Portland Streetcar Inc. fails Pdx audit

Apr 17, 2014, 6:22am PDT

Damning city audit blasts Portland's streetcar operations, oversight

Andy Giegerich

Digital Managing Editor-Portland Business Journal
Portland’s City Auditor strongly warned that city is taking too much of a financial and operational risk on Portland’s streetcar projects.

“While public-private partnerships generally allow for more private sector participation and/or ownership, we found the City applied an approach that includes the use of (transportation department) management and staff, with no real transfer of responsibility or risk to its partners,” Griffin-Valade wrote. “… The investments in Portland Streetcar’s system expansion and ongoing operations have increased over time. The City has leveraged financial resources from numerous sources, with TriMet jointly paying for annual operations.

However, Portland’s auditor “found that the Portland Streetcar structure is convoluted and confusing. Such partnerships should be tailored with the overall aim of matching risk with the partner best able to control that risk. Given the City’s clear ownership and operations responsibility, we question how and why the private sector is involved at each level of the organization.

From the audit report:

We found the structure confusing because of how the City has chosen to involve its partners in Portland Streetcar operations. Similar to the financial information for total operations, the organization chart for Portland Streetcar required us to compile information from numerous discordant sources.

We questioned the appropriateness of the City’s membership on a contractor’s Board of Directors. City representation on the Board places a City Council member in the position of advising PSI on the scope of actions and projects, while voting at the same time to authorize funding and policy direction as a member of Council. At the very least, this gives rise to the appearance of a conflict of interest, a concern also raised as a public complaint to the City Ombudsman.

While we found no actual conflicts of interest, there are related-party relationships involving PSI employees and subcontractors, and we were told about perceived conflicts of interest. PSI has a significant subcontractor relationship with a firm that provides streetcar services for multiple jurisdictions. It is not always clear when the subcontractor is acting on behalf of the City and when it may be representing other interests.

This is a damning report indeed.  It leaves the City of Portland exposed to accusations of mismanagement and negligence.  The audit makes the relationship between the City of Portland and Portland Streetcar Inc. sound like a social club operating with the veneer of business management and civic responsibility.  The only thing public seems to be the source of funds for the sloppy management of PSI.  With further investigation, it would be nice to learn the level of special interests and cronyism involved in PSI's functions for its almost 20 years of operation.  

It is worth noting here that PSI's only Director of Operations from it's beginning in 1995 until he quit last month has been Rick Gustafson.  Gustafson is also a principal in Shiels Oblitz Johnson where he has worked since 1987.  SOJ is involved in the Portland Streetcar and other transportation and development projects in the region.  SOJ manages the construction and operation of Portland's Streetcar Project.  Gustafson was also Metro's first Executive Officer in 1978 and served 2 terms until he left in 1987.  Several Lake Oswegans served on the PSI Board of Directors for a time prior to 2013:  Jack Hoffman, Judie Hammerstad and Lynn Peterson.  Anne Lininger went to work for Oregon Iron Works that manufactures streetcars for Portland Streetcar Inc. after she left her position on the Clackamas Board of Commissioners in 2013. *

Jack is on the Board of Directors of Portland Street Car Initiative, Inc.  He is also on the Board of Directors of the Portland State University Institute for Metropolitan Studies.  Jack is a past member of the Executive Committee of the Local District Council of the Urban Land Institute. In 2006, Oregon Super Lawyers recognized Jack as a Super Lawyer in Land Use/Zoning.  

Judie was the founder and chair of the Community Streetcar Coalition, a national organization that promotes streetcar projects, and was a member of the board for Portland Streetcar, Inc. She is especially dedicated to bringing the streetcar from Portland to Lake Oswego. She also serves on the Marylhurst University Board of Trustees. She holds a bachelor's degree in history from the University of Oregon.

Clackamas-based Oregon Iron Works hired former Clackamas County Commissioner Ann Lininger to join its legal team.

Julie Gustafson is, as of September 2011, assistant community relations manager for Portland Streetcar, a task she performs on contract as an employee of Shiels Obletz Johnsen. She is also the daughter of Portland Streetcar Executive Director Rick Gustafson.