Existing law establishes the San Francisco Bay Area Rapid Transit District, governed by a board of directors, with specified powers and duties relative to the construction and operation of a rapid transit system. Under existing law, the officers of the district consist of the members of the board, a secretary, a general manager, a general counsel, a treasurer, a controller, and other officers, assistants, and deputies that the board may provide for by ordinance or resolution, as specified. Existing law requires the board to appoint, and authorizes the board to remove, the secretary, the general manager, the general counsel, the treasurer, and the controller. Existing law requires all other officers and employees of the district to be appointed by, and to serve at the pleasure of, the general manager.

This bill would eliminate the positions of the treasurer and controller, would create the position of the chief financial officer subject to appointment and removal by the general manager, would transfer all of the duties previously assigned to the treasurer to the chief financial officer, and would make other related changes in this regard. The bill would authorize the general manager to designate other financial personnel to undertake any of the duties or responsibilities assigned to the chief financial officer.

Existing law establishes the San Francisco Bay Area Rapid Transit District, governed by a board of directors, with specified powers and duties relative to the construction and operation of a rapid transit system. Under existing law, the officers of the district consist of the members of the board, a secretary, a general manager, a general counsel, a treasurer, a controller, and other officers, assistants, and deputies that the board may provide for by ordinance or resolution, as specified. Existing law requires the board to appoint, and authorizes the board to remove, the secretary, the general manager, the general counsel, the treasurer, and the controller. Existing law requires all other officers and employees of the district to be appointed by, and to serve at the pleasure of, the general manager.

This bill would eliminate the positions of the treasurer and controller, would create the position of the chief financial officer subject to appointment and removal by the general manager, would transfer all of the duties previously assigned to the treasurer to the chief financial officer, and would make other related changes in this regard. The bill would authorize the general manager to designate other financial personnel to undertake any of the duties or responsibilities assigned to the chief financial officer.

Existing law establishes the San Francisco Bay Area Rapid Transit District, governed by a board of directors, with specified powers and duties relative to the construction and operation of a rapid transit system. Under existing law, the officers of the district consist of the members of the board, a secretary, a general manager, a general counsel, a treasurer, a controller, and other officers, assistants, and deputies that the board may provide for by ordinance or resolution, as specified. Existing law requires the board to appoint, and authorizes the board to remove, the secretary, the general manager, the general counsel, the treasurer, and the controller. Existing law requires all other officers and employees of the district to be appointed by, and to serve at the pleasure of, the general manager.

This bill would eliminate the positions of the treasurer and controller as specifically designated officers of the district and as positions subject to appointment and removal by the board. The bill would also eliminate specified qualifications applicable to the controller. controller, would create the position of the chief financial officer subject to appointment and removal by the general manager, would transfer all of the duties previously assigned to the treasurer to the chief financial officer, and would make other related changes in this regard. The bill would authorize the general manager to designate other financial personnel to undertake any of the duties or responsibilities assigned to the chief financial officer.

Existing law establishes the San Francisco Bay Area Rapid Transit District, governed by a board of directors, with specified powers and duties relative to the construction and operation of a rapid transit system. Under existing law, the officers of the district consist of the members of the board, a secretary, a general manager, a general counsel, a treasurer, a controller, and other officers, assistants, and deputies that the board may provide for by ordinance or resolution, as specified. Existing law requires the board to appoint, and authorizes the board to remove, the secretary, the general manager, the general counsel, the treasurer, and the controller. Existing law requires all other officers and employees of the district to be appointed by, and to serve at the pleasure of, the general manager.

This bill would eliminate the treasurer and controller as specifically designated officers of the district and as positions subject to appointment and removal by the board. The bill would also eliminate specified qualifications applicable to the controller.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2325

Author:(Lee)

As Amended Ver:May 30, 2024

Majority vote

SUMMARY

This bill eliminates the treasurer and controller as specifically designated officers of the Bay Area Rapid Transit District (BART) and as positions subject to appointment and removal by the District Board. This bill creates the position of the chief financial officer (CFO), subject to appointment and removal by the general manager and transfers all duties from the eliminated positions to the CFO.

