"Costs spur questions on Hopkins airport shuttle deal"

Sunday, February 11, 2001

Costs spur questions on airport shuttle deal
By ALISON GRANT
The Cleveland (OH) Plain Dealer


When Cleveland airport officials needed someone to run a new shuttle bus for
employees, they recommended a company that had been doing similar work at
the airport for years.

But just before operations were to begin, they were told the job would go to
a partnership including Etna Associates, whose president is Nate Gray, a
longtime friend of Mayor Michael R. White's.

The partners - Etna and APCOA/Standard Parking - estimated the shuttle
service would cost the city-run airport $944,000 a year. But the actual cost
proved higher: $1.5 million in 1998, $1.7 million in 1999 and $1.6 million
in the first 10 months of last year.

The expenses were passed along to airlines and other tenants of Cleveland
Hopkins International Airport and ultimately could filter down to airline
passengers.

An APCOA attorney said the decision to use Etna was the company's.

White administration officials declined to answer questions about the
operation, including Gray's involvement in it.

Press secretary Brian Rothenberg instead issued a statement:

"While the city has done its best, devoting considerable resources
responding to the records requests that have emanated from your newspaper,
we are under no obligation to provide you with interviews."

By May 2000, the city's internal auditor was concerned enough about the
"dramatic increase" in costs to recommend that one airport administrator be
assigned to monitor expenses from the shuttle and other parking contracts at
Hopkins.

One possible explanation for the high costs is APCOA/Etna's use of aging
buses that require frequent repairs.

Compounding this is an agreement that requires the city to reimburse the
partners for all operating expenses, including bus repairs and maintenance,
and adds a management fee set at 10 percent of those costs. To date, their
management fees have totaled about $480,000.

It also appears that APCOA/Etna brought shuttle buses from other operations
into the fleet, repaired them on the shuttle's tab and moved them back out
of the fleet shortly afterward.

Councilman Michael Dolan, chairman of council's Aviation Committee,
questioned whether the partners' fee structure is a good deal for the city.

"Somebody should be saying, 'Don't put those old, broken-down buses here
where it's on a cost-plus-fee basis,'" he said.

Last month, after The Plain Dealer questioned repair costs for the shuttle
service, the city released a report examining the expenses. It compared
charges by the company that fixes the buses - Kilbane's Auto Service of
Berea - with a "similar service station located in Detroit." The city said
Kilbane billed roughly 38 percent more for parts and labor than the Detroit
company.

Parking Commissioner Dennis Donahue recommended that Cleveland seek
competitive bids.

Kilbane's owner, Dennis Kilbane, said he charges APCOA a fair price. He
added that his labor rates to APCOA, $50 an hour, have not changed for 15
years.

"Anybody could look at a job and say they could do it cheaper," he said.

Gray, 43, who was a key aide to White in his first mayoral campaign and for
years one of his closest friends, participates in at least seven city
contracts, sometimes in partnership and sometimes as a subcontractor, to
manage city-owned parking lots, garages and airport shuttles. He declined to
comment for this story.

APCOA officials also declined to be interviewed but issued a statement
saying the shuttle service had been affected by unexpectedly high passenger
volume and the "deplorable" condition of a service road leading to the
employee parking lot, called Lot 1.

"APCOA is proud of its record of providing safe, reliable, efficient and
economical shuttle service at the airport and looks forward to continuing to
provide such service," the statement said.

The quality of service on the Lot 1 line has long been the subject of
complaints, however.

"The buses break down constantly," Continental Airlines Manager Gordon
Gregory wrote to Port Control Director William Cunningham, a month after the
shuttle opened in October 1997. "Employees are late to work or delayed in
getting home, sometimes by more than half an hour."

Responding to such complaints, APCOA Vice President Jack Santa told
Cleveland officials in a letter that the partners had been "compelled" to
employ used buses because of the city's "desire to commence shuttle service
in less than 36 hours."

Documents show that APCOA planned to stock the fleet with new buses
eventually, but this plan was never fully carried out.

Charles Rutledge, an administrative liaison with Continental, said he still
gets complaints on the buses about once a week.

"The heat doesn't work too much on them," he said. "We get a lot of
complaints they're late or there's not enough buses."

In its recent statement, APCOA said it continued running used buses, with
the city's concurrence, because it has operated the service on a
month-to-month basis while the city formulated plans to relocate employee
parking areas at Hopkins.

