Summary

Pursuant to a legislative requirement, GAO provided information on the Los Angeles County Metropolitan Transportation Authority's (MTA) restructuring plan, focusing on: (1) the cost, schedule, and funding for completing the two remaining extensions to the Red Line Subway Project, Segment Two and North Hollywood; (2) MTA's activities designed to comply with a 1996 bus consent decree and their associated costs, including potential impacts to completing the extensions; and (3) whether MTA has sufficient funding available for its rail and bus programs and the potential impacts of any funding shortfalls.

GAO noted that: (1) Segment Two is about 94-percent complete, and all state and federal funds have been allocated; (2) MTA estimates that the total cost of Segment Two will be $1.74 billion, or about 17 percent above the $1.45 billion estimated in the grant agreement with the Federal Transit Administration (FTA); (3) Segment Two is expected to open in June 1999, about 6 months later than had been projected in the grant agreement; (4) as of April 1998, MTA estimated that the North Hollywood extension was about 65 percent complete; (5) the total cost of this extension is expected to be about $1.34 billion, or $31 million above the $1.31 billion estimated in the grant agreement; (6) although MTA's restructuring plan projects that the North Hollywood extension will open in May 2000, FTA's technical consultant believes that, because of delays in tunneling, the December 2000 date in the grant agreement between MTA and the federal government is more realistic; (7) although the extension will most likely be completed near schedule and within budget, total costs could increase; (8) in addition, ongoing litigation and construction contract claims could also increase costs; (9) MTA's restructuring plan assumes that its current and planned bus program meets the requirements of a 1996 consent decree resulting from litigation over bus service; (10) however, the Bus Riders Union has argued that various elements of MTA's current and planned bus program do not satisfy the decree's requirements; (11) according to its restructuring plan, MTA faces a potential $1.14-billion funding shortfall in its bus and rail capital and operating programs through 2004; (12) GAO's analysis identified additional factors that could reduce future revenues or increase costs by another $325 million or more--thereby increasing MTA's shortfalls through 2004; (13) other cost increases, such as those that may be required by future rulings on the bus consent decree or additional investments in transit service for the areas where planned subway extensions have been suspended, could increase the bus and rail capital shortfalls; (14) MTA management officials believe that they have a strategy and the tools needed to successfully address its operating and capital shortfalls; and (15) as a last resort, the officials said that any remaining shortfall would be addressed by proposing additional bus and rail fare increases and/or service reductions, while still satisfying the principal objectives of the bus consent decree.