Senate Amendments

1. Require the general manager to appoint a CFO to take over the duties of the eliminated positions, as specified, and allow the general manger to designate other financial personnel to undertake any of the duties or responsibilities assigned to the CFO.
2. Make numerous conforming and technical changes.

COMMENTS

Bay Area Rapid Transit District. BART is a special district created by the State of California consisting of Alameda County, Contra Costa County, Santa Clara County, San Mateo County and the City and County of San Francisco. BART connects San Francisco with cities in the East Bay and northern San Mateo County operating on five lines, 131 miles of track with 50 stations in five counties. According to BART, ridership has been impacted by the COVID-19 pandemic and remote work trends in the Bay Area. Prior to the pandemic, BART served 405,000 trips on an average weekday. Bart was formed by the Legislature in 1957 and opened for service in 1972. BART currently has a nine-member board of directors directly elected by its nine election districts.

BART Inspector General. Senate Bill 595 (Beall), Chapter 650, Statutes of 2017, which authorized Regional Measure 3 (RM3), also created the BART IG. The measure, which raised toll rates on the Bay Area's seven state-owned bridges, was approved by voters in 2018 in the City and County of San Francisco, Alameda, Contra Costa, Marin, Napa, San Mateo, Santa Clara, Solano, and Sonoma Counties.

The IG was established to ensure BART makes effective use of bridge toll and other revenue and operates efficiently, effectively, and in compliance with applicable federal and state laws. Duties and responsibilities for the BART IG include, among others, conducting fraud and waste investigations, conducting audits, making recommendations to improve the efficiency and effectiveness of BART programs and operations, identifying opportunities to improve the data used to determine project resource allocations, and identifying and recommending best practices in the delivery of capital projects.

In the IG's Fiscal Year 2023 Annual Report to the California Legislature, the IG noted that "We determined that the District would benefit by consolidating financial operations under a Chief Financial Officer (CFO) within the span of control of the General Manager. A CFO structure will assist BART with its improvement efforts and better position the District to be more flexible and responsive to changes in transit and the economy, and make the most of its revenues." The IG also stated that, "Management has hired a consulting team to develop options and scenarios for a financial organizational structure based on the recommendation from the OIG's audit. These options along with a recommendation will be shared with the Financial Structure Ad Hoc Committee (see below) and the Board of Directors. The consulting team will provide a roadmap for implementing the recommended structure, including addressing change management. Staff is working to identify an author to carry legislation for amending the BART Act, which is required to place a Chief Financial Officer (CFO) position under the span of control of the General Manager." The expected implantation of this IG recommendation is July 2025.

According to the Author

According to the author, "This bill will allow the BART system to improve its financial management structure by consolidating responsibility in a Chief Financial Officer (CFO) that reports to the district's General Manager. This aligns with the Inspector General's recommendation in their 2023 report to the Legislature. To explain this recommendation, the Inspector General states, 'We determined that the District would benefit by consolidating financial operations under a Chief Financial Officer (CFO) within the span of control of the General Manager. A CFO structure will assist BART with its improvement efforts and better position the District to be more flexible and responsive to changes in transit and the economy, and make the most of its revenues."

Arguments in Support

According to BART, "Under existing law, the Board of Directors of the San Francisco Bay Area Rapid Transit District (BART) may appoint and remove specific officers, including a Controller-Treasurer. Currently, BART's Controller-Treasurer has full authority over accounting, treasury, and risk management functions, while the General Manager oversees operating and capital budgets, financial planning, financial reporting, grant administration, funding strategies, financial analysis, and other related functions.

