What Went Wrong at JTA? | Jax Today’s Mike Mendenhall on the Authority's Multi-Million Dollar Crisis

[00:00:01] [SPEAKER_01] Mike, Mike, Mike, Mike

[00:00:03] [SPEAKER_00] Mikes on Mic, a conversation about politics, government, and Jacksonville, with 50-year opinion leaders Mike Hightower, Mike Tolbert, and award-winning broadcaster and longtime political observer, Mike Miller.

[00:00:17] [SPEAKER_04] Welcome to another episode of Mike's on Mic. I'm Mike Miller, along with Mike Hightower, and Mike Tolbert is back at his home studio, and we're delighted to have you with us. Jacksonville Transportation Authority is facing a financial crisis that has led to roughly $40 million in projected shortfalls, nearly 200 employees laid off, and reductions in transit service.

[00:00:40] [SPEAKER_04] Now, the agency has been forced to reconsider major transportation initiatives, including the autonomous shuttle program called U2C, which is the ultimate circulator, and the NAVI program, which are the autonomous vehicles that you see going down Bay Street. City Council has a special committee investigating how all of this happened.

[00:01:00] [SPEAKER_04] Recently departed, CEO Nat Ford has been subpoenaed to testify, and Florida's attorney general is conducting a separate investigation into JTA's records and their spending. And now, a JTA board member is calling on the top three executives at JTA to resign, saying they covered up the authority's financial problems. Now, for full transparency, I should mention that I was a director and a manager at JTA for 16 years.

[00:01:28] [SPEAKER_04] I worked for former CEO Nat Ford for seven years until I retired in 2019. Today, we want to ask if there were warnings before this crisis became public, and if so, who heard them, and were they kept quiet for a reason? Our guest is Jacksonville Today excellent reporter, Mike Mendenhall, who's been covering this story. And, Mike, welcome back to another Mike's on Mic.

[00:01:52] [SPEAKER_01] Yeah, Mike. Welcome back. Thank you guys for having me. I'm glad I could add another mic to the mix.

[00:01:56] [SPEAKER_04] So, we don't know how to introduce anybody whose name it isn't. Meanwhile, since we're talking about buses, Mr. Tolbert, why don't you get us rolling? Who, by the way, is it Mike? Another one.

[00:02:07] [SPEAKER_02] Don't let me interrupt. Listen, Mike, in plain English, what is the financial problem at JTA? Is this a sudden cash crisis or the culmination of long-time overspending, weak budgeting, and inadequate oversight?

[00:02:28] [SPEAKER_01] It's all of the above. And I'm going to do my best to translate this in English, as you said. So, yeah, essentially, it's been a little more than two years of inadequate budgeting. Some revenue shortfalls. But as we have recently learned, it also appears just some fudging of numbers. So, we are to a point now where JTA, like you said, currently has a $40 million budget shortfall that they're trying to make up for.

[00:02:57] [SPEAKER_01] They've been drawing down on their reserves for the last couple of years. Their sales tax revenue, which is one of their main sources of revenue, has not been as high as projected. That has been an issue. But we're also seeing a situation where there could be fringe benefits that were paid to executives that were costing the company money. There's the NAVI program, which has been quite expensive, which is added to their balance sheet. And then also, two fares had not been adjusted.

[00:03:25] [SPEAKER_01] Now, that's a much smaller portion of the revenue, but fares have also had also not been adjusted since 2019. So, you add all of that together and the JTA management, the leadership there had been really, they had been paying their bills. They had been, they had been drawing down, they had to draw a line of credit. They had to get a line of credit for just right around $30 million in order to pay outstanding bills.

[00:03:47] [SPEAKER_01] And then to top it all off, their CEO, Nat Ford, he resigned in July to take a job at the Dallas Area Rapid Transit Authority and pretty much left JTA with this mess to clean up.

[00:04:02] [SPEAKER_02] Well, is this JTA actually running out of money or does it have money but the lack of a sustainable operating budget? Which is it?

[00:04:11] [SPEAKER_01] They do have money. They still have reserves, just not as much as they once did. They've drawn down a little over $34 million in reserves. Now, that number actually was at one point higher until they took out this line of credit to cover their expenses, to cover their bills. So, they do have operating cash, but that they've also had to reduce their budget. They recently laid off 200 employees. They cut bus service. They reduced some routes. They eliminated other routes that weren't used as much and they're suspending the NAVI and the downtown Skyway system in order to save money.