Escalating costs Lot 1 opened in 1997 after Hopkins began an extensive
expansion project that forced the airport to close its employee parking lot
on airport grounds half a mile from the terminal. The new employee parking
area was off Brookpark Rd., three miles farther away.

In September 1997, shortly before the new lot opened, director Cunningham
wrote a memo to Ken Silliman, one of White's executive assistants,
recommending that the city hire Hopkins Airport Limousine Service of Brook
Park to run shuttle buses serving the new lot. The company was to act as a
subcontractor to APCOA Parking, which held an umbrella contract for airport
parking.

Hopkins Airport Limousine, which for six years operated the shuttle to the
old employee lot, told airport administrators it could run the new service
for as little as $683,000 annually under a six-year contract. The price
would rise to $858,000 annually under a three-year contract or $920,000 on a
one-year basis.

But on Oct. 13, two days before Lot 1 was to open, Santa, the APCOA vice
president, wrote Cunningham to say that his company would operate the
shuttle instead, in partnership with Gray's firm.

Santa's letter said the shuttle operations would be "folded" into APCOA's
existing parking agreement at Hopkins. It set forth a different fee plan,
however, that required the city to pay all operating costs for an eight-bus
fleet, plus a management fee equal to 10 percent of those costs. The
estimated total would be $944,000 a year.

The agreement has continued month to month and was never replaced with a
formal contract.

City Council President Michael D. Polensek said the shuttle agreement should
have been brought to council for approval - and that oversight of all
airport operations needs to be stronger.

"These are areas that need to be cleaned up," he said.

Documents show that administrators planned to open the shuttle service to
competitive proposals after one year and that subordinates sent reminders to
Cunningham's successors, Solomon Balraj and Lavonne Sheffield-McClain. The
Plain Dealer could find no records showing such proposals were ever sought.

Dealing with breakdowns In his Oct. 13 letter, Santa said APCOA/Etna would
operate used buses "only until such time as new shuttle buses are selected
for the employee service."

Three years later, new buses are still the exception, records show. In
October, nine of 11 buses repaired at Kilbane's were five to 10 years old,
and most had more than 200,000 miles on them.

Breakdowns are common, and buses are towed in for repairs almost weekly.
Tens of thousands of dollars has been invested in individual vehicles - many
of them leased - to keep them running.

Bus No. 64, for example, a 1993 Eldorado that has toiled on the Lot 1 route
since April 1999, by last fall had cost APCOA/Etna $49,946 in repairs.
Eldorados of that vintage usually fetch far less on the market.

"A 5-year-old shuttle bus, I don't care what size it is, runs $10,000 to
$15,000," said Don Cox, vice president of Sunset Bus Co. of Santa Fe, N.M.,
which is the largest midsize commercial bus maker in North America.

American International, a Cincinnati company, sells midsized buses with
100,000-plus miles for $20,000 or less, sales representative Shirley
Crawford said.Kilbane said the repair costs are not out of line for "1992
buses with 300,000 miles on them, on average."

"These buses run 365 days a year, 24 hours a day," he said. "They're in
constant service. So if somebody's saying they're being excessively
repaired, they don't have a clue."

Larry Donoghue, who worked 46 years for a Chicago-based airport and parking
consulting firm, said shuttle operators often replace buses after 200,000
miles.

"You get to a certain level of mileage and it's just better to get rid of
it," Donoghue said.

That's the view of the Greater Cleveland Regional Transit Authority, which
plans to retire the Eldorados it uses as Community Circulators after 170,000
miles.

Councilman Dolan said repair costs on the Lot 1 buses appear to be "beyond
customary and normal charges."

"Somebody should be looking at that," he said. "Obviously, there's no
contract-monitoring going on at the airport."

Most airline managers at Hopkins declined to publicly discuss the Lot 1
operation. But one questioned whether APCOA/Etna's deal encourages
efficiency.

"If they drive the costs up, then obviously their 10 percent [fee] looks
better," said Ken Garfat, station manager for American Airlines. "If that
was true, it would give us some heartache."

Maintenance and repairs Repairs and maintenance on the shuttle fleet have
continued to mount over the years, reaching a total of $191,000 in 1998,
$313,000 the next year and $268,000 through the first 10 months of 2000,
city records show.

What individual buses averaged in repair and maintenance costs is difficult
to figure.

For one thing, the fleet's size has fluctuated. Documents show it grew to 11
buses early in 1998 and fell to eight later in the year, but what happened
after that is unclear. The city said it has no records showing exactly how
many vehicles were in operation.

