Summary

California Department of Transportation: Low Cash Balances Threaten the Department’s Ability to Promptly Deliver Planned Transportation Projects July 2003 2002-126 rotiduA etatS ainrofilaC S T I D U A E T A T S F O U A E R U B The first five copies of each California State Auditor report are free. Additional copies are $3 each, payable by check or money order. You can obtain reports by contacting the Bureau of State Audits at the following address: California State Auditor Bureau of State Audits 555 Capitol Mall, Suite 300 Sacramento, California 95814 (916) 445-0255 or TTY (916) 445-0033 OR This report is also available on the World Wide Web http://www.bsa.ca.gov/bsa/ The California State Auditor is pleased to announce the availability of an on-line subscription service. For information on how to subscribe, please contact the Information Technology Unit at (916) 445-0255, ext. 456, or visit our Web site at www.bsa.ca.gov/bsa Alternate format reports available upon request. Permission is granted to reproduce reports. � � � ��������� ���� ������ ������������� ������������������� ������������ ����������������������� July 3, 2003 2002-126 The Governor of California President pro Tempore of the Senate Speaker of the Assembly State Capitol Sacramento, California 95814 Dear Governor and Legislative Leaders: As requested by the Joint Legislative Audit Committee, the Bureau of State Audits presents its audit report concerning the California Department of Transportation’s (department) ability to deliver transportation projects. This report concludes the department’s ability to promptly deliver transportation projects is affected by low cash balances in the State Highway Account (highway account) and Traffic Congestion Relief Fund (TCRF), and consequently, delayed and canceled transportation projects will negatively affect the State’s aging transportation system. Several factors caused the low cash balances in the highway account and TCRF. Loans from the highway account and TCRF to the State’s General Fund drained cash reserves from these accounts at the same time the department saw highway account revenues from commercial-vehicle weight fees decrease. Further, uncertainties related to the governor’s midyear spending proposal and May 2003 budget revision caused the California Transportation Commission (commission) to halt all allocations to the Traffic Congestion Relief Program projects until the budget uncertainties are resolved. Moreover, the department’s March 2003 cash forecast update is optimistic, and consequently the department could end fiscal year 2003–04 with a negative balance. Finally, the department and the commission have alternatives to fund projects in the short term. However, most of these alternatives also have the potential to decrease the future flexibility of scheduling projects for the State Transportation Improvement Program and one potential option available to the commission may be perceived as unfair, so the commission needs to carefully consider and set guidelines for their use. Respectfully submitted, ELAINE M. HOWLE State Auditor ������������������� �������������������������������������������������� ���������������������������������������� ������������������ CONTENTS Summary 1 Introduction 7 Audit Results Cash Shortages Are Delaying Many of the Department’s Planned Transportation Projects 19 Delayed or Canceled Projects Will Affect the State’s Aging Transportation System 27 Several Factors Caused the Cash Shortage That Has Delayed Transportation Project Delivery 30 The Department Is Overly Optimistic About Its Future Revenue 34 The Department Has Alternatives for Short-Term Project Funding 40 Recommendations 43 Appendix A State Transportation Improvement Program Projects Needing Allocations to Proceed 45 Appendix B Traffic Congestion Relief Program Projects Needing Allocations to Proceed 59 Response to the Audit Business, Transportation and Housing Agency, California Department of Transportation 63 California State Auditor’s Comments on the Response From the Business, Transportation and Housing Agency 69 California State Auditor Report 2002-126 11 SUMMARY RESULTS IN BRIEF The California Department of Transportation (department) maintains and repairs more than 15,000 miles of the State’s highway system by managing numerous Audit Highlights . . . transportation projects ranging from repairing roads to adding freeway lanes. With declining revenues and depleted Our review of the cash reserves, the department is unable to complete on time California Department of many of the transportation projects scheduled through two Transportation’s (department) delivery of projects in the State of the department’s main transportation programs, the State Transportation Improvement Transportation Improvement Program (STIP) and the Traffic Program (STIP) and Traffic Congestion Relief Program (TCRP).1 Delayed transportation Congestion Relief Program projects will cause Californians to face increased traffic (TCRP) revealed that: congestion and the accompanying costs of wasted fuel, lost þ A lack of cash in the productivity, and unhealthy air. State Highway Account will result in the California Transportation The California Transportation Commission (commission) Commission (commission) oversees and allocates funds for the department’s highway allocating almost projects. In December 2002, at the commission’s request, $3 billion less than it had the department prepared an 18-month cash forecast of the originally planned for STIP projects scheduled in department’s main transportation funds to provide the fiscal years 2002–03 and commission with a complete picture of the department’s 2003–04. financial condition. At that time, the department forecast that þ Funding uncertainties the primary transportation funding source for the STIP, the associated with the Traffic State Highway Account (highway account), would end fiscal Congestion Relief Fund year 2002–03 with a negative balance. Further, the department’s (TCRF) have resulted in forecast of a positive cash balance in the main funding source the commission halting all TCRP allocations, for the TCRP, the Traffic Congestion Relief Fund (TCRF), including those to depended on the department receiving almost $1.2 billion 15 projects that currently in revenue transfers and loan repayments, both of which need $147 million to the governor’s December 2002 midyear spending proposal continue work. requested the Legislature to suspend and forgive. Prompted by the department’s analysis, the commission temporarily continued . . . halted allocations to STIP and TCRP projects. Although the department’s March 2003 cash forecast revision convinced the commission to resume allocations for STIP projects (but not 1 The STIP is a long-range program of transportation projects that primarily expand traffic capacity; the TCRP is a onetime program to speed up completion of 141 traffic congestion relief projects. California State Auditor Report 2002-126 11 for TCRP projects), we believe the revised cash forecasts are overly optimistic and could result in the commission making allocations for which the department will lack available funds. þ Delayed or cancelled Although the commission has resumed some allocations for projects will affect STIP projects, these allocations are dramatically lower than the State’s aging those originally scheduled in the 2002 STIP plan. The depart- transportation ment’s lack of cash will prevent the commission from allocating infrastructure, resulting in deteriorated highways, funds in fiscal year 2002–03 to 194 STIP projects that need more traffic congestion, $103 million to move them to their next phase of work. For and higher costs for fiscal years 2002–03 and 2003–04, the commission plans to California residents, in terms of wasted fuel and allocate almost $3 billion less to STIP projects than it originally lost productivity. scheduled in the 2002 STIP plan, a five-year schedule of transporta- tion projects and allocations that the commission updates every þ Many of the alternatives two years. The commission will include planned STIP projects to provide needed funding for projects on a short- that do not receive allocations in the new 2004 STIP plan to term basis have the the extent possible. However, carrying over a large number drawback of reducing the of ongoing projects will limit the number of new projects department’s flexibility in the 2004 STIP plan and could prevent the commission from to fund future projects, and one potential scheduling some new projects at all. Further, the department’s option available for cash shortages also affect TCRP projects—15 TCRP projects the commission may be have submitted allocation requests totaling $147 million since perceived as unfair. December 2002; however, the commission has suspended those requests because of the lack of cash in the TCRF. Until the State resolves budget uncertainties associated with the TCRF, the commission has declared that it does not plan to resume alloca- tions to TCRP projects. We interviewed agencies responsible for implementing these TCRP projects and found that the agencies’ lack of spending authority had stalled 12 of the 15 projects. The remaining three projects had sufficient funds from other sources to continue work in the short term. Delayed or cancelled projects will affect the State’s aging transportation system, resulting in deteriorated highways, increased traffic congestion, and reduced air quality. A 1999 commission report to the Senate noted funding requirements over a 10-year period of over $100 billion, and a U.S. Department of Transportation assessment for calendar year 2000 found that California’s road conditions had deteriorated since 1996. The combination of age and increased vehicle-miles traveled results in a faster rate of pavement deterioration, increased concentrations of accidents in new locations, and increased hours of traffic congestion. Delays in making improvements to congested highways mean that California residents will pay higher direct costs for wasted fuel and lost productivity. Also, consumers will pay increased indirect costs 22 California State Auditor Report 2002-126 California State Auditor Report 2002-126 33 of the delays in the form of higher prices for goods and services, as well as compounded repair costs for fixing later what the department should fix now. Further, a congested highway system, with the increased emissions caused by frequent stops and starts, will negatively affect California’s air quality. Several factors contributed to the department’s reduced ability to deliver transportation projects2. First, loans that the Legislature authorized from the highway account and the TCRF to the State’s General Fund (General Fund) drained approximately $1.5 billion in cash from these two funding sources, leaving the department more vulnerable to the unanticipated decreases in revenues that have occurred recently and resulting in fewer funds for planned projects. Second, the department expects to receive approxi- mately $138 million less in revenue in fiscal year 2002–03 than it had projected from one revenue source, commercial-vehicle weight fees, because a task force headed by another state agency underestimated the amounts to charge under a new weight-fee schedule. Moreover, although the department believes that the commission’s decision to halt STIP allocations temporarily has improved the highway account’s fund balance, the department’s revised estimate of the highway account fund balance remains somewhat optimistic. Our analysis indicates that the department may be continuing to overstate expected revenues from federal sources, the fuel excise tax, and weight fees. If, as our analysis indicates, federal funds are reduced and the revenues from fuel tax and weight fees remain at their fiscal year 2002–03 levels rather than increasing as the department predicts, the highway account could end fiscal year 2003–04 with a negative balance of approximately $154 million. In addition, the governor’s May 2003 revision to the governor’s budget threatens TCRF funds, calling for the Legislature to delay $938 million of the transfer of state gasoline sales tax revenues from the General Fund to the Transportation Investment Fund (TIF). Because state law provides for only a set number of annual transfers of specified amounts from the TIF to the TCRF, delays or reductions in amounts transferred to the TIF could result in a permanent annual loss of revenues to the TCRF of up to $678 million. To address its reduced ability to fund planned projects, the com- mission and the department have several options to provide needed funding for projects in the short term. However, most of 2 As we discuss later in the text, “project delivery” refers to the completion of a particular phase of a project. 22 California State Auditor Report 2002-126 California State Auditor Report 2002-126 33 these options have the drawback of reducing the department’s flexibility to fund future projects, and one potential option available to the commission may be perceived as unfair. Grant Anticipa- tion Revenue Vehicle (GARVEE) bonds are tax-exempt financing instruments that can be used to advance projects and use future federal-aid highway funds to retire debt; however, GARVEE bonds limit the amount of federal funding available to implementing agencies in the future. Another option, State Infrastructure Bank (SIB) loans, offers short-term financing to public entities to com- plete transportation projects; but again, recipients must set aside future revenue streams to meet commitments to repay such debt. Local agencies can also request that the commission approve project replacements or direct reimbursements in the STIP. With a replacement project, the commission allows a local agency to replace a project, that is, to advance a project that it had sched- uled for a later year in the STIP to an earlier year using its own funds and replacing the project advanced with an unidentified future replacement project (or placeholder) of equivalent value, allowing the agency to identify the specific replacement project at a later date. Direct reimbursement allows the local agency to use its own funds for the early delivery of a project that the commission scheduled in the STIP for a future fiscal year and receive a guaranteed direct cash reimbursement from the department in that future fiscal year (up to a prescribed yearly limit). The commission has limited the amount of direct reimbursements because they lock in priori- ties for future project reimbursement, thus making funding for other projects more inflexible for the region and the commission. Finally, the Department of Finance is considering seeking legislation allowing the commission to rescind TCRP allocations in times of fiscal crisis. Although this would allow the commission to transfer funds from stalled projects to agencies that are ready to begin or continue their projects, the commission will need to set criteria carefully to ensure that it does not unjustly deprive some agencies or regions of funds they need, and give the perception of favoring other agencies’ or regions’ needs. RECOMMENDATIONS The Legislature is currently deliberating on whether to adopt the governor’s recommendations to suspend the transfer of gaso- line sales tax revenues from the General Fund to the TIF and to forgive the loan repayment to the TCRF. If the transfer to the TIF is reduced or delayed without a commitment to repay the TCRF 44 California State Auditor Report 2002-126 California State Auditor Report 2002-126 55 the reduced or delayed amount in future fiscal years, the depart- ment will lose permanently up to one year’s worth of TCRP funding from the TIF transfer, further eroding