[00:04:41] [SPEAKER_01] See so, Pete.

[00:04:57] [SPEAKER_03] I have a two-part question for you, sir. First, who was ultimately responsible for checking whether the overall budget was realistic? And what is the earliest documentation point at which someone should have recognized the magnitude of this problem?

[00:05:18] [SPEAKER_01] As far as when somebody should have noticed, roughly two years ago is when they really started seeing this budget shortfall. But it really wasn't until earlier this year that they had to do an adjustment to their previous budget by about $19 million. You kind of started hearing rumblings of it, specifically at city council that had to approve that budget adjustment. And on the board, you started to feel like, okay, maybe things aren't as healthy as what the administrators at JTA are saying it is. That's when it should have been noticed. Now, ultimately, the CFO is responsible for signing off on the budget.

[00:05:48] [SPEAKER_01] So, as you mentioned, there have been three CFOs during this time period. So, there was likely some confusion going on there. But then you also have the JTA board themselves. They're responsible for approving the budget and the city council as well. But ultimately, the CEO of JTA, any agency, any independent authority of the city will tell you that the buck stops with the person at the top. So, ultimately, there's a lot of oversight responsibility. And I think that it's becoming increasingly clear that was lax.

[00:06:16] [SPEAKER_04] Keep in mind, too, there's another transfer that just happened recently from city council at the request of JTA. And that's that $30 million that was supposed to be going to transportation projects, including the Emerald Trail. And they asked that they take that $30 million and apply it to the debts that they owe, including they had to pay, obviously, all kinds of money to the employees that they fired. They all had severance.

[00:06:40] [SPEAKER_01] It's a $30 million loan from the local option gas tax that was passed in 2021. So, there's a loan from that. Plus, they went ahead and got a line of credit. Now, the line of credit is actually getting paid off by that loan. That's the majority of that money. And essentially, that's to save them interest because they were going to be paying $1.5 million per year on the interest for that line of credit. So, they were going to use that gas tax money to pay that down. They also had to pay the severance to the 200 employees that they lost.

[00:07:06] [SPEAKER_01] The remaining amount of it, they can draw on it if they need to so they don't have to draw down their reserves even more. That money will be repaid. It's by 2037. That's the deadline on that. So, they have quite a few years to pay it down. But it's going to take them a long time to replenish what they lost in their reserves and to make sure that there's stability there. And you mentioned the Emerald Trail. The Emerald Trail. And then there's also a list of other projects as well that was approved. Road work, essentially, that was approved by that local option to gas tax.

[00:07:34] [SPEAKER_01] Now, GTA and the city have that this loan from the gas tax money will not impact those projects or the timelines on those projects. We'll just have to see because that means that money is being used for other things. It's not there until it's repaid. Where do you get the money that was? Exactly. So, that's a question that has yet to be answered.

[00:07:52] [SPEAKER_04] Yeah. Now, Nat Ford's been on Mike's on Mike twice. First, he came on when he announced the NAVI program and defended his frequent trips around the nation to participate in national and international transportation organizations. He's been subpoenaed now, as we talked about, from the city council, but says he will voluntarily testify. But on his schedule, to the dismay of some members on the city council, didn't buy that very much. Ford ran JTA for 13 years before recently leaving to become the CEO of DART, as you mentioned.

[00:08:21] [SPEAKER_04] What can we determine about Ford's role in the financial management of JTA? And do we know when he first received warnings about the budgets and the overspending and inadequate reserves?

[00:08:31] [SPEAKER_01] We don't know exactly, like, when he received that information or what his role was in communicating these issues to the board.

[00:08:40] [SPEAKER_04] And whether or not they came from those CFOs who have since left JTA because of issues about financing.

[00:08:47] [SPEAKER_01] And you mentioned the city council committee that has subpoenaed Nat Ford to appear and testify. That's likely when we're going to hear those questions asked in a public forum of Nat Ford. But also, too, that same committee wants to hear from all of the CFOs who served during that time. The Jacksonville City Council Auditor's Office has always been praised as an independent arbiter, an organization or an agency that's based on the numbers. The issue with JTA is it's a state agency. So the City Council Auditor's Office doesn't have unfettered access to those numbers.

