The Belgian Connection: Second of Two Parts
Shortly after Rick Fernandez took over as the general manager of AC Transit, the agency’s board of directors awarded him the authority to approve employee travel. Sixteen months later, in April 2001, Fernandez and four of his staffers took an all-expense-paid trip to Europe that included a visit to the headquarters of the Van Hool bus company near Antwerp, Belgium. The excursion cost taxpayers $20,133 — and it was just the beginning.
In the years since, travel records show, AC Transit employees have jetted to Western Europe on more than one hundred separate occasions. The vast majority of these junkets were to Belgium, at a total cost to taxpayers of nearly $1 million. The cash-strapped agency has even paid for an Oakland bus inspector to live near Antwerp for more than five years, at a cost in excess of $500,000, not including his salary.
Since Fernandez inked an exclusive $60 million deal with Van Hool to supply the agency’s buses, he and other employees also have taken weekend getaways to some of Europe’s most popular destinations, mixing in a little rest and relaxation on the taxpayers’ dime. In fact, as the general manager was on his way to sign the Van Hool deal in January 2002, he stopped off in Paris and checked into the Normandy Hotel in the heart of the French capital. The Normandy sits in one of the most exclusive sections of the city, not far from the Eiffel Tower, one block from the River Seine, and across the street from the Louvre.
Travel records show that Fernandez’ two-day Parisian getaway, including a food allowance and roundtrip train fare to Brussels to sign the bus deal, cost taxpayers $735. Three months later, he did it again, spending another weekend at the Normandy at a total cost of $904. And finally, three months after that, in July 2002, he took a side trip to Amsterdam before going to Brussels. In all, the general manager has made at least seven European trips at taxpayers’ expense since 2001, totaling $22,983.
In a recent interview, shortly before he was scheduled to catch a plane this week for his eighth trip to the continent on the taxpayers’ dime, Fernandez admitted that he when he goes to Paris or Amsterdam at public expense, he conducts no AC Transit business. The general manager, who is paid $260,000 a year, said he takes the side trips because he needs time before the bus-deal meetings to fend off jet lag and recuperate from long plane flights. “I don’t know about you, but it takes me time to get acclimated,” he said.
These frequent European excursions represent a substantial yet overlooked public cost of an already expensive bus contract. Since 2002, the Alameda-Contra Costa Transit District has paid more than $97.2 million for 236 Van Hool buses. Last year, the agency obtained an option to buy another 1,500, even though the buses have cost tens of thousands of dollars more than some American-made models in the past and are more expensive to ship.
To bring the Belgian buses to the Bay Area, Fernandez and his staffers had to engage in a series of controversial financial transactions that allowed them to thwart federal laws designed to protect US companies and their union workers. Then last year, without giving American companies a chance to compete for the deal, AC Transit extended its monopoly contract with Van Hool for another five years.
Fernandez raves about the Van Hool buses, arguing that they’re more suited to AC Transit’s needs and more reliable than their American competitors. He also praises the Van Hool family, which founded and runs the bus company, saying it routinely accommodates the agency’s design requests better than any American bus maker would. And he asserts that the employee travel, including stationing an inspector inside the Van Hool bus factory, is necessary to ensure the buses meet his agency’s high quality standards.
Nonetheless, there’s also little doubt that the agency’s costly bus-buying spree and extensive European travel have contributed to AC Transit’s financial woes over the past eight years. Since 2000, the agency’s costs have skyrocketed, forcing it to repeatedly slash service and raise fares, as it lost millions of passengers. In fact, records show that AC Transit has the worst overall record among the Bay Area’s major urban mass transit systems in the past several years. And just last week, the agency’s board put off a vote on the general manager’s latest proposal to hike fares, which at $2 per passenger would become the Bay Area’s most expensive local bus ride.
During that first trip to Belgium, Fernandez was smitten with the Van Hool bus’ low floors and three-door design. By the time he returned to the Bay Area, he was convinced the Van Hools were ideal for his plan to create a Bus Rapid Transit system in the East Bay. Known as “BRT,” the plan calls for turning the center lanes of some of the East Bay’s busiest streets into bus-only lanes.
On May 10, 2001, just six days after returning from that inaugural trip, Fernandez asked the AC Transit board of directors to approve a five-year, no-bid contract with Van Hool. Fernandez told board members that he wanted to buy 135 of the forty-foot, three-door models, and sixty of the sixty-foot accordion-style buses with four doors — each of which had one more door than its American-made counterparts. The sixty-footers would be the workhorses of BRT.
But the sole-sourced deal appeared to violate state contracting laws, so the seven-member board voted to solicit bids for new buses. In response, Fernandez and his staff then tailored their request for proposals to specifically fit the Van Hools, thereby eliminating any serious competition from American manufacturers.
