Chicago Agency Overbilling U.S. Told to Change Mileage Claims

The Chicago Transit Authority collected more federal aid than it should have after inflating mileage covered by its bus routes, the U.S. Transportation Department said.

The Federal Transit Administration in April ordered the Chicago system to revise its 2011 tally of revenue-producing miles, which helps determine U.S. funding, and to change the way it counts mileage from now on, FTA Administrator Peter Rogoff said in a statement. Chicago’s public-transportation system is the third-largest in the U.S. by bus ridership.

“FTA has no indication that the CTA used any of the formula funds for anything other than eligible purposes to provide needed transit services to the public,” Rogoff said.

Cause of Action, a Washington-based research organization, in a report last week suggested the federal government was slow to investigate “Chicago-style fraud” at the authority because Transportation Department General Counsel Robert Rivkin held the same post at CTA from 2001 to 2004 and Valerie Jarrett, a senior adviser to President Barack Obama, was chairman of the agency’s board from 1995 to 2003.

The Cause of Action report cited a 2007 Illinois state audit that said Chicago’s transit system may have received as much as $5 million a year in extra U.S. funding for as long as 30 years. After its investigation, the FTA said the amount was closer to $700,000 to $800,000 a year.

Fraud Accusation

Chicago counted the distance between a bus garage and the beginning or end of scheduled routes as revenue-producing miles, Rogoff said. It was told in April to stop counting those so- called deadhead miles.

Including deadhead miles boosted funding by about 0.2 percent to 0.3 percent of CTA’s grant from the transit administration, Rogoff said. The U.S. didn’t ask Chicago to recalculate its bus mileage for previous years because the agency had acted in good faith, Rogoff said.

Cause of Action’s executive director, Daniel Epstein, previously worked for a foundation started by Koch Industries Inc. Chief Executive Officer Charles Koch, a billionaire contributor to Republican-leaning causes, and was counsel for Republican U.S. Representative Darrell Issa’s House Oversight and Government Reform Committee.

Rivkin and Jarrett weren’t aware of the U.S. investigation and neither played a role in the outcome, the Transportation Department said in a statement. While at CTA, neither person had any involvement with bus-mileage reporting, which was handled by the staff, said Brian Steele, a Chicago transit agency spokesman.

No Gaming

Federal money may have been paid out inappropriately back to 1982 and laws may have broken, Epstein said. His group asked the FTA, the Transportation Department’s inspector general and the Justice Department to investigate.

“What the FTA did not do was investigate whether there was wrongdoing in previous years,” Epstein said. “Their job is to refer these kinds of things to Inspector General Cal Scovel to investigate whether fraud occurred, and if fraud occurred, justice needs to be done.”

Federal authorities don’t think the Chicago Transit Authority was trying to game the system, Rogoff said. The mileage is among 21 factors the federal agency uses to allocate transit funding to local bus systems.

The Transportation Department’s inspector general is auditing the FTA’s oversight of the National Transportation Database, including the reporting of bus mileage, said David Wonnenberg, a spokesman for Scovel’s’s office.

The audit will examine FTA oversight “to ensure that submission from grant recipients and beneficiaries of these transit funds are complete, accurate and timely,” Wonnenberg said.

99 Percent

Wonnenberg declined to comment on whether the office is looking into fraud, citing a policy of not confirming or denying the existence of investigations.

The 2007 Illinois audit said CTA reported that its buses produced revenue on 99 percent of miles driven, compared with about 87 percent at comparable mass-transit systems.

The difference reflected the fact that Chicago’s bus garages are located close to the city’s routes and CTA has had a policy of picking up passengers if buses are flagged down between the garage and the start of a route, Steele said.

CTA has always followed the transit administration’s guidelines in reporting transit data, Steele said. FTA changed its definition of revenue service in 2011, which forced the recalculation, he said.

“We’ve used the same methodology for almost 30 years,” Steele said. “Each year, the FTA has verified that we’ve met all of the federal reporting requirements and has accepted the conclusions of our reports.”

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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