"This financial structure is unique compared to other transit agencies and is not optimal for efficient and transparent financial management. After an audit of BART's financial functions by the Office of the BART Inspector General and consultations with stakeholders including an ad-hoc Financial Structure Committee of the Board of Directors, the creation of a Chief Financial Officer (CFO) position, reporting to the General Manager, was recommended and unanimously supported by the Board. A CFO would oversee all functions currently under the Controller-Treasurer, in addition to the financial activities under the General Manager's purview. The CFO will also have the authority to implement strategic business changes to streamline BART's financial forecasting, budgeting, and reporting of financial data."

"AB 2325 addresses the bifurcated reporting lines of BART's financial functions by removing the Controller-Treasurer as a Board-appointed officer. This allows for the merging of all financial functions under the CFO. The new structure will create greater accountability under the General Manager and is part of BART's commitment to using our limited financial resources in the most efficient manner possible. Author amendments, to be taken in your committee, make conforming changes to BART's statute by replacing references to the 'treasurer' with 'chief financial officer.' Amendments also clarify the General Manager shall appoint the CFO and may designate other financial personnel to perform duties assigned to that position."

Arguments in Opposition

None on file.

FISCAL COMMENTS

None.

VOTES:

ASM LOCAL GOVERNMENT: 9-0-0

YES: Juan Carrillo, Waldron, Essayli, Haney, Kalra, Pacheco, Ramos, Ward, Wilson

ASSEMBLY FLOOR: 65-0-15

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk‑Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

ABS, ABST OR NV: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Schiavo, Ting, Wallis

SENATE FLOOR: 36-0-4

YES: Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Eggman, Glazer, Gonzalez, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ABS, ABST OR NV: Allen, Alvarado-Gil, Durazo, Grove

UPDATED

VERSION: May 30, 2024

CONSULTANT: Jimmy MacDonald / L. GOV. / (916) 319-3958 FN: 0003577

 CONSENT  

Bill No: AB 2325

Author: Lee (D)

Amended: 5/30/24 in Senate

Vote: 21

SENATE TRANSPORTATION COMMITTEE: 15-0, 6/11/24

AYES: Cortese, Niello, Allen, Archuleta, Becker, Blakespear, Dahle, Dodd, Gonzalez, Limón, Newman, Nguyen, Portantino, Seyarto, Umberg

ASSEMBLY FLOOR: 65-0, 5/9/24 (Consent) - See last page for vote

SUBJECT: San Francisco Bay Area Rapid Transit District: officers and employees: designation and appointment

SOURCE: Bay Area Rapid Transit District

DIGEST:

This bill eliminates the treasurer and controller as specifically designated officers of the Bay Area Rapid Transit District and as positions subject to appointment and removal by the District Board. This bill creates the position of the chief financial officer, (CFO) subject to appointment and removal by the general manager and transfers all duties from the eliminated positions to the CFO.

ANALYSIS:

Existing law:

1. Requires the officers of the Bay Area Rapid Transit District (BART) to consist of the members of the board of directors; a president and a vice president of the board, each of whom shall be a member of the board; a secretary, a general manager, a general counsel, a treasurer, a controller, and such other or subordinate officers, assistants, and deputies as the board may deem necessary and provide for by ordinance or resolution. The person appointed controller shall have been actively engaged in the practice of accounting for not less than 7 years preceding his appointment. (Public Utilities Code (PUC) §28810)
2. Requires the secretary, general manager, general counsel, treasurer, and controller of BART to be appointed by and may be removed by the affirmative votes of a majority of the members of the board of directors. All other officers and employees shall be appointed by the general manager and shall serve at his pleasure, as specified. (PUC §28811)
3. Establishes an independent office of the BART Inspector General (IG) to ensure that BART makes effective use of bridge toll revenue and other revenue and operates efficiently, effectively, and in compliance with applicable federal and state laws. (PUC § 28840)
4. Requires the treasurer to obtain consent of the board in order to exercise their authority to: (PUC § 28818)
   1. Authorize any state or national bank, a federally chartered or state chartered savings and loan association, or a trust company authorized by the state, to receive as their agent deposits of any securities acquired by the district;
   2. Place and maintain for safekeeping with any of these entities any securities owned by the district; or
   3. Make deposits of securities for safekeeping.

