SHALIMAR — A sweeping inspector general audit detailing years of oversight failures and nearly $1 million in disputed billing errors has thrown Okaloosa County’s public transit system into uncertainty, prompting commissioners to pursue a short-term contract extension with longtime operator MV Transportation while exploring significant structural changes to how the county oversees and potentially delivers service.
County commissioners voted 4-1 to direct staff to seek a six-month extension with MV Transportation and to explore moving transit oversight under the county’s airport department as a broader “transportation” function, while also continuing negotiations over disputed payments tied to paratransit “deadhead” hours.
The action followed weeks of escalating concerns after an audit found the county had insufficient contract oversight from 2019 through 2025, leading to overpayments exceeding $850,000 and revealing gaps in documentation, enforcement and internal controls.
Commissioners said the findings forced a reckoning not only with MV’s billing but also with the county’s failure to monitor a multimillion-dollar program primarily funded by federal transit dollars.
Deputy County Administrator Shelia Fitzgerald told commissioners the agenda item was intended to address questions raised at a previous meeting and to provide the board with a clearer understanding of current oversight and operations.
“The item I have for you today is really a discussion item,” Fitzgerald said, explaining she created a summary document to inform commissioners about the system, including newer members of the board. She told the packet included oversight mechanisms, comprehensive operational plans, operational statistics, and an “an actionable plan” of items completed, underway, or planned.
Some of those steps are aimed at “generating additional system income and decreasing the general fund support,” Fitzgerald said, while others address findings from the inspector general report.
Fitzgerald said the summary also outlined two alternative scenarios that would require deeper analysis: bringing transit services in-house or eliminating fixed routes and focusing solely on paratransit.
“One of those … would be the consideration to bring those services in-house,” she said. “The other would be to study if the board wanted to eliminate the provision of fixed route and only focused on paratransit.”
The debate comes after county staff spent months preparing to approve a new five-year contract with MV Transportation. This contract would have been the product of a formal competitive procurement process and would have governed transit operations through 2030.
A request for proposals was issued in August, and a special selection committee evaluated four bidders, with three deemed responsive. On Oct. 31, the county issued a notice of intent to award the contract to MV, which has operated Okaloosa County transit for the past seven years.
The proposed agreement, worth up to $20 million, would have expanded fixed-route hours from 30,000 to 32,500 due to planned Crestview service beginning in May 2026, and it would have included 30,000 paratransit hours.
County staff also described the contract as providing “budget predictability” amid MV’s wage obligations through 2029 and preserving the ability to add microtransit or other service enhancements through future amendments.
But the inspector general’s audit changed the trajectory of the contract vote and sparked a broader debate about accountability and the future of transit in a county where fixed routes have long drawn criticism for appearing underused.
Chairman Trey Goodwin framed the situation as a collision of two events: contract renewal and an audit questioning how the county could pay disputed amounts for years without proper board approval.
“We had kind of the the culmination of two things that came up at the same time that are forcing this discussion,” Goodwin said.
Goodwin said he could not support approving a new long-term contract without an apparent effort to recover disputed funds.
“If any of us went to our bank and our loan officer said, ‘I’m sorry, I gave away $850,000 of your money,’ the first question we’d say is, what have you done to get it back?” he said at the December board meeting.
Goodwin’s criticism extended beyond the audit to the fixed-route system itself. He said he believed fixed routes were underused and financially unsustainable, calling them wasteful even as he emphasized the importance of paratransit for seniors and residents with disabilities.
“The fixed route busses, read my lips. It’s government waste,” Goodwin said. “I am not going to serve one more year on this board and vote in favor of it.”
At the same time, Goodwin said he was not opposed to transit in principle, particularly the paratransit system that serves residents who cannot drive.
“I recognize the paratransit is critical to a very significant portion of our population who has needs,” he said.
A central question that surfaced repeatedly was whether Okaloosa County can eliminate fixed routes while maintaining paratransit service and federal funding.
Commissioner Carolyn Ketchel said it had long been her understanding that the county could not separate the two.
“It’s my understanding … you can’t have para transit without the fixed route, because we can’t separate the expenses,” Ketchel said.
Fitzgerald responded that she did not believe the issue was that simple and pointed to Santa Rosa County as an example of a neighboring system that operates paratransit without fixed routes.
“We know that our neighboring county, Santa Rosa County, only provides paratransit,” Fitzgerald said, adding that the county would need a comprehensive analysis of funding and grant requirements before making such a change.
Transit Director Tyrone Parker, who later confirmed he is resigning and working out a notice period, said the answer depends on the specific grants Okaloosa County receives.
“There are some grants that require, if you have fixed route service, or you receive fixed route funding, you have to have a complement for paratransit service,” Parker said, adding that some funding does not require fixed routes and that staff could research and return with more precise guidance.
Commissioner Drew Palmer asked Parker about ridership levels, and Parker said fixed-route service in 2025 accounted for “a little under 45,000 trips.”
Palmer said fixed routes serve as a safety net for residents who rely on the service for groceries, work and civic participation.
“I do think it’s a very important service,” Palmer said.
In the past, Ketchel also argued the issue is not purely financial and said transit is essential for vulnerable residents, particularly seniors and disabled workers who cannot drive.
“When you go to Publix … and you see the disabled bagging your groceries, how do you think they get there?” Ketchel said. “This is the responsibility of government … The numbers be darned in this case.”
