'Independent Analysis' Of CSX Rail Deal Questioned

The state Department of Transportation didn't go far when it needed a consultant to confirm that its $491 million deal with CSX Transportation was good for taxpayers.

It chose one of the companies that worked on the deal.

Financial adviser Jeffrey A. Parker & Associates helped DOT with plans for a commuter line in the Orlando area, which is the centerpiece of the CSX package. When DOT asked Parker & Associates to do an "independent" analysis of the $491 million deal, the consultant concluded it was worth billions to the state.

State Sen. Paula Dockery, R-Lakeland, called that conclusion "ludicrous."

"How independent could Jeffrey Parker possibly be if he's a financial adviser on part of the deal?" asked Dockery.

Florida's DOT plans to spend $491 million to buy CSX tracks in the Orlando area for commuter rail and help the company expand its freight lines into a massive hub in Polk County.

DOT has distributed the Parker & Associates report to lawmakers to show that the plan is good for Florida. State law requires the state to show it will get back more than it plans to spend on the project.

Dockery is one of several lawmakers, now in session, who say it's a bad deal and should be revised or renegotiated.

Increased train traffic through Lakeland would ruin downtown redevelopment work, and trucks would choke the roads near the hub planned for Winter Haven, critics say. Also, the high cost is forcing the state to delay other needed road improvements.

Lawmakers also are criticizing a liability agreement CSX wants the state to sign. It would make the state responsible for all accidents on the commuter line, even those CSX causes while using the line.

Jeffrey Parker defended his company's work, saying the firm's relationship with DOT had no influence on its conclusions. It disclosed that relationship in the report.

He downplayed his company's role, saying DOT provided the raw data.

"It was more of a technical analysis" of whether DOT's calculations were correct, he said. Also, the company had only about a week to complete it.

The report, however, did say that Parker & Associates was able to "confirm or update" DOT's commuter rail numbers because of the company's involvement with that project.

DOT spokesman Dick Kane said the state saw no conflict of interest between the two roles Parker & Associates played in the CSX deal. Asked this week how much Parker & Associates had been paid, Kane said he didn't know, because DOT paid the bill through another contractor. Parker said his company was paid by the hour, but he didn't know the rate.

'A Moving Shell Game'

The company, based in Chilmark, Mass., on the island Martha's Vineyard, has other contracts with the state. It is a financial adviser on the Port of Miami Tunnel project and was recently chosen to advise DOT on projects statewide that involve partnerships with private companies. Innovative financing and public-private partnerships are the company's specialties.

Dockery's criticism of the Parker report goes beyond questions of the company's independence. She said the report inflates the benefits of the CSX deal and minimizes the costs. For example, the report says helping CSX expand its rail lines will save hundreds of millions by keeping trucks off the roads. But she said it doesn't account for the more than 1,000 trucks per day that the proposed hub will add to Polk County's roads.

"This whole thing is a moving shell game," she said.

A national transportation consultant who reviewed the analysis called it a "house of cards."

It has so many problems, "I don't know where to start," said David Hartgen, professor emeritus of transportation studies at the University of North Carolina in Charlotte and a critic of government financing of public transit.

The Benefits Question

The report says that over the next 20 years, the deal will cost about $1.9 billion, including the $491 million negotiated with CSX and $864 million for building and running the commuter system. That $1.9 billion in spending will yield more than $5.4 billion in benefits.

Parker noted that the company arrived at that sum even after finding miscalculations in DOT's data and cutting benefit estimates by hundreds of millions.

The benefits it counted include new jobs, property taxes collected at the Winter Haven hub, money that shippers would save by using trains instead of trucks and time commuters would save by not waiting in traffic.

The report says the company wasn't sure about counting the savings to freight shippers. These are private companies, and whatever money they save "may or may not be passed along to consumers."

But even if those savings were subtracted from the calculations, it says, the benefits would still exceed the costs.

Hartgen disagreed, calling much of the report "squishy."

He specifically cited the state's plans to spend $32 million to help CSX move to Winter Haven from a rail yard in Orlando and build an access road.

"Basically, they are arguing that the FDOT puts up $32 million and gets $2 billion worth of benefits back," mostly from job creation and tax roll increases. "I don't believe those numbers," Hartgen said.

CSX concedes that dozens of the 110 jobs coming to Winter Haven will not be new, but transferred from the Orlando yard. Hundreds more jobs in the equation are based on CSX estimates of the warehouse and distribution businesses that will open near the hub.

Also in the benefits category is a $380 million grant from the federal government for the commuter rail project. "This is not a public benefit," Hartgen said. "That money came from you and I."

The agency expected to provide that grant, the Federal Transit Administration, has questioned whether the commuter system would attract enough riders to justify the costs. The state provided "no justification that the project will effectively serve Interstate 4 travel markets," the federal agency said in a November 2007 report.

Much of Parker & Associates' work involved attempts to obtain that grant. In e-mail to DOT officials in April 2006, Jeffrey Parker suggested ways to avoid the Federal Transit Administration's application requirements. One idea was to push the commuter project through as part of a freight rail expansion.

Stephanie Kopelousos, then DOT's chief of staff and now the head of DOT, applauded Parker's "out of the box" ideas.

"Getting this through the normal process is going to be an uphill battle," the transportation secretary wrote on April 25, 2006. "In fact, not sure we will ever get there that way."

Parker defended his efforts to work around the Federal Transit Administration, saying the agency's process for choosing projects was "inherently biased" against newer, sprawling areas such as Orlando.

DOT officials dismissed the "out of the box" discussions as brainstorming and said they eventually decided to go through the transit administration. The federal agency approved DOT's request to begin preliminary engineering, an achievement that Parker & Associates touts on its Web site. But the line didn't make this year's list of projects approved for full funding, largely because its ridership numbers were too low for the cost.

DOT officials predict they eventually will get the money, possibly through a bill filed by a project supporter, U.S. Rep. John Mica, R-Winter Garden.

Parker & Associates is still advising DOT on the project.

Hartgen has looked at a lot of rail deals in his teaching and writing about transportation financing, he said. He doesn't like it when government spends money on commuter rail and gives money to for-profit companies, he said.

From the looks of the CSX cost-benefit study, "all the costs are being borne by the public sector, and the benefits are being obtained by the private sector," he said.

If DOT took out all the "fuzz" in its numbers, Hartgen said, "this whole thing would collapse."