This bill:

1. Removes the requirement for the officers of BART to include a treasurer and controller.
2. Removes the requirement that the person appointed controller of BART to have been actively engaged in accounting for at least seven years and removes the requirement that the controller and treasurer of BART be appointed or removed by the votes of a majority of the members of the board of directors.
3. Requires the general manager to appoint a chief financial officer (CFO) and authorizes the general manager to designate other financial personnel to undertake any of the duties or responsibilities assigned to the CFO.
4. Reassigns the duties of the treasurer and controller to the CFO, and requires the CFO to obtain consent from the general manager, rather than the entire board, unless otherwise deemed necessary, in order to fulfill specified duties.
5. Makes other technical and clarifying changes.

Comments

1. Purpose of bill. According to the author, “This bill will allow the BART system to improve its financial management structure by consolidating responsibility in a Chief Financial Officer (CFO) that reports to the district’s General Manager. This aligns with the Inspector General’s recommendation in their 2023 report to the Legislature. To explain this recommendation, the Inspector General states, “We determined that the District would benefit by consolidating financial operations under a Chief Financial Officer (CFO) within the span of control of the General Manager. A CFO structure will assist BART with its improvement efforts and better position the District to be more flexible and responsive to changes in transit and the economy, and make the most of its revenues.””
2. Bay Area Rapid Transit District. BART is a special district created by the State of California consisting of Alameda County, Contra Costa County, Santa Clara County, San Mateo County and the City and County of San Francisco. BART connects San Francisco with cities in the East Bay and northern San Mateo County operating on five lines, 131 miles of track with 50 stations in five counties. BART was formed by the Legislature in 1957 and opened for service in 1972.

Prior to the pandemic, BART served 405,000 trips on an average weekday. Since the pandemic, BART and other transit operators in the state have experienced huge declines in ridership. In 2022, BART’s ridership was only 29% of 2019 levels, with the continuance of remote work being a major factor. Throughout the pandemic, California’s transit operators sustained service with help from federal COVID-19 relief packages, with BART receiving roughly $1.6 billion. However, with federal funds running out, BART and others are looking to the state for financial assistance. Specifically, BART is predicting operating deficits of $140 million by fiscal year 2024-2025 and up to $290 million for fiscal year 2025-2026. The Legislature is currently discussing possible transit operating assistance as part of the state budget process.

BART is governed by a nine-member board of directors directly elected by its nine election districts. The chief executive and administrative officer of the District is the General Manager, a position appointed by and responsible to the Board of Directors. The General Manager is responsible for general oversight and leadership to ensure the development and delivery of BART’s programs and projects, as well as coordination and consultation with BART’s internal and external stakeholders. In addition to the General Manager, BART’s executive structure includes five other officers that report directly to the Board: the

Controller-Treasurer, General Counsel, District Secretary, Independent Police Auditor, and Inspector General. With the exception of these five offices or departments, the bulk of the District’s operations report directly to the General Manager, including nine executive-level officers. While current law establishes a Controller and a Treasurer as positions, it permits the Board of Directors to combine the positions. Board Resolution No. 1958 combined the offices of the Treasurer and Controller into the single Office of the Controller-Treasurer.

1. BART IG. Senate Bill 595 (Beall, Chapter 650, Statutes of 2017), which authorized Regional Measure 3, also created the BART IG. The measure, which raised toll rates on the Bay Area’s seven state-owned bridges, was approved by voters in 2018 in the City and County of San Francisco, Alameda, Contra Costa, Marin, Napa, San Mateo, Santa Clara, Solano, and Sonoma Counties.

The IG was established to ensure BART makes effective use of bridge toll and other revenue and operates efficiently, effectively, and in compliance with applicable federal and state laws. Duties and responsibilities for the BART IG include, conducting fraud and waste investigations, conducting audits, making recommendations to improve the efficiency and effectiveness of BART programs and operations, identifying opportunities to improve the data used to determine project resource allocations, and identifying and recommending best practices in the delivery of capital projects.

