Subject: Houston Chronicle Article
From: "Nell McGarity" <[email-masked]>
To: "Alex Slater" <[email-masked]>, "Hilary Rosen" <[email-masked]>, <[email-masked]>, <[email-masked]>, <[email-masked]>
Date: Mon, 25 Oct 2010 14:04:15 -0400

FYI: here is the article from last week that Virginia mentioned. We will likely discuss this on tomorrow's call.
http://www.chron.com/disp/story.mpl/metropolitan/7256593.html
Metro moving to mediate its Spanish deal
Transit board also revising way it pays sales tax money to cities
By CHRIS MORAN
HOUSTON CHRONICLE
Oct. 20, 2010, 9:58PM

The Metropolitan Transit Authority plans to negotiate the cancellation of a $331 million contract with a Spanish rail car manufacturer through mediation, local transit bosses said Wednesday.

That is why, despite the agency's announced intention to cancel the contract, no action is proposed on today's agenda, explained Metro President George Greanias and board Chairman Gilbert Garcia.

They said they hope to begin mediation next month and begin soliciting new bids in January to provide 105 light rail cars.

No borrowing to pay

The Metro board agenda also includes a change in the way the agency disburses sales tax money to local cities to pay for road and bridge projects. The plan also codifies an unconditional pledge to cover those obligations without delay and to do it with cash on hand instead of borrowed money.

On one level, the plan is housekeeping. Voters approved a referendum in 2003 allowing Metro to collect a 1-cent sales tax to pay for transportation projects, 25 percent of which it passes on to 15 local cities and the county. The plan lays out the mechanics for moving the money through September 2014, when the sales tax sunsets.

But officials say the plan also should debunk misconceptions that Metro is delinquent in its payments to the cities or that it diverts the cities' share of the money to rail projects.

Contract to be canceled

With board approval, Metro will begin paying cities up front to cover the costs of contracts to build roads instead of waiting, as it currently does, for the cities to submit for reimbursement invoices documenting completed work. Metro also will begin setting aside cash in a pay-as-you-go account to cover future road projects. The agency had amassed $167 million in debt to cover past projects.

The Metro board will deal with the rail car contract on a future agenda. Regardless of whether mediation succeeds, Greanias and Garcia explained, the contract with Construcciones y Auxiliar de Ferrocarriles, or CAF, will be canceled.

"We are going to terminate this contract," Greanias said. "We're just trying to do it in the most businesslike, efficient manner we can."

Violation of rules

The CAF contract is part of an initiative to build five new rail lines throughout Houston, two of which would be paid for by a $900 million federal grant. Last month, however, the Federal Transit Administration informed Metro that it was withholding the grant until the agency cancels the contract and rebids the purchase of the rail cars.

The FTA found that Metro had violated federal "Buy America" procurement rules intended to protect American jobs.

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