the TCRF balance. Considering the State’s fiscal crisis, the Legislature may wish to allow the TIF to transfer the entire $678 million to the TCRF, and then authorize a loan of the money from the TCRF to the General Fund so that those funds would be repaid to the TCRF and therefore still be available in future years. To meet its short-term needs for project funding, the department should pursue cautiously other funding alternatives (GARVEE bonds, SIB loans, and direct cash reimbursement and replace- ment projects) to meet short-term project funding needs, but continue to set limits on most of these funding alternatives to avoid making future project scheduling inflexible. Should the commission be granted the authority to rescind unspent TCRP allocations, it should carefully consider state- wide priorities and ensure that all counties are treated fairly before taking such actions. AGENCY COMMENTS The Business, Transportation and Housing Agency concurs with our findings and recommendations. It believes the report pro- vides additional guidance to consider as the department explores alternative funding mechanisms over the short term. The commission chose not to provide a formal response to the report. n 44 California State Auditor Report 2002-126 California State Auditor Report 2002-126 55 Blank page inserted for reproduction purposes only. 66 California State Auditor Report 2002-126 California State Auditor Report 2002-126 77 INTRODUCTION BACKGROUND The California Transportation Commission (commission) oversees California’s state Glossary of Terms highway system, consisting of more than 15,000 miles of roadways. The nine-member Allocation: The commission’s direction to commission,3 an independent state entity that the department to authorize expenditure of funds for a specifi ed phase of work on a the governor appoints, serves as a forum for particular project. public review of the State’s transportation goals and projects. Among other tasks, the Implementing agency: Agency responsible for delivering transportation projects. Usually commission adopts the California Department either a regional transportation planning of Transportation’s (department) fi ve-year agency (for regional projects) or the department (for interregional projects). estimates of available funds for transportation projects and allocates funds for projects in two Project delivery: The completion of a particular phase of the project’s life cycle. of the department’s main programs, the State The department divides each project Transportation Improvement Program (STIP) and life cycle into four components or phases* the Traffi c Congestion Relief Program (TCRP). The with specifi c outcomes: department owns, operates, maintains, and repairs • Permits and environmental studies: The the state highway system, implementing the state project receives offi cial federal, state, and environmental approvals, as well as transportation program through its Sacramento approval from all the stakeholders and headquarters and 12 districts, planning and designing the public. all state transportation improvement projects, and • Plans, specifi cations, and estimates: selecting interregional projects for the STIP. The implementing agency creates plans, specifi cations, and estimates to provide construction companies with The STIP is a program of transportation capital the information they need to develop an improvements that primarily expand traffi c capacity. accurate bid. The STIP plan represents the commission’s intent to • Right-of-way: The implementing allocate and spend funds over a fi ve-year period. The agency obtains property rights for department and regional transportation planning the construction of the transportation project. agencies (regional agencies) use the STIP to plan and deliver transportation projects cost-effectively. The • Construction: The project is physically constructed. TCRP is a onetime program of projects designated in the Traffi c Congestion Relief Act of 2000. The Legislature intended the TCRP to speed funding and Sources: Commission TCRP guidelines and Department Project Management Handbook. completion of 141 congestion relief projects, selected * According to the department, not all projects will according to the following three primary criteria: require all four phases. 3 The State Senate and Assembly also appoint two nonvoting ex offi cio members (usually the respective chairs of the transportation policy committee in each house). 66 California State Auditor Report 2002-126 California State Auditor Report 2002-126 77 • Congestion relief: projects that relieve traffic congestion, primarily in urban areas. Types of STIP Projects STIP projects typically encompass four main • Transportation connectivity: projects that enhance types: connections between local streets and state high- • Soundwall construction: Construction ways, between highways, and between modes of of noise barriers that block, prevent, or mass transportation. diminish the transmission of noise. • High occupancy vehicle lanes: • Movement of goods: projects that improve the Operational improvement projects that movement of commercial goods along highways add freeway lanes for use by buses, and railways. commuter vans, and carpool vehicles in urban areas. The funding provided through legislation for TCRP • New facilities: New highway or multi- mode (that is, railway and highway) projects represents only a portion (20.8 percent) of facilities to improve safety and the the total funding requirements needed to complete movement of people and goods on the these projects. Therefore, many of the 141 proj- state transportation system. ects rely on other funding sources—such as STIP, • Other projects: STIP projects, including federal, or local funds—for the majority of their capacity-increasing improvements such as state highways, local roads, public transit, funding needs. intercity rail, and pedestrian and bicycle facilities, among others. TRANSPORTATION SCHEDULING Source: STIP Project Defi nitions. Transportation scheduling (which statutes term “programming”) is a public decision-making process in which the commission sets priorities and allocates funding for transportation projects for the State’s long-range transportation plans. By scheduling projects, the commission can commit anticipated revenues to transportation projects by fi scal year over a multiyear period, projecting the scope and cost of each project and scheduling the funding for each successive phase of a given project as it is needed. The commission schedules most of the State’s new transportation projects through the STIP process, which allows regional agencies and the department to participate in the process of prioritizing transportation projects. As Figure 1 indicates, STIP capital improvement funding goes to two broad programs: 75 percent of the funding goes to a regional program and the remaining 25 percent goes to an inter- regional program. State law further subdivides the funding for both the regional program and a portion of the interregional program by formula into county shares. Regional agencies then recommend projects for inclusion in the regional program using their county shares. The department recommends projects for the interregional program, with input from regional agencies. 88 California State Auditor Report 2002-126 California State Auditor Report 2002-126 99 FIGURE 1 Statutory Allocation of the State Transportation Improvement Program Capital Improvement Funds ������������������� ������������������ ������������������ ����� ��� ��� �������� ������������� �������������� �������������� ����������� ����������� ������� ������� ��� ��� ��� ��� ����������������� ������������ ������������ ������������� ����������� ���������� ���������� ���������� ������������ ������������������� ������������������� ��� ������������� ��� ��� ������������ ������������ ���������� ���������� ������������������� ������������������� Source: Streets and Highways Code. * Amounts distributed by county share: 75 percent based on county population in relationship to the county group’s population; 25 percent based on state highway miles in relation to the county group’s state highway miles. The STIP plan is a constantly evolving plan of the State’s trans- portation needs. Each STIP plan covers a five-year period and is updated every other year, with the commission adding two years to the remaining three years of the prior STIP plan. For exam- ple, in the 2002 STIP fund estimate, the department projected revenues and expenditures for the period from July 1, 2002, through June 30, 2007. In the 2004 STIP plan, the commission will carry over projects from the last three years of the 2002 STIP plan (July 1, 2004, to June 30, 2007) and add two more years (July 1, 2007, to June 30, 2009). In creating its fund estimate, the department makes assumptions that the commission then approves to estimate projected increases or decreases in revenues and expenditures, projecting not only expected revenues but 88 California State Auditor Report 2002-126 California State Auditor Report 2002-126 99 also expenditures from prior-year commitments and non-STIP capital improvement projects. As Figure 2 indicates, the two- year funding update cycle for the STIP plan begins July 15 of odd-numbered years, with the department submitting to the commission its proposed fund estimate of all federal and state funds the department reasonably believes will be available in the subsequent STIP period. The prior STIP plan is in effect during this update process, which runs from July 15 of the odd-numbered years until July l of the even-numbered years, when the new STIP period begins. Each new STIP plan includes projects the department and regional agencies have carried forward from the prior STIP plan, as well as new projects that regional agencies and the department have proposed. Included in the department’s fund estimate is a breakdown of new STIP funding capabilities by county share and fiscal year. Regional agencies use the fund estimate to determine how many projects they can include in their regional transportation improvement plans (regional plans), and the department uses the fund estimate to develop its interregional transportation improvement plan (interregional plan). Proposed STIP projects from regional agencies and the department specify the level of funding that each project requires by year and by phase. By April 1 of each even-numbered year, the commission is responsible for approving and adopting the STIP plan, based on the projects that either the department or the regional agencies recommend and ensuring that the total amount scheduled for each fiscal year of the STIP plan does not exceed the amount specified in the department’s fund estimate. According to its STIP guidelines, the commission must schedule all projects that the regional agencies’ plan recommends unless one of the fol- lowing conditions exists: • The regional plan is inconsistent with the commission’s guidelines. • Insufficient funds exist to implement the regional plan. • Conflicts exist with other regional plans or the interregional plan. • The regional plan is not a cost-effective expenditure of state funds. 1100 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1111 1100 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1111 2 ERUGIF elcyC efiL margorP tnemevorpmI noitatropsnarT etatS 51 rebmeceD timbus seicnega gnitnemelpmI gniludehcS noitatropsnarT PITS wen rof snoitadnemmocer lanoiger hguorht rehtie ,stcejorp 51 yluJ ro )seicnega lanoiger( snalp .)tnemtraped( snalp lanoigerretni 51 tsuguA )tnemtraped( noitatropsnarT fo tnemtrapeD ainrofilaC ehT eulav rallod etagergga ehT eht stpoda noissimmoc ehT margorP tnemevorpmI noitatropsnarT etatS eht stimbus tonnac dettimbus stcejorp fo ,etamitse dnuf s’tnemtraped noitatropsnarT ainrofilaC eht ot etamitse dnuf )PITS( yb devorppa stnuoma deecxe s’tnemtraped eht gnivorppa -ed eht ,etamitse dnuf eht nI .)noissimmoc( noissimmoC dnuf PITS eht ni noissimmoc eht snoitcejorp ytilibaliava dnuf serutidnepxe dna seunever detapicitna stneserp tnemtrap seicnega gnitnemelpmI .etamitse neht tnemtraped eht dna eht setaluclac ,)1 erugiF ees( alumrof PITS eht gnisu ,dna tub devorppa ,stcejorp edulcni osla seicnega lanoiger eht sefiiton .stcejorp wen rof elbaliava eb lliw taht gnidnuf fo tnuoma derebmun-ddO roirp eht morf ,detelpmoc tey ton -liava stnuoma latot eht fo nalp PITS raey-evfi eht revoc setamitse s’tnemtraped ehT ,1002 ,e.i( sraey eht ot stcejorp wen dda dna PITS wen eht ni stcejorp rof elba etamitse dnuf PITS 4002 eht ,elpmaxe roF( .doirep emit ).cte ,5002 ,3002 .elbaliava si gnidnuf taht tnetxe *.nalp PITS ).9002 ,03 enuJ hguorht ,4002 ,1 yluJ srevoc .ceD .voN .tcO .tpeS .guA .luJ .nuJ yaM .rpA .raM .beF .naJ 1 yluJ 1 lirpA derebmun-nevE .snigeb doirep PITS weN nalp PITS eht stpoda noissimmoc ehT ,2002 ,e.i( sraey eht dna ronrevog eht ot ti stimbus dna ).cte ,6002 ,4002 .erutalsigeL yraurbeF dna yraunaJ cilbup fo seires a sdloh noissimmoc ehT nrehtuoS ni eno tsael ta gnidulcni ,sgniraeh tA .ainrofilaC nrehtroN ni eno dna ainrofilaC noissimmoc ,sgniraeh eht fo noisulcnoc eht sekam dna snoitadnemmocer eraperp ffats ta seicnega gnitnemelpmi ot elbaliava meht stpoda noissimmoc eht erofeb syad 02 tsael .PITS eht yrevileD tcejorP noitatropsnarT yreviled tcejorP noitacollA detaitini yreviled tcejorP yllacidoireP seicnega gnitnemelpmI setacolla noissimmoc ehT timbus seicnega gnitnemelpmI -trohs seraperp tnemtraped ehT ecno stcejorp no krow nigeb tnemtraped eht gnivig ,gnidnuf tnemtraped eht ot stseuqer erusne ot snoitcejorp hsac mret setacolla noissimmoc eht sdnuf dneps ot ytirohtua eht tnemtraped ehT .noitacolla rof ot elbaliava si hsac etauqeda taht fo hcae gnitelpmoc ,sdnuf gnitnemelpmi esrubmier ot ro seraperp ,stseuqer eht sweiver sa snoitacolla tnerruc lla troppus dedeen sa sesahp ruof eht ralucitrap a rof seicnega htiw stnemeerga etairporppa eht noissimmoc eht wolla ot sa llew eht sA .)7 egap ,xobtxet ees( ehT .esahp tcejorp ro tcejorp dna ,seicnega gnitnemelpmi eht stcejorp wen ot sdnuf etacolla ot dneps seicnega gnitnemelpmi mret-trohs sesu noissimmoc eht ot stseuqer eht sdnemmocer .nalp PITS eht ni deludehcs timbus yeht ,stcejorp no sdnuf deraperp snoitcejorp hsac ,yllareneG .noitca rof noissimmoc rof tnemtraped eht ot seciovni erusne ot tnemtraped eht yb yam seicnega gnitnemelpmi .tnemesrubmier secruoser etauqeda taht ylno stseuqer noitacolla timbus revoc ot elbaliava eb lliw sesahp dna stcejorp esoht rof eht revo serutidnepxe hsac devorppa dna deludehcs era taht .doirep noitacolla .PITS tnerruc eht ni .PITS eht rof senilediuG noissimmoC noitatropsnarT ainrofilaC :ecruoS .yreviled tcejorp noitatropsnart htiw ylsuoenatlumis srucco gniludehcs noitatropsnarT :etoN enoptsop yam noissimmoc eht ,etamitse dnuf eht no tcapmi tnacfiingis a evah yam ssergnoC setatS detinU eht ro erutalsigeL eht erofeb gnidnep noitalsigel taht sdnfi noissimmoc eht fI* .syad 09 ot pu rof etamitse dnuf eht fo noitpoda eht The same guidelines also require the commission to schedule all projects included in the department’s interregional plan unless the commission finds that the plan is inconsistent with the guidelines or is not a cost-effective expenditure of state funds. To verify that future cash flows will be sufficient, the commission requests that the department prepare and update cash forecasts. Periodically, the department’s budget unit prepares these short- term forecasts (one to two years) of available cash to verify that the amounts will match current allocations and to identify any funding capacity available for new allocations. The commission is responsible for approving allocations to implementing agencies such as the regional agencies or the department, which are responsible for delivering transportation projects. The commission will allocate funds only if they are available and necessary to complete a project phase it sched- uled and approved in the STIP plan. Following its guidelines authorized by state law, the commission generally may allocate STIP funds for each project phase only until the end of the fiscal year for which it is scheduled in the STIP plan. For example, in the 2002 STIP plan, the commission scheduled $4 million for fiscal year 2002–03 for the permits and environmental study phase for a highway-widening project on U.S. 101 from Santa Rosa to Windsor, and has thus far allocated $3 million. Generally, the commission allocates funds only for a particular project phase during the fiscal year in which the commission has scheduled the project phase. Once allocated, project funds are generally available for spending during that fiscal year and the following two fiscal years. Typically, the commission will not allocate funds to projects that it has not included in the STIP plan. However, regional agencies or the department can submit amendments to the STIP plan to change or delete projects in certain circumstances. For example, if it is not ready to begin work on an approved project, the implementing agency can request the commission to amend the STIP plan to change the fiscal year in which the implementing agency will receive funds. Otherwise, implementing agencies deliver projects, using the funding authority that the commission has provided them. The term “project delivery,” as we use it in this report, is the completion of any given phase of the project’s life cycle. 