MOUNT CARMEL - Borough officials have spent months analyzing records from their Lower Anthracite Transportation System (LATS) contract with King Coal Tours from the past several years and the numbers simply don't add up.
Comparisons of what King Coal billed the borough for operating LATS and what the borough has been able to determine was actually spent have produced alarming discrepancies, according to council President Tony Matulewicz and LATS Executive Director Megan Janolek.
For example, this February, the four LATS buses, now operating under Catawese Coach Lines, traveled hundreds of miles more yet used less than half the fuel (731 gallons) than King Coal charged for in February 2010 (1,545 gallons) and 2011 (1,572).
Records also show King Coal charged LATS for the purchase of dozens of tires and fuel filters that do not fit LATS buses, but do fit coach buses.
There are also questions about what the borough believes are excessive labor costs, and officials want to know why King Coal included cell phone charges for nine different phones in September alone when there are just three King Coal drivers assigned to LATS buses - and they don't use company cell phones.
Ridership and fare revenue numbers are suddenly higher, too, now that LATS has a new bus service provider.
Janolek, the sole full-time employee for LATS, a government-funded entity managed by Mount Carmel Borough and designed to provide affordable public transportation in eastern Northumberland County, began the scrutiny of records upon her appointment in July. The borough reached out to King Coal for clarification, receipts and generally more specifics on spending related to LATS; while some details were provided, Matulewicz and Janolek said King Coal still didn't produce enough documentation to prove its costs.
The company did, however, begin to lower its costs. Monthly bills that totaled approximately $35,000 in July and August fell to $28,464 in September, then $26,426 in October, $24,017 in November, $17,309 in December and $17,272 in January, records provided to The News-Item show.
But tension had mounted during that time, and in January, King Coal sent a letter to the borough saying it was ending the contract, claiming the borough was not paying for services rendered.
The subsequent LATS contract switch to Shamokin-based Catawese to finish out the fiscal year, however, only further justifies the scrutiny, Matulewicz and Janolek believe. Most telling is that total operating costs for LATS in February, the first full month under Catawese, was $10,232 - some 70 percent less than the same month in 2010 ($33,872), 2011 ($34,395) or 2012 ($35,194).
The dramatic drop was apparent in March, too, for which Catawese billed LATS $13,063. It was 60-plus percent higher under King Coal for March 2010, 2011 and 2012 at $35,211, $34,393 and $35,180, respectively.
The lower costs come even amid considerably higher diesel fuel costs in 2013.
'Best interests' first
Matulewicz said this week he and other council members, who voted unanimously for the Catawese contract, have been criticized for what people perceive is unfair treatment of King Coal, a long-standing, well-known local company, but he stands behind the decision and says the numbers speak for themselves.
"There are times, as an elected official, when you must make a choice between upsetting the status quo and doing what you feel is in the best interest of the people who entrusted you to act on their behalf," he said. In this instance, "I firmly believe every council member has put the best interest of our residents, especially our senior citizens, ahead of personal, political or popular interests."
Matulewicz said the borough has expressed its concerns to officials at PennDOT, which provides LATS funding from federal and state sources, including the Lottery Senior Citizen Free Transit Fund, and requires reports on the operation. (See separate story.)
Jonathan Else, vice president of operations for King Coal, was contacted initially for an April 7 story that discussed the contract switch but did not detail the billing discrepancies. Else initially declined comment over the phone, but called The News-Item back minutes later to invite a reporter to King Coal to look over company paperwork. Later that afternoon, The News-Item showed up, but Else decided to decline comment.
He expressed frustration with the borough at that time and said he'd like to discuss the matter in detail with The News-Item at a later date. However, he has refused two more recent offers to comment, even after being provided with several examples of the discrepancies.
King Coal, family owned and operated, has been in the charter and tour business since 1978. It was providing drivers, maintenance and cleaning, insurance and diesel fuel for the fleet of LATS-owned buses for the last 28 years.
Fuel bills
When Janolek got started in her executive director role, the only documentation available to her regarding what King Coal was charging LATS were audit summaries for each fiscal year. The 2009-10 and 2010-11 summaries, the latest available, were produced by Smoker, Smith and Associates, of Hershey, and each was six pages long.
She also had one-page monthly billing summaries from King Coal that, going back to at least 2009, listed six cost categories: equipment, maintenance and garage; transportation; station and terminal; insurance and safety; general and administrative, and other. However, there was no breakdown of the spending; there were no receipts, no timecards, no invoices or other documentation. The summary merely listed the category and the charge, and then a total of the six.