1. Chief future officer. Every year the office of the BART IG submits a report to the Legislature. In 2022, the IG contracted with Sjoberg Evashenk Consulting to complete a performance audit of the organizational structure of the financial operations of BART. Based on the findings of this audit, in the IG’s 2023 annual report to the Legislature they suggested replacing BART’s current financial management structure with that of a CFO. This suggestion has been unanimously supported by the Board of Directors.

Currently, BART’s Controller-Treasurer has full authority over accounting, treasury, and risk management functions, while the General Manager oversees operating and capital budgets, financial planning, financial reporting, grant administration, funding strategies, financial analysis, and other related functions. This structure is unusual; the consulting firm evaluated 11 peer transit agencies and found that they all centralized financial operations under a single CFO or equivalent position. The firm found that a structure that unifies rather than bifurcates financial related functions is most likely to provide the flexibility, agility, and innovation required of BART over the next decades. One key benefit of consolidation would be to create greater accountability when one executive is responsible for all financial matters. A CFO structure reduces the risk of uncertainty of the Board not knowing which executive or manager to turn to for information or financial leadership.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 6/12/24)

Bay Area Rapid Transit District (source)

Bay Area Council

San Francisco Bay Area Planning & Urban Research Association

Seamless Bay Area

OPPOSITION: (Verified 6/12/24)

None received

ASSEMBLY FLOOR: 65-0, 5/9/24

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO VOTE RECORDED: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Schiavo, Ting, Wallis

Prepared by: Jacob O'Connor / TRANS. / (916) 651-4121

6/12/24 12:19:05

**** END ****

SENATE COMMITTEE ON TRANSPORTATION

Senator Dave Cortese, Chair

2023 - 2024 Regular

Bill No: AB 2325 Hearing Date: 6/11/2024

SUBJECT: San Francisco Bay Area Rapid Transit District: officers and employees: designation and appointment

DIGEST: This bill eliminates the treasurer and controller as specifically designated officers of the Bay Area Rapid Transit District and as positions subject to appointment and removal by the District Board. This bill creates the position of the chief financial officer, (CFO) subject to appointment and removal by the general manager and transfers all duties from the eliminated positions to the CFO.

ANALYSIS:

Existing law:

1. Requires the officers of the Bay Area Rapid Transit District (BART) to consist of the members of the board of directors; a president and a vice president of the board, each of whom shall be a member of the board; a secretary, a general manager, a general counsel, a treasurer, a controller, and such other or subordinate officers, assistants, and deputies as the board may deem necessary and provide for by ordinance or resolution. The person appointed controller shall have been actively engaged in the practice of accounting for not less than 7 years preceding his appointment. (PUC §28810)
2. Requires the secretary, general manager, general counsel, treasurer, and controller of BART to be appointed by and may be removed by the affirmative votes of a majority of the members of the board of directors. All other officers and employees shall be appointed by the general manager and shall serve at his pleasure, as specified. (PUC §28811)
3. Establishes an independent office of the BART Inspector General (IG) to ensure that BART makes effective use of bridge toll revenue and other revenue and operates efficiently, effectively, and in compliance with applicable federal and state laws. (PUC § 28840)
4. Requires the treasurer to obtain consent of the board in order to exercise their authority to: (PUC § 28818)
   1. Authorize any state or national bank, a federally chartered or state chartered savings and loan association, or a trust company authorized by the state, to receive as their agent deposits of any securities acquired by the district;
   2. Place and maintain for safekeeping with any of these entities any securities owned by the district; or
   3. Make deposits of securities for safekeeping.

This bill:

1. Removes the requirement for the officers of BART to include a treasurer and controller.
2. Removes the requirement that the person appointed controller of BART to have been actively engaged in accounting for at least seven years and removes the requirement that the controller and treasurer of BART be appointed or removed by the votes of a majority of the members of the board of directors.
3. Requires the general manager to appoint a chief financial officer (CFO) and authorizes the general manager to designate other financial personnel to undertake any of the duties or responsibilities assigned to the CFO.
4. Reassigns the duties of the treasurer and controller to the CFO, and requires the CFO to obtain consent from the general manager, rather than the entire board, unless otherwise deemed necessary, in order to fulfill specified duties.
5. Makes other technical and clarifying changes.