AC Transit officials specified that they would only accept proposals for “true low-floor” buses. They contended that low-floor buses, which could be boarded without an extra step up if AC transit were to build special platforms, would speed up commute times, making them ideal for BRT. At the time, several North American bus makers were selling low-floor models. AC Transit had even purchased some from an Alabama manufacturer the year earlier. But those buses had platforms at the rear of the bus that required passengers to walk up a few steps to get to the seats in the back. By contrast, the Van Hools had low floors from front to back, though most seats sit on a one-foot-high platform that requires a step up. Fernandez’ staff described the Van Hool’s design as “true low-floor,” and deemed the Alabama design unacceptable.
The agency also demanded three doors on all its new forty-foot buses and four doors on all the sixty-footers. Fernandez believed the extra door also matched perfectly with BRT, as he envisioned riders with pre-purchased tickets boarding through any one of the vehicle’s open doors. Indeed, when he asked the board to award a no-bid contract to Van Hool, he listed seven reasons for approving the deal, and five of them focused on the extra doors.
At the time, there was an American bus maker developing a three-door model with “true” low floors — Orion Bus Industries of New York. But in an interview, Fernandez said that if Orion had submitted a bid, he would not have seriously considered it, because of Van Hool’s track record but also because of a previous dispute between his agency and Orion. “We had a bad experience with them,” he said. “Van Hool had been building that type of bus, the low-floor bus, for twenty years.”
Sure enough, Van Hool was the only bus maker to bid on the deal. One other American manufacturer, Gillig Corporation of Hayward, which had sold more than 120 buses to AC Transit in the early 1990s, asked for and received an extension on the bidding deadline to determine whether it could afford to design and build a new bus for a single customer. But the East Bay bus maker ultimately decided that AC Transit’s strict requirements would be too costly, especially after agency officials said they wanted ones with diesel engines and weren’t interested in Gillig’s eco-friendly hybrid buses.
In December 2001, seven months after Fernandez requested the no-bid contract, the AC Transit board approved virtually the same exclusive five-year deal with Van Hool. But because the Belgian company was the sole bidder, it managed to extract several concessions from the agency. Among them was Van Hool’s demand that AC Transit pay all the costs associated with sending employees to training sessions in Belgium, including airfare, hotels, and meals.
Travel records show that no AC Transit employee has spent more time in Belgium than Stuart Thompson. As the agency’s on-site bus inspector, Thompson has been living near the Van Hool factory on the taxpayers’ dime since September 2002. In addition to his $2,300-a-month flat, AC Transit pays for his cell phone, utilities, and security alarm, plus provides him with a $50-a-day food allowance, including weekends. The public agency even shells out $400 a month for his housekeeper.
But Thompson’s most costly expense, according to travel records, is his auto allowance. Instead of riding the bus, AC Transit’s European bus inspector seems to prefer traveling by car — at great cost to the public. Taxpayers paid an average of $2,637 a month for Thompson’s auto allowance during the past three years. His total Van Hool-related expenses came to at least $529,044 from 2001 to October 2007. And that’s not counting his $121,097 annual salary.
Industry experts say that it’s not unusual for transit agencies to send inspectors to watch buses being built from the ground up. But if AC Transit had purchased North American-made buses, the agency’s expenses would have been far lower. Some transit agencies also keep costs down by hiring inspectors who live near the bus factories. “That way there are no living-away-from-home expenses,” said Brian Macleod, senior vice president of Gillig, which manufactures buses for transit agencies throughout the United States and is accustomed to on-site inspectors. “It’s a tremendous expense to send someone overseas when you could have contracted with a local inspector.”
But Fernandez said the extra costs are worth it. “I, myself, wouldn’t hire outside inspectors because I don’t believe you get the same commitment to building buses,” he said. AC Transit is “very fortunate” to have an experienced inspector such as Thompson who is willing to live in Europe, he added. And Thompson’s auto lease is costly, he said, because it includes fuel, maintenance, and insurance. “It’s not like he’s running around in a stretch limousine.”
But he almost could have, for the amount of money AC Transit has shelled out. From late 2004 through June 2007, the agency paid $84,390 for Thompson to lease a car.
Travel records also show that several AC Transit employees have used their trips to Belgium as an extra job perk. Either before or after they visit Van Hool, the employees set off for Madrid, Paris, or London. The employees paid for their train fare, vacation hotels, and spouses, but AC Transit foots the bill for the single biggest expense: airfare. Fernandez said he neither encourages nor discourages such trips, noting that the agency only pays the airfare and the business-related expenses and not the vacation travel. But he also said the relatively cheap European vacations were a good “employee relations” policy.
Yet agency travel records also raise questions as to whether business expenses are all AC Transit pays for. In January 2004, the agency spent $919 on a three-night stay in Paris for Amy Franjesevic, the agency’s graphic arts and publicity coordinator. She stayed at the Hotel Saint-Louis along the River Seine. Or consider AC Transit’s Marketing and Communications Director Jaimie Levin, one of the biggest cheerleaders for the Van Hool buses. AC Transit paid for Levin and Charles Kalb Jr., the agency’s procurement and materials director, to spend six nights each at a Madrid hotel in May 2003 after they visited Van Hool. The price tag of the excursion was at least $2,974.