[00:09:14] [SPEAKER_01] They really are reliant upon what the JTA provides to them. Now, it seems now that a lot of these financial issues are out in the open that the current JEA management, the interim CEO, the new CFO, Randall Barnes, who has engendered a lot of respect through his work in other city areas, other city departments over the years, seems to be increased transparency. The City Council Auditor seems to be pretty satisfied with the fact that they're getting the accurate financial picture at this point.

[00:09:42] [SPEAKER_04] We all have to realize, and I realized this when I was still working with Nat at JTA. When he got here, he had tremendous support and tremendous not just support but liking by the politicians in this town, including the mayors.

[00:10:00] [SPEAKER_01] Bipartisan, too.

[00:10:01] [SPEAKER_04] Yes, very, very bipartisan. Listen, they had a lot of great thoughts about Nat. So it's really very tough for them to have to swallow now what's been going on after they've given him that kind of support. And in saying that, if you had the opportunity to ask one question that the public still doesn't have an answer to, what would that be?

[00:10:20] [SPEAKER_01] I would want to know – this is a cliché, but when did Nat Ford know it and when did he know it? I butchered that quote from the Nixon era. I apologize. I apologize. What did you know and when did you know it? Yeah, what did you know and when did you know it? That's really the question that I would want to know. But also, too, I would also want to know why wasn't the JTA board being given accurate financial data to see what the issues were at JTA? And why wasn't the JTA board itself being more aggressive at requesting that data?

[00:10:50] [SPEAKER_01] You mentioned Nat Ford's sterling reputation up until this point. Was it just good faith? They trusted him. But it's pretty standard procedure that any board member and an independent authority in the city of Jacksonville would either be provided that information or they would be provided on it upon request.

[00:11:06] [SPEAKER_02] Mike, investigators have requested a whole buffet of different kind of records and things. And one of them I'm very interested in, I don't know what you can tell us. There's a company named WSP where Nat Ford's wife works that has a contract with JTA. What can you tell us about that?

[00:11:25] [SPEAKER_01] Yeah, so WSP is an international engineering consulting firm. It has its hand in a lot of different projects, high-profile projects around the country, around the globe. And WSP was a consultant of JTA. Oddly enough, I've been reading some of the coverage that the Dallas Morning News has been doing on this particular issue. And it turns out WSP is, according to Dallas Morning News, is actually also contracted with DART down in Dallas. So they provide strategic consult mostly on road construction projects. There's some mass transit, but a lot of infrastructure projects.

[00:11:56] [SPEAKER_01] What does his wife do to them? She's an executive level. As far as her job duties are concerned, it's mostly along the line of strategic initiatives.

[00:12:06] [SPEAKER_04] It's interesting because I heard an interview that Ford did with the Dallas TV station. They asked the question about that, and he said, we drew a very deep line between me and my wife's firm as she was doing contract work for him. But when you think about it, after he had said that, they dropped them from their consultancy.

[00:12:26] [SPEAKER_01] They did.

[00:12:27] [SPEAKER_04] There might have been a line of distinction between the two, but it didn't last very long before they said, we've got to cut and run.

[00:12:33] [SPEAKER_01] And I think when you get to that level, as you guys know, there is often perceptions of a conflict of interest because spouses and family members and families that have highly successful people tend to cross paths. But those need to be disclosed. And a lot of times you have to draw those lines. And in this situation, they were contracted to work with JTA.

[00:12:50] [SPEAKER_03] As a former board member at JTA, 16 years before his chair, I want to know if and when the JTA board knew all about this. Were they being told something different than what the senior staff knew? And let me just say, when you made a comment earlier, the board members, and we went through that under four CEOs. You rely on what the leader of your organization and the CFO gets in front of a board every month.

[00:13:20] [SPEAKER_03] CEO tells you one thing, the CFO gives you the financials. You should be able to dig into it. Got it. But if they're saying X, Y, Z, and the numbers they're showing you says X, Y, and Z, then you don't know. The issue, there's a parallel here because it's a little different. Because if you all remember what started JTA was Zahn and the CFO and a lot of senior managers were saying we were in a death spiral and that was a bunch of baloney. Anyway, there's a parallel here that is right there.