1122 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1133 State law specified TCRP projects, so the commission does not schedule and approve these projects as it does those contained in the STIP plan; however, the law does allow the commission to direct the department to authorize expenditures for TCRP projects. To gain authorization for TCRP project spending, state law requires all applicant agencies to submit project applications to the commission, detailing the project scope, cost, and sched- uled commitments by project phase—an action similar to the approval process used for the STIP—before the commission can begin making allocations. By the deadline for submission of the applications (June 13, 2002), the commission had approved an application for all or part of each of the 141 designated con- gestion relief projects. For the projects approved in TCRP legislation that also will rely on STIP funding, implementing agencies must also recommend the projects and receive approval through the STIP planning process we described earlier. Under limited circumstances, the commission may approve applications for substitute or alternative TCRP projects. This may occur if the implementing agency and the commission agree that the designated TCRP project is significantly delayed by external factors that are not likely to be remedied within a reasonable period. For example, if the TCRP project could not obtain needed environmental permits for an extended period, the commission could allow the implementing agency to replace the TCRP project with a similar project. The commission may also redirect previously allocated TCRP funds to a different project if it finds that the implementing agency is not diligently pursuing work on the scheduled project. For most projects, the statutorily designated TCRP funding represents only a por- tion of the total project costs; in many instances, the TCRP funding helps fill in funding gaps to assist implementing agencies in meeting matching fund requirements of federal or local revenue sources. TRANSPORTATION FUNDING The State finances transportation programs through several transportation funds and accounts. As Figure 3 on the following page indicates, each fund and account interacts with the others in multiple ways. 1122 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1133 1144 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1155 ���������������������������� ������������� �������������� ������������������ ������������� ������������������� �������� ��������� ���������� ������������������ �������� �������� ����������������� ������������� ������� ����������������� ���� ������� ������������������������ ����������� ���������������� ���������������� ����������������� ����������������� �������������� ���������� �������������� ������ ��������������������������� ����������������� �������������������� ������������������������ ������������������� ������� ����������������������������� ������������������������������ ������������������ ������������ ������ � � � � � � � �� � � � �� � ����� � � � � �� � �� �� � �� � � � � � � � � ��� � � �� � � � � � � � ����������������� ���� ��������� ������������������ �������������� ������������������� ����������������� ��������������������� �������������� ������������� ������������������ �������������������� �������������� ������������� � 3 ERUGIF smargorP noitatropsnarT suoiraV stfieneB seuneveR noitatropsnarT fo noitubirtsiD ��������������������������� ����������������� ������������������ ��������������������������� ������������������������ ����������������������������� .edoC syawhgiH dna steertS dna ,edoC noitaxaT dna euneveR ,edoC tnemnrevoG :secruoS The STIP is funded primarily from the State Highway Account (highway account), whose principal sources of funds are excise taxes on motor-vehicle fuels, commercial-vehicle weight fees, and federal highway trust funds. This account commits major resources for improving the interregional road system, providing highway safety, and ensuring the efficient operation of the state transportation system. The Traffic Congestion Relief Act of 2000 created the Transpor- tation Investment Fund (TIF) to provide new transportation funding from gasoline sales tax revenues (this is in addition to the state fuel excise tax we mentioned earlier). Voters in the 2002 election passed Proposition 42, adding Article XIX B to the California Constitution and permanently extending the trans- fer of gasoline sales tax revenues to the TIF. Simultaneously with the creation of the TIF in July 2000, the Legislature created the Traffic Congestion Relief Fund (TCRF) and committed the State’s General Fund (General Fund) resources for 141 designated TCRP projects. Funding for the TCRP came from an initial trans- fer of $1.5 billion from the General Fund and $500 million from state gasoline sales tax revenues, with later yearly transfers coming from the TIF. Collectively, the TCRP projects are to receive about $4.9 billion through fiscal year 2007–08. Because the legisla- tion creating the TCRP does not provide full funding for all of the projects, many will receive funding from multiple sources, including the STIP. After the yearly transfer to the TCRF is made, state law requires the division of the TIF’s remaining revenue, with 20 percent going to the Public Transportation Account to augment STIP and state transit assistance programs, 40 percent to the STIP, and 40 percent to cities and counties to support street and highway maintenance. SCOPE AND METHODOLOGY The Joint Legislative Audit Committee asked us to review the department’s delivery of projects in the STIP during the past five years and the delivery of projects funded with the TCRF. As part of the audit, we were to provide independently devel- oped and verified information related to the department’s administration of the STIP and TCRP and to determine what effect, if any, loans from the transportation funds and accounts to the General Fund had on the department’s ability to deliver STIP and TCRP projects. 1144 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1155 To understand the department’s and the commission’s roles in delivering transportation projects, we reviewed and evaluated the laws, rules, and regulations, as well as commission policies and guidelines, associated with the scheduling, approval, and delivery of transportation projects. To measure the impact on projects of loans from the highway account and TCRF to the General Fund, we obtained and reviewed journal entries and budget language authorizing the loans. Our legal counsel analyzed prior court cases, determining that the legal authority existed for making the loans and transfers. We obtained documentation from the State Controller’s Office and the Department of Finance identifying the repayment terms and interest requirements of the loans and transfers, and we verified that the repayment terms agreed with statutory requirements. We also analyzed the governor’s midyear spending reduction proposal and his May revision to determine their potential effect on the department’s loan repayment schedule and revenue projections. To analyze the department’s ability to deliver transportation projects, we examined the number of construction contracts the department completed for fiscal years 1999–2000, 2000–01, and 2001–02. However, we were unable to reasonably compare either TCRP or STIP planned and actual project deliveries for fiscal years 2001–02 and 2002–03 with a baseline of projects delivered in the previous three fiscal years. Because the TCRP began in July 2000, only seven projects had been completed as of May 2003. Further, in reviewing the department’s historical analysis of time frames for delivery of STIP projects, we found that average time frames varied greatly, depending on the type of project and the location. Therefore, we confined our review to examining financial impacts on the department’s short-term ability to deliver projects in fiscal years 2002–03 and 2003–04. To determine whether financial conditions affecting the depart- ment’s primary transportation funding sources have reduced its ability to deliver projects, we compared the scheduled number and dollar amount of planned projects in the 2002 STIP plan and the TCRP to the commission’s revised estimates of amounts it can allocate for fiscal years 2002–03 and 2003–04. Further, we analyzed the department’s cash forecasts of expected revenue during fiscal years 2002–03 and 2003–04 to determine whether the department’s estimates are reasonable. As part of that analy- sis, we reviewed historical fuel prices compared to consumption in California and evaluated the causes of a reduction in the 1166 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1177 department’s revenue from commercial-vehicle weight fees. To evaluate whether there has been a discernible reduction in the department’s ability to deliver planned projects, we conducted interviews, gathered reports, and reviewed commission surveys of regional agencies to identify the amounts of allocations that these agencies expect to need over the next two fiscal years. We also evaluated the funds available in the various transportation accounts to assess the impact that loans have played and we analyzed the effects of reduced cash on project delivery. Using the commission’s list of projects that have requested allocations since December 2002, we identified those projects in both the STIP and TCRP that have been unable to move forward because of the commission’s decision to halt or reduce alloca- tions. Further, we called several local agencies to determine the specific effects of the suspension of TCRF funds. n 1166 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1177 Blank page inserted for reproduction purposes only. 1188 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1199 AUDIT RESULTS CASH SHORTAGES ARE DELAYING MANY OF THE DEPARTMENT’S PLANNED TRANSPORTATION PROJECTS Lacking sufficient cash in its major transportation funds and accounts, the California Department of Transportation (department) and regional transportation planning agencies (regional agencies) are unable to deliver many of their planned transportation projects scheduled in the State Transportation Improvement Program (STIP) and the Traffic Congestion Relief Program (TCRP) in fiscal years 2002–03 and 2003–04.4 Cash shortages have forced the California Transportation Commission (commission) to reduce allocations to the STIP by almost $3 billion for fiscal years 2002–03 and 2003–04. Pending measures caused by the budget crisis could result in a reduction of more than $970 million of state revenue for the Traffic Congestion Relief Fund (TCRF) in fiscal year 2003–04. The suspension of allocations to the TCRP also places $7.8 billion in other funds at risk, including some federal and local matching funds. A total of 194 STIP projects are now short of funding they need in order to advance toward completion. In addition, the funding for at least 106 TCRP projects is in doubt, and work has ceased on at least 12 projects because they lack the spending authority to continue. These substantial reductions in transportation projects will leave the State’s aging transportation system congested and in poor condition. Costs to Californians will include spending more time on the road and more money for fuel, as well as higher indirect costs of goods and services. Projected Cash Shortages Caused the Commission to Halt Allocations Temporarily Cash available in the State Highway Account (highway account) and the TCRF is much less than the department anticipated in its original forecasts. In December 2002, after revised forecasts showed the highway account going into a deficit by June 2003, the commission halted all STIP and TCRP allocations, and work on many transportation projects stopped for lack of funds. After another revision of cash forecasts in March 2003, the com- mission began allocating funds again to the STIP only, but at 4 As we discuss in the Introduction, project delivery is the completion of a particular phase of a project. 1188 California State Auditor Report 2002-126 California State Auditor Report 2002-126 1199 a greatly reduced funding level. Implementing agencies, such as the department or regional agencies, have used the original STIP fund estimate to plan and commit resources for transpor- tation projects; however, the revised estimates will require the implementing agencies to delay work on many of their planned projects. During the 1998 and 2000 STIP plans, many counties elected not to use their full share balances in the STIP, reserving them for future years. As a result, the commission did not schedule large amounts of STIP capacity in these STIPs. Moreover, transportation revenues outpaced project delivery, allowing the balances in the highway account to rise while project delivery was catching up. In those years, the commission allowed the department to present approximations of revenue and expenditures because the large cash reserves in the highway account served as a buffer for any overstatements of revenue or understatements of expenditures. However, according to the Legislative Analyst’s Office, beginning in fiscal year 1999–2000, the highway account balance began to decline, partly due to higher spending levels. As the State’s fiscal crisis worsened in fiscal years 2001–02 and 2002–03, the Legislature authorized a series of loans from the highway account and the TCRF to the State’s General Fund (General Fund) that further reduced the cash balances in this account and fund. In August 2002, concerned with the rapidly declining cash balance in the highway account, the commission requested the department to provide more In December 2002 the detailed and current information than in the past on the commission halted all projected revenue and expenditures for the highway account STIP and TCRP allocations and TCRF. The commission also requested more information after the department’s about the payback schedules and interest rates of loans made cash projections indicated from the highway account and TCRF to the General Fund. that the highway account would experience negative The commission ceased all allocations for STIP and TCRP cash balances at the end projects in December 2002 after the department’s new of fiscal year 2002–03 projections, as Figure 4 shows, indicated the following: (1) the and during fiscal year highway account would experience negative cash balances by 2003–04, and that the end of fiscal year 2002–03 and during fiscal year 2003–04 a positive balance in and (2) a positive balance in the TCRF at the end of fiscal year the TCRF depended on 2003–04 was contingent on a $678 million transfer from the uncertain revenue sources. TIF and a $500 million General Fund loan repayment. Making the contingencies that the department cited much less certain, the governor’s December 2002 midyear spending reduction plan proposed suspending the transfer and forgiving the loan repayment. 