The San Diego Association of Governments paid its tolling contractor millions of dollars to operate the system that collects fees from drivers using the South Bay Expressway even though agency officials knew the software was riddled with bugs that caused incorrect accounting.
On Friday, the board that oversees the $1.2 billion agency known as SANDAG voted to hire co-contractors Deloitte and A-to-Be to take over the job.
But ETAN Tolling Technology, the company behind the failed toll-collection system, will keep adding to the $8.4 million it already has been paid by the regional planning agency. It is due to collect an additional $1.3 million to ensure a smooth transition to the new system.
HNTB, the outside consultant that was paid $4.3 million to manage the failed tolling contract, also will keep getting paid. HNTB is in line to collect $500,000 for help with the changeover.
The decision Friday came after a two-hour public recounting of the failures that led to the broken fee-collection system, which cost taxpayers $10 million in liquidated damages beyond the $12.7 million that SANDAG paid ETAN and HNTB.
The SANDAG board approved an “action plan” that will see Deloitte and A-to-Be fully in charge of toll collections along the 10-mile section of state Route 125 by early next year.
The contract, which will cost almost $30 million through 2030, was awarded on a sole-source basis because officials said the normal competitive bidding process would add 12 to 18 months to the process.
They said they spoke with six separate vendors and determined that Deloitte and A-to-Be were the best option.
The decision came on a divided vote — but even those who approved the arrangement were not happy with the choices they were presented by SANDAG executives.
An initial motion by board member Rebecca Jones, the San Marcos mayor, called for the agency to proceed with the action plan and new contractors but without paying either ETAN or HNTB any more money.
“We are wasting taxpayer dollars, and we are not protecting citizens,” she said. “To continue to put more money where we already know we have failed is completely irresponsible.”
But SANDAG’s deputy CEO Ray Major, who last month was handed the task of fixing the long-running toll-collection problem, said the agency could not proceed without ETAN because the company owns all of the equipment needed to collect tolls.
He also said overseeing the migration would be difficult without HNTB.
“We need them there through this transition,” Major told the SANDAG board. “\We need them to be working with the new vendor.”
San Diego City Councilmember Vivian Moreno voted against the measure, saying it makes little sense to invest tens of millions more on a system that already disproportionately affects people who drive in and around Chula Vista.
“South County residents are forced to pay tolls to drive on their local highways,” she said, referring to the taxes and tolls assessed to toll-road users. “South County residents are being charged twice.”
Moreno, who ended up casting the lone vote against the recommended action, instead suggested that SANDAG conduct a cost-benefit analysis of removing the toll altogether. That idea was not pursued.
Del Mar Deputy Mayor Terry Gaasterland went even further, moving to do away with the tolls temporarily while a new collection system is developed without any help from ETAN and HNTB.
“Can we simply suspend the tolling?” she asked.
SANDAG officials said such a move would have legal implications and potentially affect bondholders, who are still owed some $160 million following the agency’s purchase of the toll road in 2011.
The idea of suspending the toll was rejected.
The regional planning agency collects just over $50 million a year from the South Bay Expressway and the toll lanes of Interstate 15. Most of that — about $39 million — comes from the state Route 125 tolls.
SANDAG staff first became aware of problems with the toll-collection system produced by ETAN and managed by HNTB in October 2018. But senior executives opted to work with the company to correct the errors rather than cancel the agreement and start over.
They waited five years to inform the board about the problems, which by then had resulted in tens of thousands of drivers being charged incorrectly for using the tollway or having their accounts wrongly credited or charged.
Board members publicly questioned outgoing CEO Hasan Ikhrata at the December meeting about his decision to withhold the information from the governing board.
Ikhrata resigned effective Dec. 29. Deputy CEO Coleen Clementson was named acting CEO last month, and a search for a permanent leader has begun.
The lack of reporting was a sticking point at the Friday meeting as well. Major said he was not involved with the project until last month, but his understanding was that senior staff considered the problem “operational” and generally does not alert the board to those issues.
Two previous reports from the SANDAG independent auditor had raised questions about the agency’s contracting practices, noting repeatedly that staff relies heavily on contractors and saying it does not always properly oversee its consultants.
The audits also found that the overuse of private consultants denies agency employees the ability to broaden their professional expertise. It also allows unscrupulous contractors to collude in order to keep getting paid, auditors said.
SANDAG board members accepted the reports and their findings, but they have not responded with measures to reform the agency’s business practices.
Last fall, then-recently hired finance director Lauren Warrem said she learned the extent of the computer bugs and realized the agency would not be able to accurately report financial information to an outside auditor reviewing agency practices.
Warrem says she was fired for raising questions about her bosses’ handling of the discrepancies in November. The same month she filed a lawsuit against SANDAG alleging workplace retaliation; the case is proceeding in San Diego Superior Court.
SANDAG is also confronting a legal claim filed by a Chula Vista driver who complained that he was wrongly billed for using the South Bay Expressway.
San Diego attorney Joshua Gruenberg is representing both Warrem and motorist Brandon Kelsoe.
He said he expects to pursue a class-action lawsuit against SANDAG for its handling of the flawed toll-collection system as soon as this month.
