Town and Country Transit 'headed in the right direction'

On a Monday in April 2008, PennDOT received a call from Town and Country Transit.

By Friday, the caller said, we aren't going to be able to make payroll, recalled Toby Fauver, deputy secretary of transportation.

PennDOT began work immediately to advance money to the transportation agency so its employees could receive paychecks, Fauver said. It was the first time that PennDOT was made aware of the financial problems that had been plaguing Town and Country for several years.

Town and Country has been under state scrutiny since it was revealed early this year that the transportation agency was hundreds of thousands of dollars in debt. Vendors and contractors had been left unpaid and insurance policies were in danger of cancellation.

Since that time, the company's situation has improved, and consultants working with the agency hope to soon have much of its financial trouble under control. A balanced budget was passed this summer for the 2009-10 fiscal year.

Though the call for help to make payroll happened last year, Fauver said Town and Country's financial troubles began much earlier.

The beginning

Six or seven years ago, Town and Country began running a deficit in its shared-ride service, Fauver said.

Instead of increasing fares or asking for help, Fauver said, the agency began to transfer subsidies for the fixed-route service into the shared-ride operation.

"Every year that they didn't do something to fix shared-ride," the hole got deeper, Fauver said.

Eventually, the money Town and Country got for the fixed-route service wasn't enough to cover the losses on the shared-ride side, Fauver said.

"They needed more money," he said. "They began to spend reserve funding that they had."

In time, that ran out, too, leaving a "huge hole in shared-ride," said Robert Sharp, chief of the rural and intercity transportation division.

In order to cover basic operating costs, Town and Country took out a line of credit from a bank last summer, Fauver said. They started with $150,000 and later added $50,000.

The agency also went to a second bank and opened a second mortgage on its building, as well as a line of credit, garnering $200,000, Sharp said.

But despite the $400,000 borrowed, the agency has "nothing tangible to show for it," Fauver said.

History and inner workings

Town and Country's legal name is Mid-County Transit Authority. Formed in 1979, MCTA began operating under Town and Country Transit on March 7, 2002, according to PennDOT.

Town and Country operates two systems: shared-ride and fixed-route. Shared-ride consists of small buses and other vehicles that transport county residents to medical appointments, senior centers and other destinations.

Passengers schedule pick-up and drop-off times for the service. Outside contractors provide some shared-ride service, but Town and Country is scheduling more trips in-house, which is saving money.

Fixed-route consists of buses that run throughout the central county area on a predesignated time schedule. The bus routes were pared down earlier this year to better serve riders and save money.

PennDOT is responsible for 38 fixed-route systems in the state, most of which are urban, Fauver said. There are 14 "pure rural" systems.

Town and Country is funded by state and federal money and matching funds from member municipalities. The total local match rate is 15 percent of the state's funding for fixed-route service and increases by five percent annually.

During the 2008-09 fiscal year, Town and Country expected to receive $28,654 from member municipalities and the county. Based on the requirement, the local match should be $75,342.

For the 2009-10 year, the projected match is $29,806.35, which is about 40 percent of the requirement.

Bring in the help

Consultants were sent to Town and Country last year after PennDOT was contacted, Fauver said, and they discovered the agency owed more than $300,000. Of that, $190,000 was owed "to vendors that they couldn't pay," Fauver said, for things such as fuel and taxis.

"In order to conserve, (Town and Country) quit paying bills," he said.

The consultants made recommendations and offered technical help to the management team from May to August 2008, Fauver said.

Consultants Laurie Andrews and Lynn Colosi worked with the agency from May to August 2008, helping the agency's management and board make changes to build financial stability, the consultants said.

It was a difficult time for the consultants, Colosi said, because there wasn't much cooperation.

"We weren't embraced by management, staff or the board," she said.

At a follow-up meeting last year with Town and Country, Fauver said it was made clear that neither the board nor management wanted the consultants there any longer. Then, he said, it seemed that decisions were being made to resolve the agency's debt.