2200 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2211 2200 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2211 4 ERUGIF tsaceroF hsaC 2002 rebmeceD s’noitatropsnarT fo tnemtrapeD ainrofilaC ehT ������ ����� ��� ��� ��� � ����� ����� ����� �� � � � � � ��� � ��� � �� � � �� � � �� � � �� � � ��� � ��� � � �� � � � �� � �� � � � � � ��� � ��� � �� � � �� � � �� � � �� � � ��� � ��� � � �� � � � �� � ������������ ����������� ������������������� ��������������������������������� ���� ���� ���� .etadpU tsaceroF hsaC htnoM-81—tropeR ecnaniF ylhtnoM ,2002 ,11 rebmeceD )tnemtraped( s’noitatropsnarT fo tnemtrapeD ainrofilaC ehT :ecruoS morf noillim 876$ eviecer dluow tnemtraped eht taht demussa ecnalab FRCT ehT .2002 ,51 rebmevoN hguorht tnerruc saw atad erutidnepxe dna eunever s’tnemtraped ehT :etoN .naol dnuF lareneG s‘etatS a fo tnemyaper noillim 005$ a dna 40–3002 raey lacsfi ni dnuF tnemtsevnI noitatropsnarT eht The commission’s decision to halt allocations has resulted in work stopping on projects that lack the funds to continue. For example, the department planned a joint interregional-regional effort to widen Route 99 and Route 4 near Stockton. As the implementing agency, the department informed the commis- sion that it would be ready to list the project for construction bids in June 2003. However, because of the cash shortages, the commission cannot allocate the almost $22 million the department needs to construct this project. The department’s December 2002 cash forecast showing negative cash balances in the highway account assumed the commis- sion would allocate all amounts it approved in the STIP plan. In March 2003 the department again revised its cash forecast to refl ect the commission’s decision to halt allocations. Based on this revision of cash estimates, the commission resumed STIP allocations in April 2003, although at a much lower level than it had originally approved. However, as we explain later in this report, our analysis shows this revised cash estimate may still be overly optimistic and could cause the commission to make allocations for which the department will lack available funds when implementing agencies later present it with reimburse- ment requests. Further, lower available cash balances in the highway account give less of a margin for error in forecasting cash balances, so the department needs to be more cautious in its projections during the current economic crisis than in the past. The Department’s Lack of Cash in the Highway Account Is Delaying STIP Projects Sequence of Priorities That State Law Requires for Allocating Funds to The department’s lack of cash is delaying planned State Transportation Projects STIP projects. For example, in March 2003 the 1. Operation, maintenance, and rehabilitation department, in consultation with implementing of the state highway system. agencies, prepared a list of STIP projects, 2. Safety improvements where physical including 318 that need almost $704 million in changes, other than adding additional allocations by June 30, 2003, in order to award lanes, would reduce fatalities and the number and severity of injuries. contracts for construction or move to other phases of project completion. As we discussed 3. Transportation capital improvements that expand capacity, reduce congestion, or previously, the commission halted all allocations do both. in December 2002. In February 2003, using state 4. Environmental enhancement and law guidelines, commission staff developed criteria mitigation programs. to prioritize the allocation of scarce dollars to the projects already scheduled in the STIP plan. Source: Section 167 of the Streets and Using these allocation criteria (see textbox) Highways Code. and the department’s revised cash forecast, the commission adopted an 18-month incremental 2222 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2233 allocation plan covering the remainder of fiscal year 2002–03 and all of fiscal year 2003–04. The commission’s plan calls for it to allocate $1.8 billion in total from the highway account by June 30, 2004—approximately $600 million to STIP projects by June 30, 2003, and $1.2 billion to the State Highway Operation and Protection Program projects by June 30, 2004. The plan divides the $1.8 billion into three six-month stages, with the plan to be reviewed in light of updated cash forecasts at each stage. At its April 2003 meeting, the commission allocated over $165 million to STIP projects, with plans to allocate over $435 million to projects through the end of fiscal year 2002–03. However, this leaves 194 projects short by $103 million needed to move them forward (see Appendix A, Table A.1, beginning on page 46, for a list of these projects). Moreover, the commission’s revised allocation plan is dramatically lower than the amount originally scheduled in the 2002 STIP plan. The commission originally scheduled a total of $3.8 billion in planned allocations for the 2002 STIP projects during fiscal years 2002–03 and 2003–04. However, as Figure 5 indicates, the commission’s revised current and planned allocations for fiscal years 2002–03 and 2003–04 now represent almost a $3 billion (78 percent) reduction from the original 2002 STIP plan allocations. With this huge reduction in the allocations that the 2002 STIP plan initially envisioned, implementing agencies cannot deliver transportation projects as planned. For example, in February 2003 the Santa Barbara County Association of Governments reported that current state and local projects valued at more than $131 million needed allocations of almost $40 million before June 2004 to remain on schedule; additional allocations of more than $28 million would be needed after July 2004 to keep future projects on schedule and to prevent The many projects in the projects from being delayed or canceled. In fact, because the 2002 STIP that do not commission cannot allocate 78 percent of the funds it planned to receive allocations will be allocate in fiscal years 2002–03 and 2003–04, many projects will pushed forward to the be delayed. next STIP plan, possibly limiting the number of new The commission will have to push these ongoing projects to projects the commission which it cannot make current allocations into the new 2004 can include in the 2004 STIP plan, until the funding capacity for the 2004 STIP is STIP, or requiring the exhausted. Carrying over this large number of projects will limit commission to delete the number of new projects that the commission can include previously scheduled in the 2004 STIP. Further, if the projects carried forward from project commitments. the prior STIP plan exceed the total 2004 STIP capacity for new projects and no new revenue is provided, the commission may have to cancel scheduled project commitments. In April 2003, the commission voted to postpone the adoption date for the 2222 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2233 FIGURE 5 The Commission’s Current Revised Allocation Plan for STIP Projects for Fiscal Years 2002–03 and 2003–04 Is Almost $3 Billion Lower Than the Amounts Originally Scheduled in the 2002 STIP Plan ��� �� ��� ����� ����� ����� ����� ����� ����� ����� ����������� ������������ 2004 STIP fund estimate until October 30, 2003. Once the commission approves the department’s fund estimate for the 2004 STIP plan, regional agencies and the department will have four months to submit their regional transportation improve- ment plans (regional plans) and interregional transportation improvement plans (interregional plans), respectively. Because the commission must ensure that the dollar value of the plans it adopts into the STIP plan does not exceed the department’s estimate of the funds available during each fiscal year of the STIP plan, implementing agencies will have to evaluate their transportation priorities in order to determine how best to take advantage of the limited funding available in the next STIP. 2244 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2255 ���������� �������������������������������������������� ����������������������������������� ������ ������� ������ ������ ������� �� ������ ����������� ����������� ������ ���������������������� Sources: California Transportation Commission minutes, 2002 STIP fund estimate, and revised current STIP allocations. Lack of Cash in the TCRF Will Delay TCRP Projects Besides the delay in STIP projects, minimal cash reserves in the TCRF will affect the department’s ability to deliver at least 106 TCRP projects that require a minimum of $3.4 billion more in allocations. Since December 2002, when the commission discontinued allocations for TCRP projects, 15 TCRP projects have submitted requests for allocations totaling $147 million (see Appendix B, Table B.1, beginning on page 60, for a list of these projects). Further, we surveyed the implementing agencies for these projects and found that, due to lack of spending author- ity, work had ceased on 12 projects, including San Diego County’s proposal to acquire low-emission buses and vans for its transit service.5 Without these buses and vans, the county risks fail- ing to meet federal air quality standards; however, commission staff have stated that the commission will make no further allocations for TCRP projects until the State resolves budget uncertainties asso- ciated with the TCRF. Further, implementing agencies will have to find other funding sources or risk losing approximately $7.8 billion in other funds needed to complete their projects, including some federal and local matching funds. TCRP budget uncertainties began with the governor’s The May 2003 revision December 2002 midyear spending reduction proposal, which to the governor’s calls for withholding two payments due to TCRF in fiscal year budget requested the 2003–04: (1) the Legislature would forgive the $500 million loan Legislature to suspend repayment due on the $1.3 billion in loans from the TCRF to the $938 million of the more General Fund and (2) the Legislature would suspend the more than $1 billion originally than $1 billion transfer of state gasoline sales tax revenues from slated for transfer to the General Fund to the Transportation Investment Fund (TIF), the TIF in fiscal year which is transferred in turn to the TCRF and highway account, 2003–04 and proposed among other transportation fund sources (see Figure 3 on that the General Fund page 14). To suspend the transfer of gasoline sales tax revenues be obligated to repay to the TIF, the governor must issue a proclamation stating that the TIF for the amount the TIF transfer will have a significant negative fiscal impact suspended. Such an on activities funded by the General Fund. In addition, the action would result in Legislature must pass by a two-thirds vote legislation to suspend up to $678 million less the transfer of TIF funds for a particular fiscal year. The for TCRP projects and governor issued the required proclamation in December 2002. up to $169 million less In May 2003, a revision to the governor’s budget requested the for STIP projects than Legislature to suspend $938 million of the more than $1 billion the department had TIF transfer originally called for, and proposes that the General originally projected for Fund be obligated to repay the TIF for the amount suspended. As that year. of June 15, 2003, the Legislature had not acted on either of the 5 The remaining three projects had adequate funds from other sources to enable them to continue work in the short term. 2244 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2255 governor’s proposals. Both the department and the commission believe that the Legislature likely will suspend or reduce the TIF transfer for at least fiscal year 2003–04. Such an action would result in up to $678 million less for TCRP projects and up to $169 million less for STIP projects than the department had originally projected for that year. The suspension of TIF funds also may affect future TCRP projects because the amounts not transferred will be permanently lost, not replaced at a later time. State law appears to provide for only one transfer per year, with no provision requiring the State to make up a suspended transfer for one year in the next year. Therefore, every year that the State suspends or reduces the TIF transfer could result in the permanent loss of up to $678 million for the funding of TCRP projects, unless the Legislature takes action to obligate the General Fund to repay the suspended amounts. Since the TCRP’s inception in July 2000, the commission has allocated almost $1.5 billion to the program’s projects. As originally planned, 106 projects will require future allocations of $3.4 billion to complete the TCRF’s portion of funding for the projects. The commission’s ability to make these allocations remains uncertain, given the forecast of available cash in the TCRF through the end of June 2004 and the budget decisions that could affect the fund’s revenue sources. According to the commission’s January 2003 survey of implementing As of March 2003 the agencies for the 141 TCRP projects, as of December 31, 2002, department estimated respondents expected that more than $789 million (80 percent) that if it were to pay of the $981 million the commission had in outstanding TCRP all expected project allocations would be claimed for reimbursement by the end of fiscal expenditures for TCRP year 2003–04. As of March 2003 the department estimated that if projects, it would end it were to pay all expected project expenditures for TCRP projects, fiscal year 2003–04 with it would end fiscal year 2003–04 with a TCRF negative balance of a negative balance of $210 million. This projection assumes that the TCRF will receive $210 million. neither the scheduled loan repayment from the General Fund nor the scheduled transfer from the TIF in fiscal year 2003–04. The chief of the department’s budget unit stated that when the TCRF’s cash runs out, the department will not be able to reimburse implementing agencies unless the Legislature acts to provide additional funds or to terminate projects. Given the State’s current economic crisis, it seems doubtful that the Legislature will be able to provide any significant funding from the General Fund in fiscal year 2003–04. Further, any solution involving loans from the highway account to the TCRF would strain the highway account’s already minimal reserves, further restricting the commission’s ability to fund STIP projects. 