Assuming an 11-bus fleet, repairs averaged roughly $28,500 for each bus in
1999. Adding in the yearly cost of leasing buses - an average of $14,900
each - the per-bus cost to the airport exceeded $43,000 for the year.

Tom Goebel, vice president of Hopkins Airport Limousine Service, said he
could have equipped the shuttle with new buses comparable to the models in
Lot 1 service and repaired and maintained them at a yearly cost of $20,000
each, if the purchase price was spread over five years.

In its statement, APCOA said, "It did not make business sense for either the
city or APCOA to purchase new buses with an average cost of $140,000."

It is not clear what type of bus APCOA was referring to. When the company
proposed buying new buses in late 1997, it recommended a 27-passenger model
known as CTS Champion, records show. At the time, such buses were selling
for $50,000 to $75,000 each, according to the bus' manufacturer.

Complicating calculations on the Lot 1 fleet still further are Kilbane's
invoices showing that repairs to as many as 18 buses a month have been
billed to the Lot 1 account. In November 1997, 18 buses got repairs and
maintenance totaling $12,400. And in December 1999, Kilbane's billed for 16
buses, at a total cost to the Lot 1 account of $37,700.

Kilbane said he is puzzled by the figures: "How could I have 18 buses from
Lot 1 when there's only 12 over there? Eighteen, I don't know anything about
that."

The shuttle shuffle In addition to the Lot 1 line, APCOA/Etna has operated
two other shuttles at the airport under separate contracts.

One ferries passengers from the terminal to the airport's car rental center
off Rocky River Dr. In this case, the partners are paid a flat management
fee.

The other connected the terminal to a long-term parking lot on Grayton Rd.,
until the lot closed Dec. 31. For this service, the partners paid all expens
es and got a percentage of the net revenues.

Kilbane's bills show periodic shifting of buses among these three
operations.

In early 1999, for example, five 1992 buses from the car rental shuttle went
to Kilbane's for reconditioning. After luggage racks were ripped out and
extra seating was installed, they were put into Lot 1 service. Over the next
20 months, further reconditioning, repairs and maintenance averaged nearly
$50,000 apiece.

Buses also were transferred from Lot 1 service to the Grayton Rd. shuttle.
Three 1997-model buses - the newest in the Lot 1 fleet - were moved shortly
after Kilbane performed nearly $18,000 in repairs on them.

Dolan suggested that the city's Lot 1 deal with APCOA/Etna - pegging its
management fee to a percentage of total expenses - gives the partners an
incentive to stock older buses in the Lot 1 fleet.

But Sheldon Klapper, president of the Center for Airport Management in
Portland, Ore., said it's logical for APCOA/Etna to operate used buses for
the employee shuttle, since the partners have no long-term agreement with
the city.

"If you had a month-to-month contract, would you go out and dump huge
amounts into a bus lease?" Klapper said.

Claims, counterclaims In a May 2000 report to the mayor, Frank Badalamenti,
the city's manager of internal audit, detailed "numerous errors" with
airport parking operations.

Some findings applied to APCOA's overall contract for parking at Hopkins.
Badalamenti said that APCOA overcharged for management fees and that the
city was owed more than $243,000, including penalties and interest. The
company agreed to pay the city $300,000 to resolve this and a related
contract dispute.

It was not the first time that APCOA had been accused of overbilling. Last
July, APCOA was ousted from the Detroit airport amid accusations of "grossly
excessive" charges for shuttle van leases.

According to a lawsuit filed by Wayne County, which owns the airport, the
overcharges approached $1.5 million. The suit also said APCOA and a partner
firm had curried "personal favor-trading relationships" with airport
managers by hiring their friends and relatives.

APCOA denied wrongdoing and filed a counterclaim demanding reinstatement at
the airport and $2 million in taxes and damages. Both claims are pending.

Other findings in Badalamenti's audit concerned the Lot 1 shuttle. They
ranged from a lack of documentation to support charges to the mixing of
bills from the Grayton and car rental shuttles into Lot 1 expenses.

Badalamenti also said APCOA/Etna had "substantially understated" the cost of
running the Lot 1 employee service. He strongly recommended that White
assign an administrator to "constantly" review APCOA's operations, including
the employee shuttle.

White's administration said in records released last week that a manager had
been assigned to oversee parking at Hopkins.

City Council members said they, too, need to look more closely, particularly
at Lot 1.

"We're in a situation where we're administering a contract that allows
exorbitant cost overruns," said Bill Patmon, the Finance Committee chairman.
"It needs to be corrected immediately and investigated immediately."

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