[00:13:49] [SPEAKER_03] Anyway, as you all know, former board member Megan Hayward says that she warned Mayor Deacon about overspending, the NABU problems, the lack of oversight before the mayor removed her from the board. The mayor says she doesn't remember the meeting with Hayward the same way. Do you think the fact that the mayor removed Hayward from the board was retaliation for a warning? And if not, why was she removed?

[00:14:15] [SPEAKER_01] So it's hard to know at this point from what we know publicly whether or not it was retaliation or whether it was simply a decision to replace her with somebody with more transportation experience. That at this point is still up for debate. The mayor has maintained that this was not retaliation. Of course, Megan Hayward has been very public saying the opposite. At Jacksonville today, just like many other news outlets, we had obtained some handwritten notes that were taken by one of the mayor's staff during that meeting.

[00:14:41] [SPEAKER_01] And the mayor had mentioned it in a press conference after the budget had passed. And so we obtained those. And you could see in the notes that there was discussion of the NAVI. There was discussion of the possible cost of that project. But it was hard to discern from those notes whether or not there was a discussion about the holistic financial state of JTA. So at this point, it's still kind of a she said situation in there. It was interesting that the mayor appointed Megan Hayward and then she replaced her before her term was up. So that's unusual. That doesn't typically happen.

[00:15:11] [SPEAKER_01] She replaced her with Elaine Brown, former mayor of Neptune Beach, former city council person and president and president and then had experience on the North Florida TPO and was the liaison to JEA for for the beaches. So she did replace her with somebody with transportation experience. That much is true. But in terms of if it was retaliation or not, we we can't really tell. Well, it is going to be interesting and we might get into this more later. I really do think we should keep an eye on this and that in particular in the coming mayor's race in 2027. I think that could become an issue.

[00:15:40] [SPEAKER_04] I know we've already talked about NAVI. One thing that we didn't bring up that was, I think, pointed out. And that is that there was a time when I'm not one can't make a distinction whether this was to bring up numbers or just to get more experience. But they actually paid people to use NAVI.

[00:15:58] [SPEAKER_01] Yeah.

[00:15:58] [SPEAKER_04] To ride around town and give their impressions of what it was like and also take home the money that was being paid to them. That was bad optics, no matter how you look at it. And whoever gave advice for that to be done, I can't understand their logic behind that.

[00:16:14] [SPEAKER_01] Well, the issue is and this is something that Megan Hayward brought up is that there was concerns that the ridership numbers for the NAVI were inflated. And like you said, there were people that were being paid to ride it to give their impressions of the ridership numbers were never what they originally projected it to be. And just for clarity, the NAVI is actually the first phase of that ultimate urban circulator program. Eventually, it was supposed to be a complete replacement for the downtown Skyway. Three phases to it. Three phases to it. There's also a contract with a company called Holon, which is based in Europe, that was supposed to come in and build.

[00:16:43] [SPEAKER_01] It's still under an agreement with the city to come in and build a plant to actually build these autonomous vehicles here in Jacksonville and invest over $100 million in that plant. And then the final phase of the U2C would be to take those autonomous vehicles and take them out into the urban neighborhoods. And that's partially what the gas tax extension was going to fund, was it was going to fund the phase two and transitioning the Skyway into this essentially platform for the U2C to operate on.

[00:17:11] [SPEAKER_01] So that it was a very expensive project. They'd already spent over $100 million on it and the operation of it was expensive. And that definitely appears to be contributed to JTA's financial woes.

[00:17:21] [SPEAKER_04] By the way, before you ask your question, Mike, I want to just put a footnote to that. And that is keep your eye on that whole Holon arrangement. Because if they do stop NAVI permanently, because right now they're suspending it. But if they do drop it completely, you're going to wonder whether or not Holon still is going to want to come to Jacksonville when they don't have an operating autonomous program any longer working here.

[00:17:45] [SPEAKER_01] I think it's a valid question. I think it's a question that we've been asking and a lot of people are asking, too. We mentioned the travel. That is one of the issues that's being looked at in both the city and the state investigations. Germany and Japan are two of the spots that these JTA executives, including Nat Ford, were traveling to. And a lot of it was to promote the U2C, the autonomous program. Adam, Jacksonville was supposed to be the first city in the United States to have a public transportation system that had a fully autonomous component to it. It was branded as this innovation.