2266 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2277 Decreased state funding for TCRP projects will force implement- ing agencies to turn to other sources for funding or risk losing Data from a commission matching funds. Data from the commission’s survey of imple- survey of implementing menting agencies revealed that at least $7.8 billion in other agencies revealed that funds needed to complete their projects, including some federal at least $7.8 billion in and local matching funds, are in jeopardy if TCRF funds are not other funds, including available. In these cases, implementing agencies will need either some federal and local to secure alternative funding sources for TCRP projects to receive matching funds, are in matching funds or cancel or delay projects until funds are jeopardy if TCRF funds available. To move forward, projects that lose TCRP funding will are unavailable. have to compete for already scarce STIP funding or pursue alternative funding, such as Grant Anticipation Revenue Vehicle (GARVEE) bonds or State Infrastructure Bank (SIB) loans. How- ever, some projects may have difficulty in securing other funds; according to commission staff, nine out of 141 TCRP projects are ineligible for STIP funds. Recognizing the lack of TCRF funds, implementing agencies are already reprioritizing their transportation projects. For example, the Los Angeles County Metropolitan Transportation Author- ity (MTA) reported that if it could not replace the TCRF funds, it risked losing $490 million in federal funds for one of its TCRP projects. In April 2003 the MTA requested an amendment to the STIP plan to shift the funding from 14 state and local road and highway projects to three new transit projects in the STIP plan that rely on TCRP funding, including the project that risked losing the $490 million in federal funds, to meet matching requirements and secure these federal funds. However, some TCRP projects may not be the local agencies’ first priority, so the agencies may delay or cancel those projects until funds become available rather than give up needed STIP projects. DELAYED OR CANCELED PROJECTS WILL AFFECT THE STATE’S AGING TRANSPORTATION SYSTEM Delays or cancellations of STIP and TCRP projects caused by fund shortages will affect California’s already aging transportation system, causing roads to deteriorate further and increasing traffic congestion. Canceled or delayed transportation projects cost California commuters lost productivity and wasted fuel from excess traffic congestion. Also, this neglect of our roadways has other possible negative outcomes, such as unhealthy air and higher freight costs from added traffic congestion being passed on to California residents. Finally, failure to complete transportation projects could see the State paying costs associated with canceling construction projects. 2266 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2277 Since 1998, state law requires the department to prepare and transmit to the governor and Legislature a 10-year state plan In its 2000 assessment for the rehabilitation and reconstruction of all highways and report, the U.S. Department bridges that the State owns, with the department updating this of Transportation plan every two years beginning in 2000. In its 2002 update to concluded that California’s the plan, the department described a state transportation infra- road conditions had structure that was aging and in need of significant work. deteriorated, rating only Specifically, the commission, in a 1999 report to the Senate, 17 percent of California’s identified funding needs over a 10-year period of over $100 billion. roads as “good” or “very The U.S. Department of Transportation’s Bureau of Transpor- good” in 2000, compared tation Statistics concluded in its 2000 assessment report that with 28 percent in 1996. California’s road conditions had deteriorated between 1996 and 2000: It rated 28 percent of California’s roads as “good” or “very good” in 1996, compared with only 17 percent in 2000. Furthermore, travel in California is increasing faster than road capacity. The U.S. Census Bureau projects that from 2000 to 2025, California’s population will increase by as much as 52 percent, and the department expects that annual vehicle-miles traveled on the state highway system will increase correspond- ingly. In its 2002 plan update, the department stated that Californian’s annual travel has increased from 139 billion vehicle-miles in 1990 to 162 billion vehicle-miles in 2000; it expects this figure to reach 251 billion vehicle-miles by the year 2020, a 55 percent increase over 2000. The department’s plan update also concluded that the combination of roadway age and increased demand (measured by vehicle-miles traveled) results in a faster rate of pavement deterioration, increased concentrations of accidents in new locations, and increased hours of traffic congestion. California’s roads have also suffered because fewer transportation projects have been completed in recent years. Specifically, 717 construction contracts for transportation projects were completed in fiscal year 1999–2000, compared to 660 in fiscal year 2000–01 and only 611 in fiscal year 2001–02. In part, department staff believe the reduction in completed construction projects is a function of more funds being available for the earlier years’ STIP plans. However, the reduced number of transportation projects being built, in addition to the limited number (if any) of new projects the commission will be able to authorize in the 2004 STIP plan, could result in much worse traffic congestion on the State’s highways and roads, especially given the current condition of California’s aging transportation system. Further, regional agencies and the department may have fewer projects ready for construction in future years because of the limited funds available for new projects. 2288 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2299 Unfortunately, delayed transportation projects will compound the ultimate cost of improving congested highways. According to the department’s 2002 plan update, compensating for these delays will cost more in the future in many ways. Three of the most significant costs to California’s residents include the following: (1) direct costs of wasted fuel and lost productivity; (2) indirect costs of these inefficiencies passed through to consumers, who will pay higher prices for goods and services; and (3) compounded repair costs, including material and labor, for fixing later what the department should fix now. According to the U.S. Department of Transportation’s Federal Highway Administration, highway delays cost Americans more than $50 billion a year due to lost productivity and wasted fuel. Moreover, high levels of traffic congestion can constrain the State’s economy by making it more difficult and expensive to move goods from ports and railheads, as well as manufacturing, distribution and service centers. Further, a congested highway system results in frequent stops The U.S. Department of and starts, which increase emissions and damage California’s Transportation estimates environment. According to the U.S. Department of Trans- that transportation portation, transportation accounts for 25 percent to as much accounts for as much as as 77 percent of the various air-polluting emissions in the 77 percent of the various country. The California Air Resources Board reports that 44 out air-polluting emissions in of 58 counties in California are currently not meeting state air the country; the California quality standards for ozone levels, and over 90 percent of the Air Resources Board reports State’s population breathes unhealthy air during some part of that over 90 percent of the the year. In addition, the 2002 Urban Mobility Report issued by State’s population breathes the Texas Transportation Institute (the official research agency unhealthy air during some for the Texas Department of Transportation) found that in 2000 part of the year. California was home to four of the nation’s 10 most congested metropolitan areas.6 With increasing road congestion, regional agencies could lose federal air quality funds by failing to meet air quality guidelines that require traffic mitigation efforts. For example, under provisions in the Federal Clean Air Act, the federal government directs funds to transportation projects and programs that contribute to attaining or maintaining National Ambient Air Quality Standards in areas where amounts of ozone, carbon monoxide, or particulate matter either violate those standards or need to be maintained to avoid violating standards. Failure to comply with performance standards could result in the loss of federal matching funds to implementing agencies. 6 In California, the four metropolitan areas are: Los Angeles, San Francisco–Oakland, San Jose, and San Diego. 2288 California State Auditor Report 2002-126 California State Auditor Report 2002-126 2299 Canceling or delaying projects has another negative outcome: Implementing agencies may face additional costs for canceling contracts. Standard language in its contracts requires the department to pay for certain costs associated with terminat- ing construction contracts. In addition to paying for any work necessary to secure the construction project for termination, the department must pay reasonable handling costs for material disposal, return, or sale; a reasonable administrative allowance; and a reasonable allowance for profit, up to 4 percent of the contractor’s cost for all work performed under the contract to the point of its termination. In some instances, these closeout costs could be substantial. SEVERAL FACTORS CAUSED THE CASH SHORTAGE THAT HAS DELAYED TRANSPORTATION PROJECT DELIVERY Despite the cost of delaying transportation projects, the depart- ment’s present shortage of revenue requires it to cut back on both STIP and TCRP projects. Several factors have caused the department’s inability to deliver these planned projects as sched- uled. Although the department did not expect them to affect its ability to deliver projects, substantial loans from the high- way account and TCRF to the General Fund have burdened the department’s cash balances more than the department originally thought. Also, the State’s fiscal crisis may cause proposed budget measures to decrease the department’s future revenue further. The department also received less revenue than anticipated for one revenue source, commercial-vehicle weight fees, because a task force headed by the Department of Motor Vehicles (DMV) Although state law underestimated the amounts to charge under a revised weight-fee currently requires that schedule for commercial vehicles. the General Fund repay the $1.5 billion in loans Loans and Proposed Budget Changes Affect the from the TCRF and Department’s Ability to Deliver Transportation Projects the highway account by the end of fiscal Currently, the highway account and TCRF no longer have sufficient years 2005–06 and funds to allow the commission to allocate funding as it had 2006–07, respectively, originally planned to all projects approved in the 2002 STIP and the department may to fund TCRP projects. As Figure 6 indicates, the State authorized not receive repayment about $1.5 billion in loans from the highway account and the as scheduled because of TCRF to the General Fund in fiscal years 2001–02 and 2002–03. the State’s continuing Although state law currently requires that the General Fund fiscal crisis. repay the TCRF loans by the end of fiscal year 2005–06 and the highway account loans by the end of fiscal year 2006–07, the department may not receive repayment as scheduled because 3300 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3311 3300 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3311 6 ERUGIF dna tnuoccA yawhgiH etatS eht morF snaoL ni noilliB 5.1$ tsomlA dezirohtuA saH etatS ehT dnuF lareneG s’etatS eht ot dnuF feileR noitsegnoC cfifarT eht �������������� ����������������� ������������ ���� ���������� ������� ���������� ������� �� �� ������� ������� ��� ��� ������� ������� ���������� ������� ��� ��� ������� ������� ���� ���� ������� ������� ����� ����� ������� ������� ���� ���������� ������� .30–2002 raeY lacsiF yrammuS tegduB laniF dna ,20–1002 raeY lacsiF yrammuS tegduB laniF ,sredro evitucexe ecnaniF fo tnemtrapeD ,seirtne lanruoj ecfifO s’rellortnoC etatS :secruoS of the State’s continuing fiscal crisis. Specifically, the governor’s midyear spending reduction proposal calls for the Legislature to forgive $500 million of the TCRF loan to the General Fund and suspend the fiscal year 2003–04 transfer of more than $1 billion in gasoline sales tax revenues to the TIF. That transfer would affect both the TCRP and STIP projects. However, the May 2003 revision to the governor’s budget requests the Legislature to suspend $938 million of the more than $1 billion of the TIF transfer originally called for, and proposes that the General Fund be obligated to repay the TIF for the amount suspended. Although the Legislature has not yet acted on either proposal, were it to do so, the TCRF’s near-term ability to repay the highway account’s loans would be in doubt. Consequently, the commission would have far less funding available during fiscal year 2003–04 to allocate to STIP projects than it antici- pated, causing delays in the delivery of planned projects by implementing agencies. When the State authorized the loans, the department believed it had sufficient cash in the highway account and TCRF to meet its outstanding commitments. However, the loans coincided with several anticipated revenue sources failing to materialize at the levels projected. Moreover, the proposal to suspend the $938 million transfer to the TIF would also preclude the TIF from making its full annual transfer to the TCRF of $678 million in gasoline sales tax revenues, further reducing the TCRF’s fiscal year 2003–04 revenues. Specifically, as we discussed previously, because state law appears to require only one transfer of gasoline sales tax revenues to the TIF per year, with no contingency for making up a suspended transfer in later years, every year that the Legislature suspends the transfer of gasoline sales tax rev- enues would result in a permanent loss of up to $678 million to TCRP projects, unless the Legislature takes action to obligate the General Fund to repay the suspended amount. Incorrect Calculation of Commercial-Vehicle Weight Fees Reduced the Department’s Revenue The department expects to receive $138 million less than antici- The department expects pated in commercial-vehicle weight fees for fiscal year 2002–03 to receive $138 million because a task force headed by the DMV underestimated the less than anticipated amounts that the State should charge under a new weight-fee in commercial-vehicle schedule. The new fee schedule was necessary for California to weight fees for fiscal avoid sanctions and lost fees and to remain in the International year 2002–03. Registration Plan (IRP). 