TxDOT's own $1 billion error caused statewide frenzy & sparked an audit

Link to article here.
Getting an “earful” is putting it mildly…TxDOT had a public flogging. However, actions speak louder than words. Will these senators have the spine to take on this Governor in May of 2009 as the next legislative session winds down and he dishes more threats and ultimatums? Will these same legislators GUT the Texas Department of Transportation and enact REAL reforms, or was yesterday’s hearing all hot air? What will likely determine that is the grassroots revolt now underway. The Lege is either with us, or they’re with the lobbyists and the Governor. There is no in between.

TxDOT gets earful at Senate hearing
By Patrick Driscoll

AUSTIN — There was plenty of blame to go around but little trust Tuesday as Texas senators probed Texas Department of Transportation finances, promises and actions — scrutiny that could last another year.Lawmakers, trying to figure out why the department this year suddenly faces funding shortfalls, didn’t like what they heard at a joint hearing of the Senate finance and transportation committees.

Sen. Tommy Williams, R-The Woodlands, after listening to state auditors and budget officials describe the agency’s bookkeeping, jumped the gate before TxDOT even got a word out.

“It doesn’t matter what they come up and tell us, if they have poor internal controls,” he told his colleagues. “I don’t have a lot of confidence with what’s coming out of that shop over there.”

More than half a dozen senators took turns slinging similar barbs. The sharpest accusation, verbalized by a few, was that TxDOT may have created a funding crisis after the Legislature last spring put a leash on private financing of toll roads and tasked another committee to study the merits.

“There are many, many people, myself included, who believe this is a ploy to pressure us to go back to toll roads,” said Sen. Judith Zaffirini, D-Laredo.

Last July, after state lawmakers went home, the agency took another look at its finances. There were federal cutbacks, more state diversions, inflation and some expected drying up of private toll investments to deal with.

Bottom line: TxDOT was headed into the red — $3.6 billion by 2015. The agency said it would have to slice out $1.1 billion in projects this fiscal year, on top of $900 million pushed back months before because projections had been too optimistic. That left just $3.1 billion for construction, way down from $5 billion in 2006, dubbed the “go-go year.”

But what wasn’t widely known, until Tuesday, was that the $1.1 billion was an accounting error. That money was never there to begin with — some bean counters or planners had tallied some bond proceeds twice.

“Let me state right off that we should have done a better job of anticipating this state of affairs,” TxDOT Director Amadeo Saenz said in a written statement to senators.

Senators were aghast.

“You’ve got to be kidding,” said Sen. Kip Averitt, R-Waco.

Zaffirini said TxDOT officials should have pointed the finger at themselves months ago instead of blaming lawmakers for their woes. She said a Dec. 5 talking-points paper, just handed to her, never mentions the agency’s own goofs.

Saenz, pointing to a Dec. 10 talking-points paper in front of him, said it does mention the inflated projections.

They literally were on different pages.

Meanwhile, Saenz recently reorganized staff so that planners, schedulers and bill payers will all report to the finance director.

“We have a system and that system needs to be improved,” he told the senators. “We’re working on that.”

Finance Committee Chairman Steve Ogden, R-Bryan, said something definitely needs to change. While holding a TxDOT balance sheet, he said he knows how to do a cash-flow statement and what he was looking at wasn’t that.

“I mean, this is screwed up,” he said. “This is bad.”

The other big questions of the day had to do with why TxDOT won’t use $2.9 billion in available bonds, or include another $5 billion approved by voters in November in financial projections.

Transportation officials said it’s because they don’t know if legislators will pay debt service on the $2.9 billion. Otherwise, some road maintenance would have to be deferred.

And as far as the $5 billion, which would be paid back with an infusion of general funds rather that relying on existing flows of gas taxes and other driver fees, the Legislature still has to make that appropriation, which could happen next year.

“We want to make sure that we do not leave this agency in debt,” said Hope Andrade, chairwoman of the Texas Transportation Commission, which oversees TxDOT. “As long as we can work together on how we can pay the debt, we will be open to any option.”

Trust us, senators replied. But, they added, with construction inflation outstripping interest rates, it’s best to put the $2.9 billion in bonds into action.

“We expect you to issue that debt,” Transportation Committee Chairman John Carona, R-Dallas, said
Link to article here.

$1 billion error caused cash crunch
Agency officials say they double-counted bond revenue; legislators remain skeptical about legitimacy of fiscal ‘crisis’
By Ben Wear
Austin American Statesman

But lawmakers, always skeptical, were often openly hostile during a lengthy Senate committee hearing that amounted to a thorough wood-shedding of TxDOT. They let department officials know that they remain suspicious about the legitimacy of the fiscal crisis.

Texas Transportation Commission members, said state Sen. Kirk Watson, D-Austin, “have an agenda. And that’s to privatize the second-largest (highway) system in the world. And you are hell-bent-for-leather to do that.”

State Sen. Tommy Williams, R-The Woodlands, pushed for a third party to look at TxDOT’s books.

“It’s important to me that we get the state auditor’s office in there as quickly as possible,” said Williams, who carried legislation last year that substantially curtailed TxDOT’s authority to agree to long-term leases with private companies to build and run tollways.

TxDOT’s executive director, Amadeo Saenz, said he would welcome an audit.

Saenz, TxDOT Chief Financial Officer James Bass and three transportation commissioners spent three hours answering questions in an unusual, out-of-session joint meeting of the Senate Finance and the Senate Transportation and Homeland Security committees.

TxDOT officials first announced a money shortage in November, ascribing it to a number of factors: inflation, reduced federal transportation grants, increased road maintenance needs and, most tellingly to legislators, the loss of revenue from those private toll road leases. Until Tuesday, top TxDOT officials had said nothing publicly about having made a serious bureaucratic error.

According to Saenz and Bass, the $1.1 billion that was counted twice was money borrowed through selling bonds. As a consequence, top agency officials told TxDOT’s various divisions and districts that they had $4.2 billion to spend this fiscal year.

“As soon as I heard that number,” Bass said, “I knew it was an overestimate.”

Soon after, with so-called “lettings” for 2008 trimmed to $3.1 billion, TxDOT officials announced huge cuts in spending on right of way and project design, as well as a freeze on the start of many road projects that were ready to go. That sudden halt to projects got legislators’ attention — and their goat. The Legislature and voters last year gave the agency authorization to borrow an additional $8 billion — though $5 billion of that will require further legislative action in 2009 — and so legislators don’t like that crucial road projects are suddenly up on blocks.

It didn’t take long after the freeze announcement for the idea to take hold that TxDOT was manufacturing a crisis to coerce legislators into backing away from the limits on private toll road contracts.

Tuesday’s alternative explanation may have been only partially helpful to the agency.

“So, what you’re saying is, it’s not a political effort on your part,” Watson said. “It’s a lack of competence.”

Saenz said he has brought the planning function, along with project procurement, under Bass’ control to avoid the sort of left hand-right hand problem that caused the error.

How state and federal money goes into and out of TxDOT has long been a puzzle, one made only more complex by the addition of toll road financing and a growing practice of delegating road building to local agencies. Lawmakers, gazing at balance sheets gray with numbers and listening to Bass’ clarifications of them, said the opaque nature of how TxDOT presents its finances makes it hard to trust the numbers.

“This is screwed up,” said state Sen. Steve Ogden, R-Bryan, chairman of the Finance Committee, brandishing a revenue-and-expense table. “This is really bad. I heard your explanation. But based on the data, it doesn’t match.”