[00:18:13] [SPEAKER_01] And that was really what Nat Ford was trying to put his stamp on that and make it a marquee project both for JTA and for his career. So I think that's definitely something that's at the heart of a lot of this issue, even if we find out that the financial issues encompassed a lot of other things.

[00:18:29] [SPEAKER_02] Yeah, before we go back to Nat Ford, which we're going to do, I think, I want to ask about board member Daniel Valancourt calling for the resignation of the interim CEO, COO, and senior vice president of public affairs. Valancourt was appointed in January, I think, to the board by Governor DeSantis. Can you tell us, Mike, why he has spoken up and will other board members follow what he's done?

[00:18:55] [SPEAKER_01] No, I can't speak for the other board members. He put out this letter yesterday basically saying that, look, we as a board member, I should have been more inquisitive. I should have asked more questions. I should have asked for more financial documents and to back up what the senior leadership at JTA were telling us. The constant drumbeat was, look, JTA is financially strong. They would have numbers. They would present numbers.

[00:19:17] [SPEAKER_01] But as the deficit started to grow, one of the things that his letter pointed out that I thought was interesting is there was a line that said pending to make it seem like that deficit was not as bad as it actually was. One thing, too, that I found striking in the letter was, Mike, you mentioned that he was appointed by Governor DeSantis. He said that if Governor DeSantis requested his resignation, he would offer it. He was taking some of the blame. And so to me, that was pretty telling as to how he felt the board's responsibility in all of this.

[00:19:47] [SPEAKER_01] And again, he put that statement on his own. It was not a statement of the full board. So it's unclear. There is a JTA board meeting Wednesday the 28th. That'll be a pretty interesting meeting to see what he says publicly and how the other board members respond, if at all.

[00:19:58] [SPEAKER_03] Nat Ford taking this highly paid, highly visible role as CEO of Dallas Transit. I would think all of these unanswered questions, investigation, their new CEO has got to be somewhat concerning. What are the folks in Dallas saying? What is the Dallas press reporting? And could this controversy in Jacksonville wreck where he is in Dallas?

[00:20:21] [SPEAKER_01] We were talking a little bit before the show here, but I've been paying attention to what the Dallas Morning News has been reporting. And as of right now, the folks down in Dallas, they're standing behind their hiring process of Nat Ford. At this point, there were board members at the time that were concerned that said that they saw red flags in Nat Ford's pass and his record, not just in Jacksonville, because he had been at other major transportation authorities in the United States. But they were still largely standing behind their decision.

[00:20:46] [SPEAKER_01] And he actually had his first day and gave a speech defending his record. So at this point, he's in the position. He has the job. And there hasn't been any discussion about him going anywhere else or leaving that organization. It has been interesting, though, to know, as any journalist would do, most of the outlets down there have been interviewing people here in Jacksonville, particularly council member Rory Diamond, who has always been critical of the U2C program.

[00:21:11] [SPEAKER_01] But has always been pretty supportive of Nat Ford up until recently himself, just personally as a professional, as a person. So he's been interviewed and council member Rockman Johnson as well. Both were liaisons to the JTA. Rory Diamond is currently the liaison of the city council to the JTA and Johnson was previously. So they're reaching out to these Jacksonville leaders as the story unfolds to try to understand what are the concerns that are in Jacksonville and how should that be related to what's going on down here in Dallas. And he signed a three year employment contract.

[00:21:40] [SPEAKER_01] My understanding is and this is according to the Dallas Morning News. That's five hundred fifteen thousand dollars a year. Plus, he got an eighty thousand dollar relocation benefit.

[00:21:49] [SPEAKER_04] Five months from now, Jacksonville is going to be having their city elections. How much is this JTA controversy do you think is going to play in this? Because we have not heard from Wyman Duggan yet at all.