3322 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3333 California participates in the IRP in accordance with the federal Intermodal Surface Transportation Efficiency Act of 1991. Participation in the IRP allows California commercial-vehicle operators to operate across jurisdictions, with a simple one-step registration. It also allows California to receive revenues from other jurisdictions (including 48 states and the District of Columbia, as well as 10 Canadian provinces) that collect fees for commercial vehicles based in any of those jurisdictions that also operate in California. The IRP requires a uniform method of registration for commercial vehicles operating in interstate commerce. California joined the IRP in 1985, through an excep- tion that allowed it as well as some other jurisdictions to collect registration fees on trailers. Eventually, California was the only remaining jurisdiction still using a trailer exception. Further, California did not use the IRP’s most common methodology for registering commercial vehicles, which encouraged jurisdic- tions to collect weight fees on gross vehicle weight (the weight of the commercial vehicle and the heaviest load it will carry) or combined gross vehicle weight (the weight of the commercial vehicle and the trailer and the heaviest load it will carry). To retain its IRP membership and avoid sanctions and the possible loss of as much as $110 million a year in fees from other jurisdictions, a task force headed by the DMV conducted a seven-year study for the State, which resulted in elimination of trailer registrations and the creation of a new fee structure, effective December 31, 2001, based on the gross and combined gross operating weight of commercial vehicles. This new methodology combined reg- istration and weight fees, formerly collected on trailers, in the commercial-vehicle weight fees. The Legislature intended that the new weight-fee methodology In April 2003 DMV would be revenue neutral and that the State would continue estimated that only to collect the same level of revenue after the change in 423,000 commercial methodology as before. However, DMV staff stated that the vehicles would register—a task force had no way of knowing the number of commercial 36 percent reduction from vehicles that would register under the new methodology. the 656,000 used to set Unfortunately in setting the new fee schedule, the DMV’s task the fee schedule. force overestimated the number of commercial vehicles that would register, and weight-fee revenues dropped significantly as a result. Specifically, the task force estimated that 656,000 intrastate commercial vehicles would be subject to the new methodology. The task force used this figure to project the amount of revenue that the DMV would collect and revised the weight-fee schedule accordingly. However, in April 2003 the DMV estimated that only 423,000 commercial vehicles would register—a 36 percent reduction from the estimate used to set 3322 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3333 the fee schedule. Because the number of vehicles registering turned out to be much lower than the task force originally anticipated, the amount of actual and expected fee revenue that the DMV received as of April 2003 for fiscal year 2002–03 is about $138 million less than first projected. The DMV believes that most of the difference in the two estimates of the number of commercial vehicles results from two factors. According to the DMV and the commercial-trucking indus- try, the number of registered commercial vehicles fell short by 107,000 vehicles mainly because the owners of some of the vehicles moved them to other states, and owners of others registered fewer vehicles because of the downturn in the economy. Another reason the DMV gave for the overestimate was that it included in its estimate 116,000 vehicles under 10,000 pounds, such as delivery vans, that are not subject to the new weight-fee methodology. THE DEPARTMENT IS OVERLY OPTIMISTIC ABOUT ITS FUTURE REVENUE Our analysis indicates that the department’s March 2003 revision to its cash forecast remains overly optimistic. For example, the department assumes that two of its main revenue If its current revenue sources for the highway account, revenues from the state fuel assumptions fail to excise tax and commercial-vehicle weight fees, will increase in fully materialize, the the next fiscal year. However, our analysis indicates that these department could end revenues are equally likely to stay consistent with fiscal year fiscal year 2003–04 with 2002–03 levels or decrease, possibilities that the department a negative cash balance needs to consider fully. If its current revenue assumptions fail to in the highway account. fully materialize, the department could end fiscal year 2003–04 with a negative cash balance in the highway account. We analyzed the department’s March 2003 cash forecast of the expected ending cash balance for the highway account in fiscal years 2002–03 and 2003–04, and we believe the department’s revenue assumptions to be overly optimistic for these fiscal years. As the Table shows, we believe the department’s estimate of fiscal year 2002–03 revenues is incorrect because the department overstated federal revenues by $37 million according to the 2003 distribution of federal spending authority for transportation in California, an annual schedule informing each state of how much federal transportation funding the federal government authorizes states to spend. Further, if state fuel excise tax and weight-fee revenues for fiscal year 2003–04 do not increase 3344 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3355 TABLE Comparison of the California Department of Transportation’s and the Auditor’s Revenue Projections for the State Highway Account Cash Balance (Dollars in Millions) Fiscal Year 2002–03 Per Department Per Auditor Analysis Difference Beginning balances $1,173 $1,173 Revenues Federal revenues 2,594 2,557 $ (37) State fuel excise tax 2,062 2,062 Commercial-vehicle weight fees 669 669 Other revenue 113 113 Total revenues 5,438 5,401 (37) Less: Total expenditures (5,924) (5,924) Loans to the Traffic Congestion Relief Fund (TCRF) and the State’s General Fund (General Fund) (647) (647) Ending cash balances $ 40 $ 3 $ (37) Fiscal Year 2003–04 Per Department Per Auditor Analysis Difference Beginning balances $ 40 $ 3 $ (37) Revenues Federal revenues 2,580 2,580 State fuel excise tax 2,078 2,062 (16) Commercial-vehicle weight fees 783 669 (114) Other revenue 109 109 Total revenues 5,550 5,420 (130) Less: Total expenditures (5,042) (5,042) Loans to TCRF and General Fund 0 0 Ending cash balances 548 381 (167) Less: Expected expenditures for State Transportation Improvement Program projects allocated by June 30, 2003 (102) (102) Expected expenditures for State Highway Operation and Protection Program projects allocated by June 30, 2004 (432) (432) Remaining cash $ 14 $ (153) $(167) Sources: California Department of Transportation’s March 2003 forecast for the State Highway Account and auditor analysis. 3344 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3355 but stay consistent with fiscal year 2002–03 levels, a likely conclusion given our analysis, the department will receive another $130 million less in revenues than it currently expects. The department estimated that it would end fiscal year 2003–04 with a cash balance of $548 million in the highway account so long as the commission did not make any allocations after December 2002. If the commission allocates the full amount of $1.8 billion in fiscal years 2002–03 and 2003–04 (as we discuss on page 23), based on the department’s expenditure formulas, implementing agencies will spend and request reimbursements for approximately $534 million of the allocations for STIP and other transportation programs in fiscal year 2003–04 ($102 million for STIP expenditures and $432 million for the State Highway Operation and Protection Program expenditures), leaving the highway account with an ending balance of $14 million. However, if some of the department’s revenue assumptions fail to fully materialize, we estimate it could end fiscal year 2003–04 with a negative balance in the highway account of up to $153 million, leaving insufficient funds to meet current commitments. The Department Cannot Support Its Estimate of Increases in State Fuel Excise Tax Revenues The department receives approximately 38 percent of its total revenues from the state fuel excise tax, a tax of 18 cents per gallon of fuel. In calculating its projections of state fuel excise tax revenues, the department used projections from the Department of Finance (Finance), adding two assumptions: (1) state fuel excise tax revenues will increase by The department’s belief approximately 0.5 percent for fiscal year 2003–04 and future that state fuel excise tax years and (2) the conflict in Iraq would not negatively affect revenue will increase by the fuel supply or cause higher fuel prices that would lower $16 million in fiscal year gasoline consumption. However, the department could not 2003–04 lacks a rational provide us with any analysis or other evidence to support its basis and seems to conflict assumptions. In fact, the only analysis the department could with its own research. provide declared that the state fuel excise tax revenues would decrease if fuel prices continued to increase, predicting up to a 4 percent decline in fuel consumption if the average price per gallon of gasoline rose to $2.50. However, according to its March 2003 cash forecast, the department is assuming no drop in fuel consumption as a reaction to the rise in gasoline prices in its revenue projections because the research in this area is inconclusive. Nevertheless, the department’s belief that state fuel excise tax revenues will increase by $16 million or 0.8 percent in fiscal year 2003–04 lacks a rational basis and seems to conflict 3366 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3377 with the department’s own research, analysis showing that the convergence of tension over war with Iraq, the Venezuelan oil workers’ strike, and low inventories have driven prices for crude oil and gasoline higher. Our analysis of reports from the federal Energy Information Administration (EIA) shows an inverse trend between rising gasoline prices and fuel consumption in California: As prices increase beyond a certain point, consumers purchase less fuel. As Figure 7 on the following page indicates, in four of the five instances when gasoline prices in California have increased significantly (17.9 percent on average) since 1970, gasoline con- sumption decreased. According to the EIA, gasoline prices can fluctuate because of seasonality; competition between local retail stations; or disruptions in the crude oil supply stemming from world events or domestic problems, such as refinery or pipeline outages. Gasoline prices in California increased substantially in the first few months of 2003, and in the department’s April 2003 presentation to the commission, the department reported receiving $17 million less in state fuel excise tax revenues during January and February 2003 than it had projected. However, as of March 2003, the department had not altered its assumptions regarding fuel prices and consumption, continuing to predict an increase in state fuel excise tax revenues for fiscal year 2003–04. For our analysis, we assumed that the department would see no increase in fuel excise tax revenues from fiscal years 2002–03 to 2003–04. Although gasoline prices have decreased from their peak in mid-March 2003, if they increase during the summer of 2003 or do not decrease quickly enough, the department’s assumption of an increase in state fuel excise tax revenues for fiscal year 2003–04 could fail to materialize. Revenues From Commercial-Vehicle Weight Fees May Not Increase as Promptly as the Department Expects The department also assumes it will receive increased revenues from commercial-vehicle weight fees in fiscal year 2003–04. However, as of April 2003, actual and expected revenues for fiscal year 2002–03 from these fees are down almost $138 million from the weight-fee revenues projected in the 2002 STIP plan. As we explained earlier, the DMV’s task force overestimated the number of vehicles that would be subject to the new methodology, and use of that estimate in computing the revised weight-fee schedule caused the shortfall in revenues. The DMV identified the revenue shortfall in April 2003, and Finance has drafted legislation to increase the fee schedule 3366 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3377 3388 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3399 7 ERUGIF sesaerceD yllareneG noitpmusnoC ,esaercnI secirP enilosaG s’ainrofilaC sA )0002 ot 0791 morF ataD( ���� ������� �������������������� ����������������� ������������������� ��������������������� ��� ������� � �������������������� ������� ������������������ ����������������������� ��������������� ����������������� ����������������� �������������������� ��� ������� ������������������ ������������������ ��������������������������� ���������������� ������������������������ ����������� � ������� ���������������������� � � � � � � � � � � � �� � � � � � � � � � � � � � � �� � � � � � � �� � � � � � � �� � � � � � � � � � � � � � � �� � � � � � � � � � � � � � � � � � � �� � � � � � � �� � � � � � � � � � � � � � � � � � � � � � � �� � � � � � � � � � � � � � � � � � � � ������������������������������������� �������������������� ����������� .noissimmoC ygrenE ainrofilaC dna noitartsinimdA noitamrofnI ygrenE laredeF eht morf ataD :secruoS .noitaflni rof detsujda ,srallod 3002 no desab si secirp enilosag eht no ataD :etoN charged. However, the department is assuming that the Legislature will act to restore the weight-fee revenues through legislation that would take effect during fiscal year 2003–04, which may not be reasonable given the time required for legislation to pass and the trucking association’s opposition to the fee revision. The department believes it will receive an increase in weight-fee The department assumes revenue over the previous fiscal year of $114 million (for a total it will receive increased of $783 million) in fiscal year 2003–04. However, the department’s revenue from commercial- belief is based on the assumption that the Legislature will act by vehicle weight fees of December 2003 to pass a trailer bill proposed by Finance that $114 million in fiscal would increase the current fee schedule by approximately year 2003–04, which 60 percent. According to representatives of the California may not be reasonable Trucking Association (trucking association), the commercial given the time required to trucking industry may oppose the revision in the commercial- pass legislation to raise vehicle weight fees, even though the intent of the legislation the fees and the trucking is to restore the total revenues to their former levels. The truck- association’s opposition ing association feels that the DMV has not gathered sufficient to the fee revision. information on the number of commercial vehicles to accurately revise the weight-fee schedule. Representatives of the trucking industry stated at an April 2003 meeting that the Legislature should wait to revise the com- mercial-vehicle weight-fee schedule until the DMV has collected a full year’s worth of revenue and has data on the actual number of intrastate commercial vehicles, information the DMV does not expect to have until October or November 2003, and that it proposes to present to the Legislature in a report by January 1, 2004. Therefore, if the Legislature agrees to wait, the bill would not be introduced until January 2004 at the earli- est. Additionally, IRP regulations require California to notify member jurisdictions 120 days prior to the effective date of the fee change. Because half of the IRP jurisdictions have staggered registration throughout the year, the timing of the notifica- tion could cause further delay in collecting revenues from some jurisdictions before the end of fiscal year 2003–04. Therefore, the department would not begin to see an increase in weight-fee revenues until, at the earliest, January 2004 from California IRP and intrastate vehicles, and June 2004 from IRP member jurisdictions. 