Audit reveals major concerns about UTA operating procedures

Published: Tuesday, Aug. 26 2014 4:00 p.m. MDT

A TRAX train arrives at Salt Lake Central Station in Salt Lake City on Monday, Aug. 25, 2014.

Ravell Call, Deseret News

SALT LAKE CITY — A review of policies and practices at the state’s largest mass transit agency shows numerous instances of questionable business practices, including a “sweetheart deal” in which a developer was prepaid $10 million for a future project that was eventually constructed by a different developer.

The Performance Audit of the Utah Transit Authority was conducted at the request of Sen. John Valentine, R-Orem, who had expressed concerns about UTA’s plans for transit-oriented development in the Salt Lake and Utah valleys.

Valentine said he was also troubled by the elevated salaries and bonuses of the agency’s “highly compensated” management team and the seeming lack of compliance to transparency requirements in reporting their total annual compensation.

A third issue was whether UTA has been judicious in the use of the tax resources the agency had been given as it purportedly worked to expand bus and rail service.

Valentine said the findings in the audit report would seem to validate his concerns regarding the way the agency operates.

“They advanced $10 million to a developer, and it appeared to be some kind of insider transaction to me,” he said. “That’s why I (asked for) the audit.”

The report found that UTA prepaying developer Draper Holdings for the Draper FrontRunner parking structure was against the agency’s internal policy and practices. Not surprisingly, an independent law firm concluded that agreements with the developer appear to be overly favorable to the developer.

Valentine, who is a tax attorney by trade, said the audit indicates UTA needs to implement some fundamental changes in the way it does business.

“There is some room for change to accomplish what we’ve mandated for them to do,” he said, “but to do it in a way that is transparent.”

UTA submitted a formal response to the report, noting the audit identified recommended improvements in a few areas and that the agency has already implemented all of the recommendations, said Mike Allegra, UTA's general manager.

Allegra acknowledged that the agency has “made some mistakes” over the years.

“Frankly, we’re moving forward, (and) we’ve learned a lot,” he said.

“We’ve already changed our procedures and policies, and we’re looking to better ourselves,” Allegra said. “We have to strengthen our polices and procedures, and that’s what we’re doing.”

Before lawmakers consider giving UTA any more tax increases to fund future transit projects, the agency would need to show marked improvement in all the areas raised in the audit, Valentine said.

He noted that the agency has been audited several times over the past six years, which indicates ongoing concern about the way UTA conducts its business.

“There is a saying in the law, 'res ipsa loquitur' — Latin for "the thing speaks for itself,'" Valentine said. “Three audits since 2008; that’s quite a few audits that have outlined problems UTA has had.”

In addition to the prepayment that blatantly violated UTA policy, auditors also raised questions regarding the Draper FrontRunner parking structure.

UTA did not conduct a cost-benefit analysis to determine why Draper was a superior site for a parking structure compared with other locations on the FrontRunner line, the report stated. This is an important analysis that, had it been done, could have explained UTA’s decisions and rationale, the report noted.

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