[00:22:00] [SPEAKER_01] No, I think I would look for this to be a key talking point in the mayor's race in particular. Mayor Duggan has gone out of her way to say that, look, JTA is a state agency. Yes, I appoint three board members before those board members are appointed by Governor DeSantis. She got out early and was making that point. But I think that largely Mayor Duggan has been a popular mayor. She's been able to work bipartisanly with the city council across the aisle on a lot of different issues that a lot of people didn't think. So any opponent to Mayor Duggan is going to be looking for something.

[00:22:30] [SPEAKER_01] And I think that this conversation with the former board member Hayward as well. And when did the mayor know and did she understand how bad the financial situation was at JTA? I think that's going to become an issue. In public transit, it affects a large swath of the electorate that Mayor Duggan caters to and relies on and has tried to champion projects for. So I definitely think that it's an issue that's going to come up in the election. But also, too, city council confirms those board members as well at JTA. And they have an oversight responsibility, too.

[00:22:59] [SPEAKER_01] And you have a lot of city council members that are also up for reelection. So I could see this becoming an issue in both the mayor's race as well as in some city council races.

[00:23:07] [SPEAKER_02] Mike, if JTA and Zahn was a 10, what do you think JTA and Ford will end up being?

[00:23:15] [SPEAKER_01] I hesitate to rank. Has anybody checked Calci or the Polymarkets at this point to see if that's on there? I don't know if I'm going to touch a number there, but I covered the JTA crisis. And that was a really rough time for the city and a really rough time for JTA. And it resulted in federal indictments and a federal conviction. So it's early in this process, but I haven't seen anything that's risen at this point that's risen to a level like that.

[00:23:41] [SPEAKER_01] But I do think, though, both of those incidents or both of these issues affect agencies that affect everybody's daily lives. JTA with your electricity and your water bill. JTA with public transit, trying to get people to and from work and to and from the grocery store. So I think that anything that's endangering those types of services is going to get the public's attention. I think that's something very important to remember here.

[00:24:04] [SPEAKER_03] The only other thing I would add to that is just the public's distrust of government again. Oh, here we go again. Yeah. Jacksonville. Yeah. And I think that's that.

[00:24:14] [SPEAKER_01] And there's so much right now out there. And you mentioned JEA. And of course, we've been talking about JTA. But also today, the Jacksonville Housing Authority fired its CEO because they fired her without cause. But she had just recently put forth a plan that would have taken developer fees and given her and some of her senior staff a bonus on housing projects, which would have given them a lot of money. Those are the kind of issues that you're seeing at some of these independent authorities.

[00:24:40] [SPEAKER_01] And the airport, I will mention, too, I wouldn't quite call it a scandal or anything. But there's been differences of opinion on policy on how to invest its money between the city council and the airport authority, which resulted in the threat of a lawsuit. The airport authority threatened to sue the city because they thought that the city council overstepped their bounds. So you're seeing this strain in a lot of the independent authorities, which it puts stress on the consolidated form of government in Jacksonville, too. So that's that's an issue that I think is going to keep coming back.

[00:25:07] [SPEAKER_01] And I think it could definitely generate some conversation, if not some proposals for reform here in the coming years. I agree.

[00:25:14] [SPEAKER_04] Listen, guys, the clock is telling me I've got to go. And so is Scott Westerman, our producer, who's about to pull us all off here because we're running over so much. Multiple hooks. Yes, he does. But Mike Mendenhall, thank you so very much. Thank you, guys. It's a complicated issue. And I think you really spelled it out well for it and make it easy to understand for our viewers and listeners. So thank you.

[00:25:34] [SPEAKER_01] Thank you for having me. And I did the best I could with a pretty complicated topic, but really appreciate you having me on. Thank you.

[00:25:40] [SPEAKER_04] And we also want to invite you back to once this thing unfolds and we continue talking about it.

[00:25:45] [SPEAKER_01] I would love to be back. We'll have you back. All right.

[00:25:48] [SPEAKER_04] That's going to do it for all of us. Thank you so much for joining us. And of course, we want to thank our donors who keep the lights on and the cameras rolling. And we'll see you again in a couple of weeks. Take care.

[00:25:56] [SPEAKER_00] Mikes on Mic with Mike Tolbert, Mike Hightower and Mike Miller can be found on your favorite podcasting platform, Facebook and YouTube. Visit the website at Mike's on Mike dot com. Join us next time for more conversation with Mike's on Mike. Mike.