAG’s next meeting on Friday, February 24. The meetings are held at SANDAG’s board room within the Wells Fargo Building at 401 B Street in downtown San Diego.