When the consultants arrived last year, board President Henry Mores said the board was in favor of the help. Near the end of the summer, the consultants' contract was up and they left, he said. Then, the board understood that things were looking better for Town and Country, he said.

Tracking the progress

After the consultants' departure, PennDOT began monitoring Town and Country's financial situation.

The first quarter report — covering July, August and September 2008 — showed that Town and Country was operating on a $72,000 deficit, Fauver said. It wasn't a great figure, but officials decided to give it few months to let the changes reflect in the finances, he said.

By the second quarter report, Fauver saw that the deficit was not decreasing, he said.

"I personally started getting phone calls" from unpaid vendors, he said.

That led to meetings with PennDOT, legislators, the county commissioners and municipal officials in January and February to discuss ways to help the agency.

"We cannot continue to provide taxpayer dollars" to a state-funded agency "that by law is required to balance its budget," Fauver said.

Then-general manager Michael Johnston resigned on Feb. 13, amidst the meetings. When contacted for comment for this story, Johnston said he had no "time or inclination" to discuss the matter.

Return of the consultants

After the local meetings between PennDOT and officials, the board accepted the help of consultants at its Feb. 18 meeting.

On Feb. 23, Andrews and Colosi arrived at Town and Country for a six-month stint funded by PennDOT with the stipulation that they have the power of a general manager, Fauver said.

"I think the consultants will leave them with a good action plan," he said.

On March 11, Andrews and Colosi presented the board with an analysis of the agency's financial situation and a list of recommendations. The consultants found that the agency's property and liability insurance and workers' compensation insurance premiums were past due and in danger of being cancelled.

Several recommendations were approved by the board, including the search for a new general manager.

An original budget shortfall of $218,000 was reduced to $191,000 because of a decrease in fuel costs, the consultants said. Two primary vendors accounted for $177,000 of the outstanding debt, they said.

"It was immediately evident that TACT suffered from a poor image and estranged relationships with its community partners," the consultants wrote in a report. "Additionally, relationships between TACT and some of its vendors were adverse because of the continual, overdue payments owed to the vendors."

Management has since remedied relationships with vendors, the consultants said.

Financial situation a shock

Mores said he didn't know how deep of a hole Town and Country was in.

He was aware of some debt — Mores and former general manager Johnston had worked out payment plans with some vendors — but nothing like what was revealed.

"It was a surprise to me," he said. "It was to everybody on the board."

The board received monthly statements that appeared fine, Mores said.

"The reports that we were given every month ... everything looked good," he said. "There were a few places" with debt, but nothing that couldn't be fixed, he said.

Mores has been on the board for five years. He was reappointed president at June's meeting.

The board kept out of the agency's finances and left the management up to the people in charge because they were trusted, he said.

"We weren't really enlightened to the tightness of the financial ability of the organization," he said. "We had all the faith in the world in the management."

Mores said the financial standing is something the board should have been knowledgeable about, but was kept in the dark.

"We have great faith in Gerry (Miller, operations manager) and Patty (Lynn Baker, finance manager)," Mores said. "I don't know what they were being told by the general manager."

Fauver said the board was not made aware of all the bills.

"There was a lot of financial activity going on that the board was not aware of," he said. "Consequently, it had no idea of the company's dire financial situation until recently."

The board was aware of some organizations that were falling behind on payments, Mores said, which resulted in some debt for the authority.

"Bills weren't being paid (by Town and Country) because we weren't receiving money in from the other entities," he said. "We weren't reneging on anybody."

Payment plans were worked out and "everybody was willing to work with us," Mores said. "They knew times were tough for everybody."

"We are willing to work with anybody to keep things running," he said.

When Johnston approached him about a securing a bank loan, Mores said, he didn't consider the possibility of other ways to get the funds, such as government assistance.