From July to September, Janolek repeatedly requested records to substantiate the monthly reports from the current fiscal year and the three previous years, but King Coal provided nothing until September, she said. Even then it was only partial records, and some of the documents were too dark or too light to read.
Even more concerning for the borough, there were myriad examples where the bills submitted did not match what the borough was charged as reported in the audit summaries and in some of King Coal's billing summaries. Fuel bills are among those with some of the largest discrepancies.
King Coal submitted fuel bills for 2009-10 from its fill-ups at a local gas station that show the purchase of both clear diesel and red-dye diesel, the latter colored by suppliers to signify its tax-free status. The $56,376 total for that fiscal year covered the purchase of 19,640 gallons of fuel, according to the audit, but the receipts show that only 8,614 gallons of that involved the red dye diesel used by the LATS buses. The 11,026 gallon difference would have lowered the LATS fuel bill by $35,886.
There is not one month from July 2009 to June 2010 - the entire fiscal year - where receipts of fuel purchased match what the borough was billed.
For example, Janolek has receipts that show 884.10 gallons of red dye fuel purchased in July 2009 while the borough was billed for 1,559 gallons in the audit summary. In October 2009, receipts show 589.1 gallons purchased but a bill for 1,635 gallons. In December, it's 521.1 versus 1,650.
There are even two months during that fiscal year where there are no receipts for red-dye fuel purchases, yet the borough was billed for 1,622 gallons (September 2009) and 1,672 gallons (March 2010) of fuel.
King Coal did not provide Janolek with fuel bill receipts for 2010-11; therefore, no comparisons could be made against the fiscal year fuel cost of $63,138 reported in the audit summary.
When the borough switched from King Coal to Catawese, LATS changed the fuel billing process. A gas card now assigned to each bus is used by the drivers when they fill up. LATS is billed directly every two weeks.
The borough also now directly pays its insurance premium for LATS, something King Coal previously handled as part of its contract.
Otherwise, Catawese provides the drivers, maintenance and cleaning, just as King Coal had.
Another change involves tally sheets filled out by each LATS driver that record rider numbers and miles traveled. King Coal previously collected the sheets and money from the fare boxes and submitted them to the borough. Now, Janolek collects the sheets and empties the fare boxes herself at least twice a week. She is now the only one with a key to the fare boxes.
Tires purchases
The 2009-10 audit summary under transportation expenses shows King Coal purchased 32 tires valued at $8,486 for LATS. But the actual bills from Steve Shannon Tire & Auto Center, Bloomsburg, provided by King Coal at Janolek's request, show that only 18 of the 32 tires purchased would fit the LATS buses.
The fleet includes three 29-seat 2003 Thomas Transit Buses and one 21-seat 2009 Chevrolet Transit Bus.
Based on this information, the borough should have been charged $4,376, or $4,110 less.
The LATS buses use tire dimensions described as 11R22.5, but 14 tires in the bills are 315/80R22.5. William Milbrand, Catawese Coach owner and president, was asked to help explain the difference. He said the 315/80R22.5 tire cannot fit the LATS buses, and he uses that size tire on his coach buses.
The 2010-11 summary shows an even larger discrepancy in the $9,229 of tire purchases. Just four of at least 28 tires purchased can fit on the LATS buses, records show. The other 24 tires were 12R22.5 models, which cannot fit on any of the LATS buses, according to Milbrand.
Based on this information, the borough should have been charged $976 - $8,253 less than it was billed and paid.
Also, King Coal billed LATS for 24 fuel filters in 2009-10, according to records, but the part numbers involved, P556915 and P556316, are for filters that do not fit the type of engine used on the LATS buses. They do fit the engines used for coach buses, Milbrand said.
And, some purchases for which King Coal billed LATS included sales tax, from which LATS is exempt as a publicly funded operation.
Labor costs
Fiscal year 2009-10 records provided by King Coal show Jonathan Else worked an average of 30.58 hours a week on LATS-related business between the King Coal garage and office. Robert Else III, owner of King Coal, worked an average of 25.71 hours a week on administration. Also, one office employee, Kathy Else, is recorded as having worked an average of 17.79 hours a week on LATS-related business, while another office employee, identified only by a last name, worked an average of 3.71 hours a week. Combined, the hours King Coal charged for LATS administration and office work averaged 77.79 a week in that fiscal year. That does not include times for drivers and garage employees, but Janolek and Matulewicz said they are most concerned about the administrative charges.