COMMENTS:

1. Purpose of bill. According to the author “This bill will allow the BART system to improve its financial management structure by consolidating responsibility in a Chief Financial Officer (CFO) that reports to the district’s General Manager. This aligns with the Inspector General’s recommendation in their 2023 report to the Legislature. To explain this recommendation, the Inspector General states, “We determined that the District would benefit by consolidating financial operations under a Chief Financial Officer (CFO) within the span of control of the General Manager. A CFO structure will assist BART with its improvement efforts and better position the District to be more flexible and responsive to changes in transit and the economy, and make the most of its revenues.””
2. Bay Area Rapid Transit District. BART is a special district created by the State of California consisting of Alameda County, Contra Costa County, Santa Clara County, San Mateo County and the City and County of San Francisco. BART connects San Francisco with cities in the East Bay and northern San Mateo County operating on five lines, 131 miles of track with 50 stations in five counties. BART was formed by the Legislature in 1957 and opened for service in 1972.

Prior to the pandemic, BART served 405,000 trips on an average weekday. Since the pandemic, BART and other transit operators in the state have experienced huge declines in ridership. In 2022, BART’s ridership was only 29% of 2019 levels, with the continuance of remote work being a major factor. Throughout the pandemic, California’s transit operators sustained service with help from federal COVID-19 relief packages, with BART receiving roughly $1.6 billion. However, with federal funds running out, BART and others are looking to the state for financial assistance. Specifically, BART is predicting operating deficits of $140 million by fiscal year 2024-2025 and up to $290 million for fiscal year 2025-2026. The Legislature is currently discussing possible transit operating assistance as part of the state budget process.

BART is governed by a nine-member board of directors directly elected by its nine election districts. The chief executive and administrative officer of the District is the General Manager, a position appointed by and responsible to the Board of Directors. The General Manager is responsible for general oversight and leadership to ensure the development and delivery of BART’s programs and projects, as well as coordination and consultation with BART’s internal and external stakeholders. In addition to the General Manager, BART’s executive structure includes five other officers that report directly to the Board: the

Controller-Treasurer, General Counsel, District Secretary, Independent Police Auditor, and Inspector General. With the exception of these five offices or departments, the bulk of the District’s operations report directly to the General Manager, including nine executive-level officers. While current law establishes a Controller and a Treasurer as positions, it permits the Board of Directors to combine the positions. Board Resolution No. 1958 combined the offices of the Treasurer and Controller into the single Office of the Controller-Treasurer.

1. BART IG. Senate Bill 595 (Beall, Chapter 650, Statutes of 2017), which authorized Regional Measure 3, also created the BART IG. The measure, which raised toll rates on the Bay Area’s seven state-owned bridges, was approved by voters in 2018 in the City and County of San Francisco, Alameda, Contra Costa, Marin, Napa, San Mateo, Santa Clara, Solano, and Sonoma Counties.

The IG was established to ensure BART makes effective use of bridge toll and other revenue and operates efficiently, effectively, and in compliance with applicable federal and state laws. Duties and responsibilities for the BART IG include, conducting fraud and waste investigations, conducting audits, making recommendations to improve the efficiency and effectiveness of BART programs and operations, identifying opportunities to improve the data used to determine project resource allocations, and identifying and recommending best practices in the delivery of capital projects.

1. Chief future officer. Every year the office of the BART IG submits a report to the Legislature. In 2022, the IG contracted with Sjoberg Evashenk Consulting to complete a performance audit of the organizational structure of the financial operations of BART. Based on the findings of this audit, in the IG’s 2023 annual report to the Legislature they suggested replacing BART’s current financial management structure with that of a CFO. This suggestion has been unanimously supported by the Board of Directors.