Mores did question Johnston on the move, he said, but was shown that the agency appeared to be able to pay the money back without problem.

Town and Country continues to make payments on the borrowed money.

After meetings were called by PennDOT and Johnston's resignation, the board felt it was time for the consultants to step back in, Mores said.

"Everybody has been working together very well," he said.

Community communicates

At the meetings held by PennDOT, ideas were shared to better Town and Country by community leaders and lawmakers, but none were brought to fruition, causing frustration.

Before the meetings, State Rep. Jeff Pyle, R-Ford City, learned from PennDOT about Town and Country's problems that he described as a "blindside for everyone."

"Johnston had the board wrapped around his finger and had refused everything the consultants had told them to do," Pyle said he was told.

After that realization, he told board members to "either vote to do everything the consultants say or PennDOT is yanking all the funding," Pyle said.

He speculated on a reason Town and Country spiraled into debt.

"I think bills were being thrown in the trash," Pyle said. "I don't think the board knew."

"They had no accountability of mail," he said. "All mail was routed directly to Johnston."

Pyle cited financial mismanagement and a disconnect between the board and home municipalities as part of the problem.

Why keep it around?

Town and Country is an asset to the county, Mores said.

"How often in these days do you find somebody that you can count on to take you to the doctor's, take you to the grocery store?" Mores said. "The shared-ride gets the people who do not have a mode of transportation to the place where they need to be."

Residents with a more relaxed time schedule can catch the bus to predetermined destinations around the central county area, he said.

"It's very good for anybody who needs the service," he said.

The shared-ride system was causing the biggest problems, Colosi said, because invoices weren't being generated and the software was being used improperly. Those factors stunted a flow of payments from outside entities who pay for the service, she said.

"Had that all occurred, there never would have been a problem," she said.

It has been somewhat difficult throughout the year for the consultants to forge working relationships with staff and the board.

It took some time, but "the staff people love us," Colosi said.

"We're less viewed as the enemy now," Andrews added. "I think that it has been more well-received."

It has been difficult to get some members of the board to share those feelings, the consultants agreed. Training for the board can help them better understand their roles, transportation and the funding opportunities available to keep cash flowing in.

For example, money for a program for people with disabilities has been available for a few years, the consultants said, but the agency has never banked on it. The program now is being implemented.

The consultants are confident that the agency can turn into a success story after common practices are traded in for more efficient means of operation. A Web site was created, new decals placed on vehicles and an advertising program has been implemented, all under their direction.

Bringing the agency up to a respectable level is a goal of the consultants, Andrews said, "and I don't know that that was done in the past."

"It's possible for this agency of be a community asset," Colosi said. "I think its gloomy days are over."

The consultants expect Scott Kloes of Sewickley to begin work as general manager on Monday. An offer of employment was extended to him by the board Wednesday.

The board's original candidate for general manager backed out on his expected start date earlier this month.

'The last shot'

But if dark clouds stay over the Kittanning office, Town and Country won't stick around, Fauver said.

"This is the last shot for us," he said.

A few agencies around the state have had similar issues with rerouting subsidies, Fauver said, but the problem was fixed before it became unmanageable.

Every agency hits bumps and PennDOT tries to help as much as possible to keep them running and serving their communities, he said.

"All we ask is that they manage that money well," Fauver said. "I feel like we've done about everything we can do to help the agency along."

"They let things go and didn't do the work that was necessary to increase revenue ... on the shared-ride side," he said. "It didn't have to happen, but it did."

Pyle said he and other county officials will not let the shared-ride system fail if Town and Country doesn't survive.

"Shared-ride is easily the most important component of the Armstrong County transportation system," he said.

Management and officials involved have a positive outlook for the agency, provided it stays on the right track. Turning around a transportation system is not easy, but drastic changes have been made — it is up to authority management and the board to keep progressing.

"It's not rocket science to manage the system," Fauver said. "I believe the agency is headed in the right direction."