Commissioner Sherri Cox, who said she had been skeptical of transit in the past, described the service as critical for residents who need transportation to medical appointments, particularly during the pandemic.
“I cannot imagine how many fatalities we might have had if we didn’t have some kind of public transit getting our elderly and disabled … to those appointments,” Cox said.
During the January meeting, Fitzgerald and County Attorney Lynn Hoshihara confirmed the county has been negotiating with MV over the disputed “deadhead” hours that formed the center of the audit’s questioned costs.
Fitzgerald said she and Hoshihara had spoken with MV and received an offer, but she questioned whether it should be discussed publicly during the meeting.
“They did provide us with with an offer, but I don’t know the appropriateness of talking about that in today’s meeting,” Fitzgerald said.
Hoshihara said MV submitted a settlement proposal.
“MV’s proposal for settlement is that they have offered a payment of $250,000 to settle that matter over the span of the term of the new contract, which is a five-year term,” Hoshihara said.
Commissioner Paul Mixon said the offer was a step forward but not enough, particularly given what he described as the county’s repeated willingness to modify the agreement and pay more over time.
“I’m just not sure that it’s a far enough move,” Mixon said, adding he was disappointed it was not closer to a 50-50 split of the disputed amount.
“We’ve shown ourselves to be tremendous partners,” Mixon said. “And I don’t see 250 is really coming to the table.”
Mixon also suggested the county could counteroffer.
Commissioners discussed the county’s need to demonstrate value to MV if it asks for a longer extension while also pressing for a larger settlement. Cox, who seconded Mixon’s motion, said she wanted staff to attempt to counter MV’s offer.
“I think it’s more than fair for us to accept the lion’s share of the load … and still … have a partner … fully vested here and accountable,” Cox said, proposing a counter of around $400,000.
Mixon said Parker’s resignation added urgency to the county’s decision-making, warning that it is facing contract renewal, a disputed audit finding, and a leadership transition all at once.
“My concern with bringing it up now is that we have an open bid, we have an unknown future, and we have a need to replace leadership,” Mixon said. “That’s probably the precursors to a perfect storm.”
Mixon said he did not necessarily want to bring transit operations in-house. He argued the county should restructure oversight so transit is housed within a larger department that can provide stronger financial and administrative controls.
“We’re missing a level there as well,” Mixon said, describing the current structure as a manager reporting directly to county administration without an intermediate department head.
Cox said Parker’s departure could lead to additional turnover.
“I fear … that there will be additional attrition accompanied to that,” Cox said.
Palmer said he supported exploring a stronger management structure but worried about how the county would keep transit running during a transition.
“My concern is where we stand contractually,” Palmer said. “How do we continue to operate as we’re going through this transition?”
County Administrator John Hofstead said he has seen the county’s transit system evolve over more than a decade, including a period when the county operated a smaller in-house transit program.
“Management was adequate to say the best,” Hofstead said of the earlier in-house model, adding that the county shifted to contract operations as it expanded fixed routes.
Hofstead said transit is a “multi-million dollar operation” largely funded through federal grants, with additional state funding and limited general fund support. He said the county’s long-standing goal has been to reduce general fund contributions.
“Our goal has always been to limit the general fund contribution,” Hofstead said.
Hofstead said he would not recommend returning to an entirely in-house transit operation at the current scale, but he said the county could explore a hybrid model that keeps a contract operator while strengthening internal oversight and administration.
“Can we … bring that back to you and some type of supplemental in-house operation as it relates to all of the administrative aspects of it, and still manage a contract operation? Certainly, we can do that,” Hofstead said.
Commissioners also raised concerns about the procurement process itself, after learning the county’s request for proposals omitted a $500,000 performance bond — a safeguard included in the current MV contract.
Hoshihara confirmed the omission and said it likely stemmed from an oversight that carried forward from prior contract language.
MV representatives told commissioners the omission affected all bidders, but MV was willing to provide the bond anyway, absorbing the cost.
Goodwin suggested the error could raise additional questions about the integrity of the procurement process.
As commissioners weighed competing priorities, fiscal accountability, service continuity, and the needs of riders, Fitzgerald urged caution about eliminating fixed routes and warned the county could face backlash once the debate becomes public.
“I would just hesitate to, you know, to move quickly in the direction of eliminating fixed route,” Fitzgerald said, noting that in 2024 fixed-route trips exceeded paratransit trips before shifting in 2025.
Fitzgerald also floated the possibility of a shorter agreement, rather than a full five-year contract, such as an interim one-year deal while the county studies long-term options.
“Instead of entering into a five-year agreement, could we consider an interim one-year agreement?” Fitzgerald said.
Mixon ultimately made a motion directing staff to seek a six-month extension with MV and to explore moving transit under the airport department as a transportation function, while continuing discussions over the settlement offer.
The motion passed 4-1, with Ketchel voting against it.
After the vote, Hofstead said staff needed time to consult with department directors and the vendor to determine what is feasible.
“A lot of what we talked about today we’ve been hit cold with and I really need the opportunity to talk to the department directors and have a better understanding of fit and how we can make this thing work,” Hofstead said.
Goodwin said the board needed to give staff direction quickly as the county approaches key deadlines.
“We’re on a fast train towards the end of February, and we have to do something,” Goodwin said.
Pro Communi Bono
St. Francis De Sales, Ora Pro Nobis!
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