Currently, BART’s Controller-Treasurer has full authority over accounting, treasury, and risk management functions, while the General Manager oversees operating and capital budgets, financial planning, financial reporting, grant administration, funding strategies, financial analysis, and other related functions. This structure is unusual; the consulting firm evaluated 11 peer transit agencies and found that they all centralized financial operations under a single CFO or equivalent position. The firm found that a structure that unifies rather than bifurcates financial related functions is most likely to provide the flexibility, agility, and innovation required of BART over the next decades. One key benefit of consolidation would be to create greater accountability when one executive is responsible for all financial matters. A CFO structure reduces the risk of uncertainty of the Board not knowing which executive or manager to turn to for information or financial leadership.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 5, 2024.)

SUPPORT:

Bay Area Rapid Transit District (sponsor)

Bay Area Council

San Francisco Bay Area Planning & Urban Research Association (SPUR)

Seamless Bay Area

OPPOSITION:

None Received

-- END --

Date of Hearing: May 1, 2024

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Juan Carrillo, Chair

ABPCA Bill Id:AB 2325 (

Author:Lee) – As Introduced Ver:February 12, 2024

SUBJECT: San Francisco Bay Area Rapid Transit District: officers: designation and appointment.

SUMMARY: Eliminates the treasurer and controller as specifically designated officers of the Bay Area Rapid Transit District (BART) and as positions subject to appointment and removal by the BART Board. Specifically, this bill:

1. Removes the treasurer and controller as specifically designated officers of BART.
2. Eliminates the treasurer and controller as positions subject to appointment and removal by the BART Board.
3. Deletes the requirement that the person appointed controller to have been actively engaged in the practice of accounting for not less than 7 years next preceding their appointment.
4. Makes other technical and clarifying changes.

EXISTING LAW:

1. Requires the officers of BART to consist of the members of the board of directors; a president and a vice president of the board, each of whom shall be a member of the board; a secretary, a general manager, a general counsel, a treasurer, a controller, and such other or subordinate officers, assistants, and deputies as the board may deem necessary and provide for by ordinance or resolution. The general counsel shall be a person admitted to practice law in the Supreme Court of California and shall have been actively engaged in the practice of law for not less than 10 years next preceding his appointment. The person appointed controller shall have been actively engaged in the practice of accounting for not less than 7 years next preceding his appointment (PUC 28810).
   
2. Requires the secretary, general manager, general counsel, treasurer, and controller of BART to be appointed by and may be removed by the affirmative votes of a majority of the members of the board of directors. All other officers and employees shall be appointed by the general manager and shall serve at his pleasure, as specified (PUC § 28811).
   
3. Establishes an independent office of the BART Inspector General (IG) to ensure that BART makes effective use of bridge toll revenue and other revenue and operates efficiently, effectively, and in compliance with applicable federal and state laws (PUC § 28840).
   

FISCAL EFFECT: None.

COMMENTS:

1. Bay Area Rapid Transit District. BART is a special district created by the State of California consisting of Alameda County, Contra Costa County, Santa Clara County, San Mateo County and the City and County of San Francisco. BART connects San Francisco with cities in the East Bay and northern San Mateo County operating on five lines, 131 miles of track with 50 stations in five counties. According to BART, ridership has been impacted by the COVID-19 pandemic and remote work trends in the Bay Area. Prior to the pandemic, BART served 405,000 trips on an average weekday. Bart was formed by the Legislature in 1957 and opened for service in 1972. BART currently has a nine-member board of directors directly elected by its nine election districts.
   
2. BART Inspector General. Senate Bill 595 (Beall), Chapter 650, Statutes of 2017, which authorized Regional Measure 3 (RM3), also created the BART IG. The measure, which raised toll rates on the Bay Area’s seven state-owned bridges, was approved by voters in 2018 in the City and County of San Francisco, Alameda, Contra Costa, Marin, Napa, San Mateo, Santa Clara, Solano, and Sonoma Counties.