3388 California State Auditor Report 2002-126 California State Auditor Report 2002-126 3399 THE DEPARTMENT HAS ALTERNATIVES FOR SHORT- TERM PROJECT FUNDING The department can use a variety of alternative techniques to help fund transportation projects over the short term. GARVEE bonds, SIB loans, and the type of reimbursement and replacement projects authorized by Section 14529.7 of the Government Code are viable funding alternatives that can provide transportation agencies financing to accelerate project delivery. Also, the commission could pursue legislation allowing it to rescind existing allocations on projects that are not using the money and then reallocate those funds to other projects. However, because most of these alternatives could result in decreased funding flexibility and rescinding allocations could cause the perception of unfair treatment, the department and the commission need to carefully consider and limit these alternatives’ use. GARVEE bonds can be used to fund projects in both the TCRP and the STIP programs. GARVEE bonds are tax-exempt debt financing that use future federal-aid highway funds to retire the debt. However, GARVEE bonds do not increase the total amount of federal revenues the State receives. Thus, to the extent that the department uses GARVEE bonds to finance projects, the State will have fewer federal funds available for projects in the future because part of the future federal revenue stream will be com- mitted to repaying the bonds. In fact, state law prohibits the State Treasurer’s Office from authorizing the issuance of GARVEE bonds if the annual debt service on all outstanding GARVEE bonds would exceed 30 percent of the total federal funds deposited in the highway account in any period of 12 consecutive months The department plans within the previous two years. The department reported that to use the State’s first it has not used GARVEE bonds to fund projects in the past, but it GARVEE bond issue plans to use the State’s first bond issue to finance San Diego’s to finance about route I-15 managed lanes project, which will use GARVEE bonds $171 million of the cost to finance about $171 million of the project’s cost. Department of San Diego’s route I-15 staff believes that more implementing agencies will attempt managed lanes project. to use these bonds in the near future because of the State’s fiscal crisis and the limited availability of transportation funds. The department needs to move cautiously in using these bonds, however, because overuse will limit the amount of federal fund- ing available for projects in future years. Another way to address the funding shortage is for regional agencies to use SIB loans, which provide short-term financing from a mixture of federal and state sources to local public entities and public/private partnerships, such as regional 4400 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4411 agencies, to accelerate the delivery of transportation projects. California is one of 10 states to participate in an SIB pilot program, and the commission established guidelines in January 2003 for the use of $3 million in SIB funding. Although the commission gave applicants 60 days from January 23, 2003, to submit initial applications for SIB loans, department staff managing the loan program said that they had received no applications as of April 2, 2003. Based on their conversations with staff in regional agencies, commission staff said they thought regional agencies were reluctant to take advantage of these loans because the total amount available to regions under the SIB loan program was limited and the interest rates were high. The department can still accept applications on a first-come-first-served basis whenever loan funds are available. However, use of the SIB loans also requires the regional agencies to commit future revenue streams to the repayment of these loans and hence could reduce the flexibility of scheduling new projects in future years. The replacement and reimbursement projects authorized by Section 14529.7 of the Government Code are other alternatives the department can use to address its short-term funding needs. The law allows for two types of arrangements: replacement The commission limits projects and direct reimbursement projects. With replacement direct reimbursements projects, the commission allows a local agency to advance a project because scheduling scheduled for a later year in the STIP to an earlier year, using and approving a its own funds and replacing the project with an unidentified direct reimbursement future replacement project (or placeholder) of equivalent value for a project locks in to replace the project advanced, with the specific replacement reimbursement priority project to be identified at a later date. Direct reimbursement for that project, making projects allow the local agency to use its own funds for the early all other allocations more delivery of a project scheduled in the STIP plan for a future inflexible for the region fiscal year and receive a guaranteed direct cash reimbursement and the commission. in that future fiscal year (up to a prescribed yearly limit) from the department. The commission encourages local agencies to use local funds to advance the delivery of projects approved in the STIP plan when state funds are not sufficient to make direct project allocations. However, the commission gives preference to replacement projects and limits direct reimbursements because the scheduling and approval of a direct reimbursement for a project locks in reimbursement priority for that project, making all other allocations more inflexible for the region and com- mission. Any projects with a direct reimbursement guarantee for a particular year will receive first priority for transportation funds, so before any other projects can receive such funds, the department must first reimburse all implementing agencies 4400 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4411 that used their own money for direct reimbursement projects. Thus, the commission must exercise caution in approving direct reimbursements, because these projects then have first priority in funding allocations in future years. Recognizing the limitations surrounding direct reimbursements, in April 2003 the commission amended the reimbursement policy guidelines to add a yearly cap on the total amount of The commission set direct reimbursements. It set the statewide cap at $200 million a statewide cap of annually, with a single agency or county cap of $50 million $200 million annually for annually. This cap applies to the total amount the department direct reimbursements, will repay an implementing agency in a given year. For example, with a single agency or the commission approved the first combination replacement- county cap of $50 million direct reimbursement request in April 2003 for a major project for annually. the MTA. This project will use almost $142 million in project replacements and $175 million in future-year direct reimburse- ments to fund its bus and transit projects; however, it will not violate the commission’s cap because the department will repay the MTA less than $50 million per year from fiscal years 2005–06 through 2008–09. Replacement and reimbursement arrangements provide a way for local agencies to advance their projects. However, the commission’s decision to add a cap to direct reimbursement projects seems reasonable because such projects limit future scheduling flexibility. Finally, Finance is proposing legislation to allow the commission to rescind unspent allocations of previously allocated TCRP funds during times of fiscal crisis. Because of requirements in state law and the commission’s TCRP guidelines, neither the depart- ment nor the commission can rescind allocations of previously allocated funds until or unless the implementing agencies fail to meet required timelines. If the commission had the ability to rescind allocations for TCRP projects, it could rescind allocations for projects that have been delayed for reasons such as lacking required permits or right-of-way clearances, thus allowing the commission to reallocate the funds to those agencies that are ready to move forward on their projects. However, the commis- sion needs to consider carefully the potential disadvantages of rescinding allocations because by rescinding an allocation for a particular project, the commission is giving priority to one project or region over the project or region from which it is taking the allocation. Thus, the commission will need to consider carefully statewide priorities and the potential unfairness and harm to counties if it obtains the authority to rescind allocations. 4422 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4433 RECOMMENDATIONS The Legislature is currently deliberating on whether to adopt the governor’s recommendations to suspend the transfer of gasoline sales tax revenues from the General Fund to the TIF and to for- give the loan repayment to the TCRF. If the transfer to the TIF is reduced or delayed without a commitment to repay the reduced or delayed amount in future fiscal years, the department will lose permanently up to one year’s worth of TCRP funding from the TIF transfer, further eroding the TCRF balance. Considering the State’s fiscal crisis, the Legislature may wish to allow the TIF to transfer the entire $678 million to the TCRF, and then autho- rize a loan of the money from the TCRF to the General Fund so that those funds would be repaid to the TCRF and therefore still be available in future years. To meet its short-term cash needs, the department should do the following: • Continue its efforts to become more precise in revising its revenue and expenditure estimates and ensure that these revi- sions are properly supported and presented in cash forecast updates it submits to the commission. • Continue to pursue cautiously other funding alternatives (GARVEE bonds, SIB loans, and direct cash reimbursement and replacement projects) to meet short-term project funding needs, but continue to set limits on most of these funding alternatives to avoid making future project scheduling inflexible. Should the commission be granted the authority to rescind unspent TCRP allocations, it should carefully consider statewide priorities and ensure that all counties are treated fairly before taking such actions. 4422 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4433 We conducted this review under the authority vested in the California State Auditor by Section 8543 et seq. of the California Government Code and according to generally accepted government auditing standards. We limited our review to those areas specified in the audit scope section of this report. Respectfully submitted, ELAINE M. HOWLE State Auditor Date: July 3, 2003 Staff: Doug Cordiner, Audit Principal Celina Knippling Renee Davenport LeAnn Fong-Batkin 4444 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4455 APPENDIX A State Transportation Improvement Program Projects Needing Allocations to Proceed In March 2003, California Transportation Commission (commission) staff, in consultation with the California Department of Transportation (department) and regional agencies, prepared a list of State Transportation Improvement Program (STIP) projects that required allocations by June 2003 in order to award contracts for construction or move forward with other phases of project delivery. Although the commission planned to allocate funds to some of the projects based on the criteria that commission staff developed in accordance with state law, the projects shown in Table A.1 on the following pages will not receive allocations in fiscal year 2002–03. 4444 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4455 4466 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4477 1.A ELBAT deecorP ot snoitacollA gnideeN stcejorP PITS )sdnasuohT ni sralloD( detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI 042 $ 30 .nuJ .noitatilibaher tnemevap seliN-odaravlA—ytiC noinU 8912 ademalA 1 enal-ruof tcurtsnoc ,skcart daorliaR cfiicaP noinU eht ta eunevA lartneC nO—kraweN 541 30 .nuJ .noitarapes edarg R9002 ademalA 2 ot owt morf nediw ,teertS yrokciH dna draveluoB yawetaG neewteb eunevA notnrohT—kraweN 021 30 .nuJ .senal ruof S9002 ademalA 3 826 20 .ceD .noitatilibaher noissimsnart dna enigne suB—yaB tsaE A3112 ademalA 4 llawdnuos tcurtsnoc ,)snoitrop( teertS aralC atnaS ot draveluoB nairepseH—drawyaH 076 30 .nuJ .)snoitcerid htob( C09 ademalA 5 htob no noitazilangis llatsnI—egnahcretnI daoR ztneP mahruD ta 99 etuoR etatS no ytnuoC ettuB nI 095 30 .beF .spmar-ffo dnuobhtron dna dnuobhtuos 5142 ettuB 6 07 30 yaM .tnemngilaer yawdaor ,daoR tessahoC ot enaL kciH morf daoR refeeK—ocihC raeN 34L1 ettuB 7 22 30 yaM .yawdaor nediw ,edanalpsE eht ot 23 etuoR morf eunevA hthgiE tseW—ocihC 74L1 ettuB 8 591 30 .nuJ .stnemevorpmi eganiard dna gninediw ,teertS riF ot daoR ttoillE morf teertS dnomlA—esidaraP 411L2 ettuB 9 225 30 .beF .noitatilibaher yawdaor ,evirD evilO kcalB ot yawykS morf daoR nosraeP—esidaraP 911L2 ettuB 01 66 30 .beF .noitcesretni etatilibaher ,daoR ffatsgaW dna yawykS fo noitcesretni eht tA—esidaraP 021L2 ettuB 11 96 30 yaM .noitatilibaher yawdaor ,99 etuoR ot yawdiM morf eunevA reltnE—ocihC 19L2 ettuB 21 016 30 yaM .noitcurtsnocer yawdaor ,99 etuoR fo tsae selim 9.5 ot selim 7.4 morf daoR laeN—esidaraP 39L2 ettuB 31 58 30 yaM .noitcurtsnocer yawdaor ,daoR hcnaR sreniM fo htuos daoR rognaB—ellivorO 49L2 ettuB 41 ot noisnetxe ,eunevA reltnE ot yawdiM morf eunevA yawdeepS—ocihC dna mahruD neewteB 53 30 .nuJ .99 etuoR 89L2 ettuB 51 dna ,senal nrut dda ,nediw ,evorpmi ,pmar-ffo 4 etuoR/eunevA tserclliH—hcoitnA 05 30 yaM .llawdnuos tcurtsnoc A1102 atsoC artnoC 61 htiw noitats piuqe dna ,tcurtsnoc ,llatsnI—noitats )TRAB( tisnarT dipaR aerA yaB tnioP yaB–grubsttiP 053 30 yaM .ytilibapac kcabnrut citamotua ylluf D1102 atsoC artnoC 71 4466 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4477 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI 002 $ 30 yaM .erutcurts gnikrap eht no level lanoitidda na tcurtsnoC—noitats TRAB dnomhciR G1102 atsoC artnoC 81 ,daehliart kraP lanoigeR senoirB eht dna daoR leD revliS neewteb daoR yellaV zeileR—etteyafaL 901 30 .naJ .erusolc pag liart lanoiger tcurtsnoc L1102 atsoC artnoC 91 dna truoC doownelG neewteb egatnorf kraP lliH kaO eht gnola daoR yellaV enotS nO—ellivnaD 26 30 .nuJ .enal elcycib II ssalc rof yawdaor fo edis htuos nediw ,loohcS hgiH atsiV etnoM M1102 atsoC artnoC 02 nairtsedep dna ekib dnetxe ,liarT esrohnorI eht dna tseW daoR yellaV enotS fo noitcesretnI—omalA 01 30 yaM .seitinema dna stnemevorpmi rehto gnidulcni liart P1102 atsoC artnoC 12 worroM dna teertS rodamA neewteb daoR maD olbaP naS dnuobtsae ot tnecajdA—olbaP naS 511 30 .nuJ .htap nairtsedep tcurtsnoc ,evirD Q1102 atsoC artnoC 22 2 30 yaM .setarg mrots yldneirf-elcycib llatsni ,08-I gnolA—dnomhciR–oedoR S1102 atsoC artnoC 32 fo esahp lanfi tcurtsnoc ,teertS truoC/rabosE ot aerA gnigatS yldejeN eht morF—zenitraM 003 30 .nuJ .liarT yaB W1102 atsoC artnoC 42 371 30 yaM .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—nisaB eohaT 58L3 odaroD lE 52 81 30 .beF .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—onserF 20L6 onserF 62 5 30 .rpA .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—onserF 20L6 onserF *62 566 30 .nuJ .