At Catawese, Milbrand said he puts 5 to 10 hours a week into LATS-related business, while his three secretaries have yet to do any work related to the transportation system, he said last week. Again, driver and maintenance times would be additional.
As executive director, Janolek said she works 35 hours a week for LATS. Borough manager Edward Cuff III, who serves as her assistant, spends between 10 and 20 hours a week on LATS business. The former director, Jerry Matzura, worked 40 hours a week, while former borough manger Joseph Bass, who worked as program supervisor, played a role in obtaining grants for LATS.
Janolek said she does the majority of the administration of the program and has "no idea" why King Coal administrators needed as many as 68 hours a week more than what Milbrand is spending on LATS work.
She asked that very question of King Coal management. She said she was told the LATS duties were too intermingled into the larger operation to provide a separate total.
Details, still discrepancies
Janolek's press for details did produce some results for this past September's billing, but there were still discrepancies, she said.
For example, timesheets were not broken down by how many hours were spent on LATS versus King Coal duties; many of the timesheets didn't include names, and some of the sheets showed handwritten notes about trips LATS doesn't make.
On the September utilities bill, there were two line items for Verizon cell phone use that indicated nine cell phones being used for just three regular LATS drivers. And, two of those drivers use personal cell phones and the third one doesn't use a cell phone, Janolek said. Upon randomly calling some of the numbers, she discovered one number belongs to a non-LATS driver and another belongs to a maintenance employee.
Janolek said she questioned some of the discrepancies in the September bill, and King Coal management ended up changing two of the numbers, blaming the problem on software errors.
For example, health care costs for several employees doing LATS work was listed as $689. When Janolek asked whether they have a co-pay, King Coal lowered the number to $580.91.
In the end, the original September bill dropped from $29,523 to $28,463.80. Still, Janolek said, she could only verify $16,661.26 in spending, leaving $11,802.54 unaccounted for.
Even the original September bill was lower than most of the monthly totals for the past three fiscal years. In 2009-10, the average monthly charge was $34,253, records show. In 2010-11, it was $34,387; and in 2011-12, it was $34,766.
The lowest monthly cost in the 36 months of those three fiscal years was $29,935 in June 2012, while the next lowest was $33,872 in February 2010. The highest monthly cost over that time was $35,246 in December 2011.
Janolek said that as she continued to press for details to explain discrepancies from past years, she was told King Coal wanted to "go from here forward." Meanwhile, King Coal's charges to LATS continued to decline through January, when the contract ended.
Janolek has since asked for other past billing information from King Coal, but she said she has been refused.
Meanwhile, King Coal maintains the borough still owes it $41,024 involving costs from September to January. Matulewicz said the money will be released as soon as King Coal can prove the costs.
Fair comparison?
The $10,232 cost to operate LATS during Catawese's first full month in February is $24,163 less than the $34,395 King Coal charged in February 2011 and $23,640 less than the $33,872 it charged in February 2010. That is a direct comparison of all costs, including the fuel and insurance now paid by the borough, Janolek said.
Those significant savings have been realized even with higher fuel prices and with LATS buses traveling more miles.
Milbrand, who had previously stressed that he was sought out by the borough and did not pursue the LATS contract, said he is not undercharging the borough. He said he "absolutely" considers his charges fair and reasonable.
Looking up
Janolek, who was appointed as LATS executive director in July following Matzura's retirement after 30 years, has been praised by borough council members for better record-keeping, identifying concerns and changing LATS routes for better time and efficiency that has led to higher ridership and fare revenue.
In 2009-10, LATS had 5,211 riders and $6,577 in fare revenue, while in 2010-11 those totals were 4,462 and $6,034 and in 2011-12 they were 6,049 and $8,012.
Meanwhile, through the first eight months of the current fiscal year, LATS has had 7,441 riders and generated $8,867 in fare revenue - already higher than previous year totals.
The increases have come about despite a reduction in a destination-based fare price that ranged from $1 to $2.25 but is now a flat $1 for those under 65 who use the service for any destination. Those 65 and older ride free.
Matulewicz described the transition from King Coal to Catawese as "nearly flawless," and he said Milbrand has been accommodating of every borough request.
"I am thrilled. The future is very bright for LATS," he said.
That future includes approving a new three-year contract for LATS service by July 1. The borough advertised for bids in April, and proposals are due by May 3.
While Milbrand said Catawese will submit a bid, and others have as well, Janolek said, one is not expected from King Coal.