NOTE: This story has been updated to include responses from SANDAG Board Members received after original publication.
Board members at the San Diego County Association of Governments are calling for an independent examination into the agency’s use of overly aggressive revenue forecasts to sell Measure A, a tax increase voters rejected in November.
In emails sent to NBC 7 Investigates and the Voice of San Diego, board members said they were not informed of errors in the agency’s economic forecast, which were used to create revenue expectations for both Measure A and the agency’s existing sales tax, TransNet.
The board members submitted a letter to SANDAG requesting an “independent examination of all the materials and personnel relevant to the issue,” following a series of revelations from Voice of San Diego that SANDAG staff members knew of the incorrect revenue forecasts months before Measure A was put on the ballot, but went forward with the incorrect projection anyway.
“I have no remembrance of having been informed of any of this,” Bill Wells, City of El Cajon Mayor and SANDAG Board Member said. “I learned about this from the VOSD article.”
Steve Vaus, City of Poway Mayor and SANDAG Board Member, told NBC 7 Investigates and VOSD the same thing. “I was not aware of the Measure A revenue forecast discrepancies until reading coverage of the issue earlier this month.”
In a letter, to SANDAG Board Chair Ron Roberts, Vaus, Wells and five fellow board members, Dianne Jacob, Richard Bailey, Catherine Blakespear, Kristine Alessio and Jerry Jones, are asking for an independent review into the incorrect revenue forecasts.
“None of us are suggesting the result of such an examination is a foregone conclusion - it may indeed exonerate SANDAG - but for the public to be well-served an impartial and thorough examination must be conducted,” Vaus, Wells and five fellow board members write to SANDAG Board Chair Ron Roberts. “At the very least we, and our constituents, need answers to the questions: Who knew about the revenue forecast discrepancies? When did they know? What was known? Who was the information shared with? Why wasn’t the Board or Executive Committee informed?”
Such a review, they write, “may be inconvenient; time-consuming and expensive. But the need to restore confidence in the agency is of the utmost importance.”
SANDAG is a regional agency that leads planning and transportation efforts for the region and conducts research on issues like population growth. The board is made up of elected officials throughout the county.
Measure A was a proposed half-cent tax for a period of 40 years. According to the measure, a portion of the funds raised would have gone to specific transit projects throughout the county.
Prior to the November election, SANDAG Officials including board chair and County Supervisor Roberts told voters Measure A was expected to generate about $18 billion over 40 years. That dollar amount was included in a commercial that urged voters to approve Measure A.
“Collecting 23 cents a day from each person in the region could make a big difference. These pennies add up to $18 billion over 40 years. That is local money, that leveraged with federal and state dollars, could fund hundreds of projects to keep San Diego Moving forward,” one commercial touted.
Newly obtained emails show SANDAG staff, specifically, SANDAG chief economist Ray Major and a technical services staff member, became aware, as early as 2015, that the $18 billion was unrealistic.
The formula used to calculate estimated income growth and taxable retail sales estimates were incorrect and too high.
In a written statement published by the Union-Tribune, SANDAG Executive Director Gary Gallegos said, “The Measure A revenue estimate was created separately by long-time agency economist Marney Cox...It wasn’t until November that staff identified the root cause and were able to conclude there was an error in the agency’s forecast model that had caused the income growth, and therefore the taxable retail sales estimates, to be high. These numbers had been used in the process of calculating the Measure A revenue forecast.”
In October, Voice of San Diego learned SANDAG’s economic forecast for an existing sales tax called Transnet has collected 25 percent less revenue than it promised voters. The economic forecast is the formula used to predict how much money will come in to pay for big projects.
In December, SANDAG adopted a new, more conservative revenue forecast for the remainder of TransNet. According to that forecast, TransNet would end up bringing in around $9 billion for transportation projects, $5 billion less than voters were told when it was on the ballot more than a decade ago.
In a report to its board members in December, SANDAG staff said in order to finish all the highway expansion, new transit lines and other transportation projects promised in the 2004 Transnet tax, it would need to find as much as $17.5 billion from unknown federal and state sources.
SANDAG used the same formula to come up with the numbers for Measure A.
“Given the facts, they should in their periodic disclosures, their continuing disclosures and official public statements, they should be telling this story,” Peter Kiernan, an attorney with Schiff Harden who specializes in public finance and infrastructure, said. “They have to come clean on this. It’s very dramatic.”
In a previous statement, Helen Gao, a spokeswoman for SANDAG said “...revenue forecasts by their very nature are an educated guess of what might happen in the future. What the agency did become aware of in December 2015 was that its computer model was producing aggressive forecasts for taxable retail sales. Taxable retail sales estimates are one of a large number of factors that went into revenue forecasting for Measure A.”
Earlier this month, NBC 7 Investigates and Voice of San Diego sent a letter to each SANDAG board member asking them if and when they became aware of the incorrect revenue forecasts and what they, as board members plan to do about it.
Click here to read the letter.
Click here to see who else is a SANDAG board member.
According to Gallegos, SANDAG has or will generate an independent forecast for TransNet sales tax program, make changes to employee positions, ask more experts to review its next growth, provide more updates to the TransNet taxpayer oversight group and develop forecasts with a range of possible outcomes to better capture uncertainty.
An agenda for SANDAG’s February 24 meeting shows the board will be provided background information and asked to provide feedback on SANDAG’sforecasting process and sales tax revenue projections.