Fernandez said Levin, Kalb, and Franjesevic’s trips were legitimate business expenses, even though records make no mention of what AC Transit business was involved. Levin and Kalb, he said, went to Madrid for an international bus show and Franjesevic, according to Levin, visited Paris to get a first-hand look at that city’s transit marketing design efforts. When pressed as to why these explanations were not mentioned on travel reports, AC Transit General Counsel Kenneth Scheidig said employees should do a better job completing the forms.
Scheidig himself is guilty of the same infraction. Records show that he has traveled to Europe at least five times, costing taxpayers a total of $11,421 — not counting the trip he had scheduled for this week. On at least three of those excursions, he stopped off in Paris for a few days. He did not charge AC Transit for Parisian hotel stays, but the agency paid him $50 a day food allowance in the French capital, though there is no indication on his travel records of what work he had there.
These trips were fairly unusual. After all, lawyers typically exchange documents by e-mail, fax, or FedEx, and don’t fly 5,500 miles to hammer out the details of contracts. “We do a lot of contracts with agencies from around the country and they have never once sent their lawyer to negotiate a contract, or for a site inspection, or to visit, or to sign documents, or for any other reason,” said Macleod of Gillig bus company.
Scheidig, who makes $217,000 a year, acknowledged that typically it would be unnecessary for him to negotiate the details of a contract in person. But he said Van Hool is a special case because it’s so small. “They’re a family-run business that wants to see folks face to face,” he explained.
In all, AC Transit employees, including Thompson the bus inspector, filed at least 163 travel vouchers for European trips from 2001 to October 2007, the vast majority of which were to Van Hool, totaling $947,238. And in the coming months and years that price tag promises to grow higher. Last week, at Fernandez’ request, the AC Transit Board of Directors increased the daily food allowance for international travel to $134, an increase of 168 percent.
Over the past few years, Rick Fernandez and the AC Transit Board of Directors have operated in relative obscurity. Board meetings are sparsely attended and except for some good reporting in the Berkeley Daily Planet, and a few stories in the Oakland Tribune, the agency’s fascination with Belgian buses has gone mostly unnoticed. But that may change as Bus Rapid Transit gets closer to reality.
As details of BRT have surfaced over the past year, the plan has spurred a heated debate throughout the East Bay. Proponents maintain that it is the best way to coax people out of their cars and onto buses, while critics argue that it will cause nightmarish traffic, and send motorists onto quiet neighborhood streets. Currently, the plan is to transform the two center lanes of Shattuck and Telegraph avenues, International Boulevard, and East 14th Street into bus-only lanes, from downtown Berkeley to either San Leandro or BayFair BART stations. BRT would operate much like a light-rail system, only with buses instead of trains.
Even though the construction of BRT would mean tearing up some of the East Bay’s major thoroughfares to build street-center platforms, it does not need the approval of Berkeley, Oakland, or San Leandro, according to AC Transit officials. However, agency Deputy General Manager Jim Gleich said that if any of the cities comes out against the plan, BRT would not go forward. The plan is currently in its final environmental review stage.
This year, as the debate intensifies over BRT, three AC Transit board members will be facing reelection: Joe Wallace, who represents El Sobrante, San Pablo, Richmond, El Cerrito, Albany, Kensington, and parts of Berkeley; Greg Harper, who represents Emeryville, Piedmont, and portions of Berkeley and Oakland; and Board President Chris Peeples, an at-large member. Peeples is one of the staunchest supporters of the Van Hools and he is the only current board member who was on the panel in 1999 when it hired Fernandez to take over the agency and handed him authority over employee travel. He declined to answer questions for this story.
Harper, meanwhile, has expressed the most skepticism about the Belgian buses during the past few years, though he has repeatedly voted to buy them. Harper, who is the immediate past president of the board and a strong proponent of BRT, said in an interview that the Van Hools enjoyed such overwhelming support on the board that he would have lost his ability to get things done had he publicly opposed them.
However, Harper recently indicated that his support for the Van Hools may be waning. Last year, apparently because of safety concerns, AC Transit ordered the manufacturer to redesign all future buses for AC Transit without the raised platforms and extra doors. Now that the new Van Hools will resemble their American competitors, Harper is having second thoughts. In fact, when asked whether the elimination of the buses’ extra door and overhaul of the low-floor design meant that buying the Belgian buses was a waste, he responded: “I’d say pretty much it was.”
What Do You Think, Readers?
Whether or not it makes sense to buy Belgian buses has little to do with the underlying issue of Bus Rapid Transit. Should Berkeley and Oakland support AC Transit’s plans for bus-only lanes on Telegraph Avenue and other thoroughfares?
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