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That SANDAG told staffers to hide and delete records is perhaps the most shocking revelation to come from a bombshell report this week, but it isn’t the only major discovery in the document. The report also found that witnesses urged investigators to look into other major issues, that the agency’s chief and board chair misled board members and the public after the scandal broke and that the agency has been crippled by mismanagement.
That San Diego Association of Governments leaders told staffers to hide and destroy public records as its forecasting scandal unfolded is perhaps the most shocking revelation to come from an outside investigation into the agency, but it isn’t the only major discovery in the document.
The report also found that witnesses urged investigators to look into major issues outside the scope of the investigation, that the agency’s chief executive and board chair misled board members and the public in a letter and op-ed after the scandal broke and that the agency has been crippled by mismanagement and amateurish work for years.
The investigation also confirmed what Voice of San Diego had previously reported: SANDAG leaders were told about fatal flaws in the agency’s internal forecasts in December 2015, and staffers directly tied the problems to the agency’s expected tax collections for major transportation projects, but leadership failed to act on the warnings and never disclosed the problems to its board or the broader public.
This all played out as the agency was selling the public on a new tax increase, Measure A, on the November 2016 ballot.
Nonetheless, the agency carried on with the broken forecast, which it has since abandoned, revealing a $17 billion shortfall for TransNet, the sales tax approved by voters in 2004.
Here are four more things we learned from the investigation by Orange County-based law firm Hueston Hennigan.
SANDAG greenlit the investigation, but tailored its scope to be especially narrow.
The only question investigators were supposed to answer, really, was who within SANDAG knew that the agency’s revenue forecast for Measure A was wrong, when they knew it and what they knew about it.
Voice of San Diego has uncovered a series of significant issues related to the agency’s tax programs – and its refusal to disclose basic facts about those programs.
SANDAG structured the investigation so that it would not look into any of those questions, even though they’re all fundamentally related to the same issue.
Multiple witnesses told the investigators that was a big problem.
SANDAG keeps a running plan to pay for everything in TransNet. It tracks the money expected to come in, and the expected cost of all the projects it wants to build.
But in October 2015, the agency updated the costs of every project it might build in the next 40 years. Three months later, the agency used out-of-date project costs in its TransNet update, which hid an $8 billion increase in the cost of the program.
TransNet’s program director, José Nuncio, later told me the agency did so intentionally because it made it easier to compete for state and federal grant money to build the projects.
“A number of witnesses raised this issue as one of significant concern. We have not investigated this issue since if falls outside the scope of our authorized work,” the investigation reads.
After SANDAG acknowledged TransNet had a $17 billion budget shortfall, SANDAG Board Chairman Ron Roberts published an op-ed in Voice of San Diego assuring the public nothing was wrong.
After Voice of San Diego uncovered emails and internal presentations in which SANDAG staffers tried to sound the alarm about the agency’s broken internal forecast, Executive Director Gary Gallegos sent the board of directors a letter assuring them nothing was wrong.
Both the op-ed and the letter were misleading, investigators found.
The investigators used a panoply of euphemisms to describe the responses: “somewhat dishonest,” “insufficiently transparent,” and said they contained “wordsmithing issues.”
Technical staff didn’t know before the election that Measure A’s revenue forecast was wrong, Roberts Wrote. But virtually the entire technical staff had concluded exactly that before the election.
He also wrote that while there were concerns about the forecast, it wasn’t clear that there was any effect on TransNet. That’s also wrong, the investigators concluded.
Witnesses also told investigators they took issue with statements in Gallegos’ letter that no staffers had ever told management they were concerned the Measure A forecast was overestimated, and that no one connected the broken forecast to TransNet’s ongoing revenue.
The report concludes staffers made the connection to TransNet explicitly clear in a December 2015 meeting, and one staffer said there was a debate about Measure A’s revenue in that meeting, too.
“A number of witnesses were unhappy with SANDAG’s public relations response to the Measure A forecasting error, having found it to be somewhat dishonest,” the investigation reads. “In particular we showed a number of witnesses Gallegos’s letter, and most agreed that (staffers) had drawn a clear connection between the (forecast) and the TransNet Plan of Finance.”
Most of the investigation is focused on the years of subpar forecasting and modeling work that was ignored by SANDAG’s leaders, Gallegos and Kim Kawada, the chief deputy executive director.
It reads like a consultant’s report recommending a top-to-bottom overhaul of a private company.
The long and the short of it, though, is that SANDAG lost a number of staffers over the years who worked on the agency’s long-range forecast, and either failed to replace them or instituted a series of stop-gap measures that made sure immediate needs were met, but allowed major problems to fester.