The IG was established to ensure BART makes effective use of bridge toll and other revenue and operates efficiently, effectively, and in compliance with applicable federal and state laws. Duties and responsibilities for the BART IG include, among others, conducting fraud and waste investigations, conducting audits, making recommendations to improve the efficiency and effectiveness of BART programs and operations, identifying opportunities to improve the data used to determine project resource allocations, and identifying and recommending best practices in the delivery of capital projects.

In the IG’s Fiscal Year 2023 Annual Report to the California Legislature, the IG noted that “We determined that the District would benefit by consolidating financial operations under a Chief Financial Officer (CFO) within the span of control of the General Manager. A CFO structure will assist BART with its improvement efforts and better position the District to be more flexible and responsive to changes in transit and the economy, and make the most of its revenues.” The IG also stated that, “Management has hired a consulting team to develop options and scenarios for a financial organizational structure based on the recommendation from the OIG's audit. These options along with a recommendation will be shared with the Financial Structure Ad Hoc Committee (see below) and the Board of Directors. The consulting team will provide a roadmap for implementing the recommended structure, including addressing change management. Staff is working to identify an author to carry legislation for amending the BART Act, which is required to place a Chief Financial Officer (CFO) position under the span of control of the General Manager.” The expected implantation of this IG recommendation is July 2025.

1. Bills Summary and Author’s Statement. This bill eliminates the treasurer and controller as specifically designated officers of the district and as positions subject to appointment and removal by the board. This bill also makes technical and conforming changes to law governing BART. BART is the sponsor of this bill.
   

According to the author, “This bill will allow the BART system to improve its financial management structure by consolidating responsibility in a Chief Financial Officer (CFO) that reports to the district’s General Manager. This aligns with the Inspector General’s recommendation in their 2023 report to the Legislature.

“To explain this recommendation, the Inspector General states, ‘We determined that the District would benefit by consolidating financial operations under a Chief Financial Officer (CFO) within the span of control of the General Manager. A CFO structure will assist BART with its improvement efforts and better position the District to be more flexible and responsive to changes in transit and the economy, and make the most of its revenues.’ (p. 7)”

1. Arguments in Support. According to BART, sponsor of this bill, “Currently, BART’s Controller-Treasurer has full authority over accounting, treasury, and risk management functions, while the General Manager oversees operating and capital budgets, financial planning, financial reporting, grant administration, funding strategies, financial analysis, and other related functions.
   

“This financial structure is unique compared to other transit agencies and is not optimal for efficient and transparent financial management. After an audit of BART’s financial functions by the Office of the BART Inspector General and consultations with stakeholders including an ad-hoc Financial Structure Committee of the Board of Directors, the creation of a Chief Financial Officer (CFO) position, reporting to the General Manager, was recommended and unanimously supported by the Board. A CFO would oversee all functions currently under the Controller-Treasurer, in addition to the financial activities under the General Manager’s purview. The CFO will also have the authority to implement strategic business changes to streamline BART’s financial forecasting, budgeting, and reporting of financial data.

“AB 2325 addresses the bifurcated reporting lines of BART’s financial functions by removing the Controller-Treasurer as a Board-appointed officer. This allows for the merging of all financial functions under the CFO. The new structure will create greater accountability under the General Manager and is part of BART’s commitment to using our limited financial resources in the most efficient manner possible. In addition to the language in AB 2325, BART is seeking amendments to replace references to the ‘treasurer’ within the Public Utilities Code with ‘chief financial officer or other finance personnel designated by the general manager’ to conform with the District’s new financial structure.”

1. Arguments in Opposition. None on file.
   

REGISTERED SUPPORT / OPPOSITION:

Support

Bay Area Rapid Transit District [SPONSOR]

Bay Area Council

San Francisco Bay Area Planning & Urban Research Association (SPUR)

Seamless Bay Area

Opposition

None on file

Analysis Prepared by: Jimmy MacDonald / L. GOV. / (916) 319-3958