That’s how a copy-paste error in 2004 managed to overstate by nearly $4 billion how much a tax increase in 2016 could raise.
“This appears to have been, first, a staffing problem: SANDAG did not provide enough people, or the right people, to run its forecasts,” the investigation concludes.
Those issues – plus SANDAG modelers being isolated from one another and ignored by leadership – meant the problem was known as early as 2013.
One staffer left the agency in 2012, but rather than replace her, SANDAG asked her to work part time from Florida. An expert panel reviewing the model said SANDAG’s income expectations were out of whack, but instead of inspect the whole model, the staffer manually capped its results beginning in 2040, meaning the error stayed in the forecast with a Band-Aid.
In 2013, two other staffers were working on a related forecast, and again instead of investigating why the income expectations were so high, simply applied another Band-Aid. One of those staffers wrote a note in an internal communications system that the forecast had “known problems,” but no one did anything to find or fix them.
Everything began coming to light in 2015, when two new staffers started working with the forecast and immediately saw serious problems – that’s when they wrote the notorious “omg” and “wtf” emails over the forecast that eventually led to the crucial December 2015 meeting.
Even then, SANDAG leadership didn’t tell staff to get to the bottom of the problem. That didn’t happen until Voice of San Diego started asking questions in October 2016.
In December 2015, SANDAG leadership and technical staff met to discuss the problem with its internal forecast, which we now know had been known about for years.
Multiple witnesses agreed that it was explicitly said in that meeting that the erroneous forecast was overstating how much money TransNet would be expected to raise. SANDAG nonetheless put forward a spending plan for TransNet in 2016 using the faulty data, giving a false sense to the public that the agency would meet all of its promises.
But the report says it can’t conclude whether that meeting specifically discussed Measure A’s revenue estimate.
One staffer, Clint Daniels, a principal research analyst, told the investigators that Chief Economist Marney Cox said in that meeting he had not used the faulty forecast to estimate Measure A’s revenue total. Another staffer couldn’t remember whether Cox said he didn’t use it for Measure A, or for TransNet. A third staffer who wasn’t present said he heard Cox denied using the faulty forecast on either tax increase. Cox denies saying either. In reality, Cox used the faulty forecast to estimate revenue for both Measure A and TransNet.
Investigators don’t settle the dispute, leaving it as a he-said, she-said. But if the dispute happened, as the staffers allege, Measure A’s revenue expectations were at least discussed. Gallegos and Kawada said they don’t remember it coming up.
It also means staff would have concluded during that meeting that the bad forecast was used to estimate revenue for an existing tax increase, but not for a new tax increase. The report doesn’t say where the estimate for that hypothetical tax increase would have come from.
In either case, Ray Major, the current chief economist, acknowledges that he learned unequivocally just a few weeks later that Cox had indeed used the forecast to estimate Measure A’s revenue. At that point, Major knew that the Measure A forecast was wrong, but he said he didn’t tell Gallegos or Kawada because he didn’t think they would trust him, since Cox had been there longer.
Months later, on Oct. 11, 2016, a few weeks before the election, Voice of San Diego asked a series of questions about the agency’s forecast, and agency staff started looking at it again.
“(Senior research analyst Dan Flyte) said that by this point, he and others at SANDAG knew the Measure A forecast was wrong,” the investigation found. “At the time, Flyte felt that SANDAG should simply admit that it was erroneous.”
Another staffer said it was known long before then.
“Daniels agreed that by this time they knew there was a problem with the Measure A forecast, even though they didn’t know the source. In Daniels’s opinion, they had known since December of 2015,” the investigation reads.
The report, however, leaves some benefit of doubt to Gallegos and Kawada about what was known after that meeting at the end of 2015.
“If in fact no one brought up Measure A during the December 2015 meeting, then we have seen no indication that staff ever raised any issue regarding the Measure A forecast to Gallegos or Kawada until October 2016,” it writes.
There is no transcript available of that meeting to corroborate what was said. But it is known that one staffer, Daniels, alleged that Measure A came up, and that Cox lied about it. Daniels still says the full extent of the error, and its implications for Measure A, was known at the time. It’s also known that the forecast’s connection to TransNet was made explicitly during that meeting, although the agency didn’t disclose that problem until a year later. And Major fully acknowledges that he knew that Measure A’s forecast was wrong a full 10 months before the election. Finally, a month before the election, virtually the entire staff had concluded the same.
And that’s when agency leadership directed staff to start deleting and hiding documents to keep them from becoming public.