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—onserF 20L6 onserF *62 7 30 .beF .noitcurtsnocer yawdaor ,stimiL ytiC htroN ot teertS neerG morf eunevA cfiicaP—swolliW 27L3 nnelG 72 daorliar etatilibaher ,teertS I dna ,teertS F ,eunevA etroN leD ta sgnissorc daorliaR—akeruE 001 30 .nuJ .sgnissorc 4702 tdlobmuH 82 155 20 .ceD .senal ekib II ssalc ,evirD nolavA ot teertS sserpyC morf evirD tunlaW—akeruE P4502 tdlobmuH 92 noitatilibaher yawdaor ,eunevA retsoF ot daoR ecnaillA ot draveluoB aomaS morf teertS K—atacrA 066 30 .nuJ .stnemevorpmi nairtsedep dna P9502 tdlobmuH 03 ot daoR ttelliG fo htuos sretemolik 6.0 morf snoitacol suoirav tA—ytnuoC lairepmI 070,2 30 .rpA .tnemhsiuqniler rof noitatilibaher tnemevap ,daoR notgnihtroW fo htron sretemolik 3.0 465 lairepmI 13 583 30 .beF .noitcurtsnocer ,ecurpS ot 6 etuoR ,daoR eyW—pohsiB 4 oynI 23 014 30 .rpA .noitcurtsnocer ,arreiS ot 861 etuoR ,teertS emoH—pohsiB 5 oynI 33 egap txen no deunitnoc .ecno detnuoc ,rebmun tcejorp detacilpuD * 4488 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4499 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI 4 $ 30 .nuJ .gnicafruser ,slliH amabalA eht ni sdaor ytnuoc nO—eniP enoL raeN 6001 oynI 43 redrob adaveN eht ot daoR keerC ecanruF fo tsae morf daoR liarT hsinapS dlO nO—apoceT raeN 4 30 yaM .gnicafruser yawdaor ,)snoitacol suoirav( 8001 oynI 53 dna syalrevo tnemevap ,steertS nerraW dna drihT htuoS ,nedenS ,hcidnaM—pohsiB 65 30 .rpA .stnemevorpmi eganiard 3051 oynI 63 dna syalrevo tnemevap ,steertS nerraW dna drihT htuoS ,nedenS ,hcidnaM—pohsiB 41 30 yaM .stnemevorpmi eganiard 3051 oynI *63 501 30 .nuJ .yalrevO—daoR llebbahS 6303 oynI 73 422 30 .nuJ .yalrevO—daoR keerC elttuT 9104 oynI 83 111 30 .nuJ .yalrevO—daoR noitatsbuS 1204 oynI 93 ,draveluoB ekaL anihC ot teertS nahaM morf ,draveluoB tsercegdiR tseW nO—tsercegdiR 000,1 30 .naJ .senal ruof ot nediw dna tcurtsnocer 2202 nreK 04 526 30 yaM .llawdnuos tcurtsnoc ,99 etuoR etatS nO—dlefisrekaB 6053 nreK 14 latnemnorivne ,yawsserpxe ,eF atnaS ot 99 etuoR etatS ,daoR dradnatS htneveS—retfahS 000,1 30 .nuJ .ngised dna 0078 nreK 24 004 30 yaM .stnemevorpmi etis refsnart tcurtsnoC—drofnaH 6258 sgniK 34 063 30 yaM .yalrevo ,eunevA lhU ,eunevA drawoH ,eunevA lraeP ,eunevA silyaB—ekalraelC P1203 ekaL 44 47 30 yaM .yawekib dna htuos noisnetxe daor ,daoR enilykS—ellivnasuS 3212 nessaL 54 htiw noitcesretni eht ot 593 etuoR etatS htiw noitcesretni eht morf teertS niaM gnolA—ellivsenaJ 071 30 yaM .teertS niaM yalrevo dna htap ekib tcurtsnoc ,63 etuoR etatS 1622 nessaL 64 581 30 yaM .noitatilibaher yawdaor ,593 .S.U ot 3-A daoR ytnuoC gnolA—ytnuoC nessaL nI 2622 nessaL 74 detaler dna egnahcretni wen ,17 etuoR dna draveluoB noissiM fo noitcesretnI—anomoP 923,2 30 .nuJ .stnemevorpmi noitcesretni 2322 selegnA soL 84 ta snoitarapes edarg ,anomoP dna selegnA soL neewteb yellaV leirbaG naS—tsaE rodirroC ademalA 82 20 .ceD .selagoN dna ,riovreseR ,noynaC aerB ,slliH esoR ,ollebetnoM ,yellaV ,dnE tsaE 8132 selegnA soL 94 .ecno detnuoc ,rebmun tcejorp detacilpuD * 4488 California State Auditor Report 2002-126 California State Auditor Report 2002-126 4499 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI ta snoitarapes edarg ,anomoP dna selegnA soL neewteb yellaV leirbaG naS—tsaE rodirroC ademalA 34 $ 20 .ceD .selagoN dna ,riovreseR ,noynaC aerB ,slliH esoR ,ollebetnoM ,yellaV ,dnE tsaE 8132 selegnA soL *94 ta snoitarapes edarg ,anomoP dna selegnA soL neewteb yellaV leirbaG naS—tsaE rodirroC ademalA 115,5 30 .nuJ .selagoN dna ,riovreseR ,noynaC aerB ,slliH esoR ,ollebetnoM ,yellaV ,dnE tsaE 8132 selegnA soL *94 draveluoB knabruB/draveluoB adevlupeS eht fo renroc tsaehtroN—yellaV odnanreF naS/selegnA soL 481,1 30 yaM .yawdaor nediw ,egnahcretnI draveluoB knabruB/504 etuoR ot tnecajda noitcesretni 9632 selegnA soL 05 dna draveluoB hcaeB gnoL neewteb teertS nosraC—snedraG naiiawaH ,doowekaL ,hcaeB gnoL 724,1 30 yaM .noitazinorhcnys langis ,eunevA dlefimoolB 5482 selegnA soL 15 lortnoC dna ecnallievruS cfifarT detamotuA ,snoitcesretni 95—selegnA soL fo aera nretsaehtroN 615,2 30 .beF .)CASTA( metsyS 8582 selegnA soL 25 781,1 30 .beF .CASTA ,snoitcesretni 95—selegnA soL fo aera nretsaehtroN 8582 selegnA soL *25 667 30 .beF .CASTA ,snoitcesretni 95—selegnA soL fo aera nretsaehtroN 8582 selegnA soL *25 345 30 yaM .ssaprevo nediw ,01-I revo egdirB eunevA dnalrevO—selegnA soL tseW 3682 selegnA soL 35 ot teertS tsriF morf daoR odnanreF naS no yellaV odnanreF naS nretsaE—selegnA soL 203,2 30 .naJ .htap ekib I ssalc tcurtsnoc ,teertS drofnarB 8682 selegnA soL 45 fo noisnetxe ,draveluoB aisetrA ot draveluoB faelneerG morf keerC notpmoC gnolA—notpmoC 883 30 yaM .htap nairtsedep/ekib I ssalc 9682 selegnA soL 55 211 20 .ceD .tcennocretni langis ,draveluoB daemesoR/doowekaL—yenwoD 0782 selegnA soL 65 530,1 20 .ceD .tcennocretni langis ,draveluoB daemesoR/doowekaL—yenwoD 0782 selegnA soL *65 seyeR dna ,skaO dnasuohT ,daoR nanaK ,srodirroc lanoiger niam eerht nO—slliH aruogA 523 30 yaM .noitazinorhcnys langis ,daoR ebodA 5782 selegnA soL 75 seyeR dna ,skaO dnasuohT ,daoR nanaK ,srodirroc lanoiger niam eerht nO—slliH aruogA 993 30 yaM .noitazinorhcnys langis ,daoR ebodA 5782 selegnA soL *75 ,evirD lliH reppoC ta daoR hcnaR llahweN ot yaW tlibrednaV ta 5-I raen 621 etuoR—atiralC atnaS 252 30 .nuJ .ngised dna erusolc pag rotcennoc 5882 selegnA soL 85 001 30 .rpA .secaps gnikrap lanoitidda 521 tcurtsnoc ,noitatS knilorteM llahweN—atiralC atnaS 1092 selegnA soL 95 egap txen no deunitnoc .ecno detnuoc ,rebmun tcejorp detacilpuD * 5500 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5511 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI ,mranelG fo sgnissorc osla ,eromlliF dna raM leD ta snoitatS—rodirroC eniL eulB anedasaP 993 $ 30 yaM .stnemevorpmi nairtsedep ,ainrofilaC ,raM leD 2192 selegnA soL 06 dna eunevA kramweN neewteb draveluoB citnaltA htroN—kraP yeretnoM ,ytnuoC selegnA soL 841 20 .ceD .noitazilennahc ,gninediw ,eunevA namlleH 5192 selegnA soL 16 nediw dna ecalper ,draveluoB yrotciV dna teertS egdirttiK neewteb eunevA apmaT—selegnA soL 342 30 yaM .noitarapes edarg htap ekib rof egdirb dnetxe dna senal owt dda ,egdirB eunevA apmaT 0903 selegnA soL 26 gninediw ,evirD notgnitnuH dna daoR noissiM revo egdirB teertS otoS—selegnA soL 143,1 30 yaM .noitatilibaher dna 3903 selegnA soL 36 nediw ,teertS nodlehS dna teertS htrowtneW neewteb daoR noynaC leruaL nO—selegnA soL 94 30 yaM .senal ekib dda dna senal xis ot ruof morf egdirb 4903 selegnA soL 46 933 30 yaM .egdirb etatilibaher dna nediw ,eunevA aktenniW dna eunevA nosaM neewteB—selegnA soL 5903 selegnA soL 56 nediw ,teertS lartneC dna teertS ademalA neewteb teertS laicremmoC nO—selegnA soL nwotnwoD 082 30 yaM .teertS laicremmoC 6903 selegnA soL 66 dna sehcaorppa egdirb nediw ,noissiM dna sengiV neewteb egdirB teertS tsriF nO—selegnA soL 320,1 30 yaM .sdradnats ytefas teem ot sgniliar lacirotsih ecalper 4013 selegnA soL 76 dna ecalper ,daoR odnanreF naS dna teertS yalcraB neewteb evirD edisreviR nO—selegnA soL 564,1 30 yaM .enal ekib dda dna sehcaorppa dna egdirB edisreviR ngilaer 5013 selegnA soL 86 sretemolik 1.0 ot teertS doowhcrA fo htuos sretemolik 1.0 morf eunevA aktenniW nO—selegnA soL 322 30 yaM .noitatilibaher dna gninediw egdirb ,teertS eromliG fo htron 8013 selegnA soL 96 nairtsedep tcurtsnoc ,oykoT elttiL ni retneC civiC nwotnwod fo tsaehtuoS—selegnA soL 561 30 yaM .stnemevorpmi 6113 selegnA soL 07 gnoL/pmar-ffo yaweerf 101 eht morf draveluoB elcriC yellaV nI—sasabalaC raen selegnA soL fo tseW 103 30 yaM .yawdaor nediw ,sasabalaC ot daoR yellaV 3313 selegnA soL 17 esahp tsrfi ,evirD relliM fo dne htron eht ta eunevA llewdroB fo tseW ,teertS lliM fo htuoS—notloC 420,2 30 .rpA .kcots gnillor s’knilorteM rof ytilicaf ecnanetniam dna dray egarots fo 1023 selegnA soL 27 065 30 yaM .erutcurts gnikrap tcurtsnoc ,eunevA surtiC htroN 955 dna eunevA drihT htroN 085 tA—anivoC 4223 selegnA soL 37 ,snoitats muesuM WS dna ,75 eunevA ,eunevA hcnerF ,62 eunevA ,nwotanihC—selegnA soL 58 30 yaM .seitilicaf gnikrap elcycib tcurtsnoc 7223 selegnA soL 47 734,2 30 .naJ .noitcesretni evorpmI—draveluoB inidnaB ta draveluoB citnaltA 0034 selegnA soL 57 5500 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5511 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI -owt ,skcart daorliar eht fo edis htuos eht dna evirD bulC yrtnuoC fo edis tsew eht nO—aredaM 031 $ 30 .rpA .gnithgil aera dna ,pots sub ,mroftalp gnidaol-regnessap ,tol gnikrap ,daor ssecca enal 5202 aredaM 67 ,teertS ht9 ot ht4 morF .yalrevo ,teertS ht4 ot dr3 morf ,eunevA arutneV—allihcwohC 92 30 yaM .yawdaor tcurtsnocer 1288 aredaM 77 76 30 yaM .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—aredaM 0588 aredaM 87 32 30 .beF .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—niraM 3612 niraM 97 ecafruser dna etatilibaher ,teertS nosnhoJ dna teertS ssecnirP neewteb yawegdirb nO—otilasuaS 131 30 .rpA .yawdaor R2102 niraM 08 yb tol edir-dna-krap atinaznaM eht dnapxe ,egnahcretni 101 .S.U/1 etuoR etatS—ytiC niraM 76 30 .nuJ .sdnalkrap eht ot ssecca evorpmi ot elttuhs a etarepo dna secaps 08 C023 niraM 18 08 yb tol edir-dna-krap atinaznaM eht dnapxe ,egnahcretni 101 .S.U/1 etuoR etatS—ytiC niraM 442 30 yaM .sdnalkrap eht ot ssecca evorpmi ot elttuhs a etarepo dna secaps C023 niraM *18 ronim ,yawdaor etatilibaher ,daoR elgnairT ot htuoS 94 etuoR morf daoR harraD—asopiraM raeN 514 30 .beF .krow redluohs dna ,tnemngilaer 11K2 asopiraM 28 01 30 .beF .noitatilibaher yawdaor ,noisividbus ordeP noD ni sdaor suoiraV—ordeP noD ekaL 21K2 asopiraM 38 11 30 .beF .langis wen llatsni ,teertS leruaL dna )1 etuoR etatS( teertS niaM fo noitcesretni eht tA—ggarB troF P5804 onicodneM 48 )ADA( tcA seitilibasiD htiw snaciremA rof etercnoc wen llatsni ,snoitacol suoiraV—ggarB troF 52 30 yaM .sklawedis dna ,rettug ,sbruc ,spmar tnailpmoc P6804 onicodneM 58 dna evomer ,sgnissorc daorliar daoR tnalP dna ,daoR tropriA ,evirD ecremmoC ,teertS droF—haikU 61 30 yaM .tnemevap ecalper P9804 onicodneM 68 spmar ADA tcurtsnoc ,daoR droF dna evirD eripmE fo snoitcesretni dna teertS etatS htroN—haikU 81 30 yaM .snoitcesretni dezilangis delevart ylivaeh ta P5904 onicodneM 78 ,enal nrut tfel suounitnoc a tcurtsnoc ,)401 daoR ytnuoC( teertS etatS htroN nO—haikU raeN 003 30 .nuJ .eganiard dna ,senal elcycib edivorp ,langis gnidargpu ro gnillatsni rehtie yb noitcesretni evorpmi P1014 onicodneM 88 543 30 .nuJ .yawdaor etatilibaher ,992 etuoR ot 593 etuoR morf etuor kcurt solraC/renraW—sarutlA 1402 codoM 98 teertS renraW morf teertS ht8 ,992 etuoR dna teertS kraP neewteb ,teertS renraW—sarutlA 594,1 30 .beF .noitatilibaher yawdaor ,tsae teef 005 6712 codoM 09 ,erots lareneg ta dne tsew ot 593 etuoR morf daoR ekaL ydnuL—ydnuL raeN 013,1 30 .rpA .noitatilibaher yawdaor 9002 onoM 19 egap txen no deunitnoc .ecno detnuoc ,rebmun tcejorp detacilpuD * 5522 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5533 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI dna lanimret tropria eht neewteb ,tropriA etimesoY/htommaM tsaE—sekaL htommaM 02 $ 30 yaM .daor enal-owt tcurtsnoc ,daoR gnissorC notneB 2152 onoM 29 045 30 yaM .tnempiuqe detaicossa dna sesub 21 etatilibaheR—aerA ecivreS ytnuoC yeretnoM 4001 yeretnoM 39 ,seunevA tunlaW dna elppA neewteb pil rettug ot pil rettug laeR onimaC lE—dlefineerG 05 30 .nuJ .yalrevo tnemevap 3101 yeretnoM 49 bruc ,tnemevap ecalper dna evomer ,teertS dr3 hguorht teertS ssuR ot teertS yawdaorB—ytiC gniK 05 30 .nuJ .deriuqer sa klawedis dna ,rettug 4101 yeretnoM 59 dna tcurtsnocer ,eunevA edreV olaP dna taolS neewteb ,eunevA etnoM leD nO—yeretnoM 588 30 yaM .snaidem epacsdnal tcurtsnoc 6511 yeretnoM 69 dna lanoitarepo tcurtsnoc ,noitarapes 86/1 etuoR ot egdirB reviR lemraC morF—lemraC raeN 000,1 30 yaM .stnemevorpmi gnisaercni yticapac 0028 yeretnoM 79 dna lanoitarepo tcurtsnoc ,noitarapes 86/1 etuoR ot egdirB reviR lemraC morF—lemraC raeN 000,2 30 yaM .stnemevorpmi gnisaercni yticapac 0028 yeretnoM *79 ot teertS reddiK morf teertS tnorF dna ,teertS yeretnoM ot teertS tnorF morf teertS tseW—dadeloS 16 30 .beF .cirbaf gnicrofnier tnemevap htiw yalrevo ,teertS tsaE A5101 yeretnoM 89 005 30 .rpA .yawdaor nediw ”,elohesuoM eht“ sa nwonk ssaprednu daorliaR cfiicaP noinU eht tA—eekcurT 34L3 adaveN 99 75 20 .ceD .senal owt ot eno morf pmar-ffo 5-I dnuobhtuos nediw ,evirD revluC dna 5-I fo noitcnuj tA—enivrI 6972 egnarO 001 rof gnireenigne yranimilerp ,enil ogeiD naS ot selegnA soL fo gnissorc eunevA lliH deR—nitsuT 233 30 yaM .noitarapes edarg 4569 egnarO 101 44 20 .ceD .noitcurtsnocer egnahcretni ,draveluoB egelloC arreiS dna 08-I tA—nilkcoR C151 recalP 201 42 30 .nuJ .noitcurtsnocer egnahcretni ,draveluoB egelloC arreiS dna 08-I tA—nilkcoR C151 recalP *201 dna yawhgih etatilibaher ,)901 daoR ytnuoC( daoR htruowkceB/eniplaC—htruowkceB raeN 714,1 30 .nuJ .stnemevorpmi ytefas 5402 samulP 301 dna yawhgih etatilibaher ,)901 daoR ytnuoC( daoR htruowkceB/eniplaC—htruowkceB raeN 855 30 .nuJ .stnemevorpmi ytefas 5402 samulP *301 yawdaor ,daoR eeL ot noitcesretni 98/07 etuoR eht morf daoR noitcnuJ ycniuQ—ycniuQ 082 30 .beF .noitatilibaher 3322 samulP 401 .ecno detnuoc ,rebmun tcejorp detacilpuD * 5522 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5533 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI ,selim 2.4 gnidnetxe stimil ytic eht fo htron morf daoR sivaD ekaL nO—alotroP raeN 514 $ 30 .beF .yawdaor etatilibaher 4422 samulP 501 htron gnidnetxe 98 etuoR etatS fo noitcesretni eht morf 51A daoR ytnuoC nO—alotroP raeN 52 30 .nuJ .yawdaor etatilibaher ,selim 54.1 6422 samulP 601 dna noisividbus niatnuoM dloG ot ecnartne eht raen 51A daoR ytnuoC nO—alotroP raeN 002 30 .nuJ .yawdaor etatilibaher ,selim 4.1 htron gnidnetxe 7422 samulP 701 002 30 .beF .yawdaor etatilibaher ,evirD alusnineP ot evirD droffilC morf daoR evoC giB nO—retsehC raeN 0522 samulP 801 ,etag ecnartne bulC yrtnuoC ronamlA ekaL eht ot 31A morf evirD droffilC nO—retsehC raeN 03 30 .nuJ .yawdaor etatilibaher 1522 samulP 901 092 30 .beF .yawdaor etatilibaher ,daoR noitcnuJ ycniuQ ot enaL lleB morf daoR eeL nO—ycniuQ 3522 samulP 011 ,selim 9.0 drawtsew gnidnetxe dna daoR keerC giB morf daoR ekaL skcuB nO—yellaV wodaeM 513 30 .beF .yawdaor etatilibaher 4522 samulP 111 521 30 .nuJ .yawdaor etatilibaher ,daoR etroP aL-ycniuQ nO—etroP aL raeN 5522 samulP 211 reirrab egdirb ,)7310-C9 .oN egdirB( reviR rehtaeF fo krof htron revo eunevA tsriF nO—retsehC 52 30 .beF .tnemecalper liar 5432 samulP 311 morf nediw ,egdirB daorliaR cfiicaP ot daoR weivmarT morf ,evirD naidnI nO—sgnirpS mlaP 78 30 .beF .senal ruof ot owt 7001 edisreviR 411 ,yawkraP ecarreT egnarO dna teertS notgnihsaW neewteb ,draveluoB neruB naV nO—edisreviR 323,1 30 yaM .stuonrut sub dna ,naidem desiar ,rettug ,bruc etercnoc a tcurtsnoc 3011 edisreviR 511 004 30 yaM .margorp erahsedir lanoigeR—edisreviR 1089 edisreviR 611 523 30 .rpA .yawdaor etatilibaher ,111 yawhgiH ot teertS noskcaJ morf draveluoB oidnI nO—oidnI M0 edisreviR 711 251 30 .nuJ .tnemhsiuqniler rof yawdaor etatilibaheR—111 dna 68 setuoR no oidnI dna allehcaoC J57 edisreviR 811 846 30 .nuJ .stnemevorpmi teerts ,61 etuoR ot yaweerF ytiC latipaC morf eunevA ttaW—otnemarcaS 86L2 otnemarcaS 911 dna htron eht no teertS J yb dednuob supmaC—otnemarcaS ,ytisrevinU etatS ainrofilaC dnuora setuor ekib III dna ,II ,I ssalc fo krowten tcurtsnoc ,htuos eht no draveluoB mosloF 64 30 .beF .supmac hguorht dna 70L3 otnemarcaS 021 09 30 yaM .noitcurtsnocer yawdaor ,draveluoB yelaR gnola tocsA ot anA atnaS morF—otnemarcaS 81L3 otnemarcaS 121 egap txen no deunitnoc 5544 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5555 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI 000,1 $ 30 .rpA .yawdaor nediw ,skaO riaF gnola daoR elgnE ot eunevA inocraM morF—leahcimraC 93L3 otnemarcaS 221 lacol ,notyaD dna areiviR kraP ,eluorpS ,teertS eniV ,teertS dr3 htroN—otnemarcaS 198,1 30 .beF .noitcurtsnocer daor 20L9 otnemarcaS 321 ,keerC nauJ naS/daoR noynaC nauJ naS ,teertS tsriF/ttocserP yb dednuoB—atsituaB nauJ naS niard mrots dna edisdaor ,651 etuoR/daoR drayeniV noissiM ,651 etuoR/daoR yeretnoM 331 30 yaM .tnemevorpmi 358 otineB naS 421 03 30 yaM .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—otineB naS 839 otineB naS 521 09 30 yaM .srotcennoc dna ,ssaprevo ,egnahcretni wen a tcurtsnoc ,85 yawhgiH dlO ta 51-I nO—wotsraB O371 onidranreB naS 621 57 30 .beF .)2 esahp( gnidliub eht fo roiretni eht fo noitarotser ,noitats refsnart ladomretni secraG lE—seldeeN E1 onidranreB naS 721 046 30 .beF .)2 esahp( gnidliub eht fo roiretni eht fo noitarotser ,noitats refsnart ladomretni secraG lE—seldeeN E1 onidranreB naS *721 983,1 30 yaM .sllawdnuos tcurtsnoc ,eunevA tropweN dna daoR notraB neewteB—ecarreT dnarG C442 onidranreB naS 821 saerA ecivreS draoB tnempoleveD tisnarT natiloporteM dna tisnarT ytnuoC htroN eht ni secivreS tisnarT 052,5 30 yaM .metsys noitcelloc eraf llatsni dna ,erucorp ,ngiseD—ogeiD naS fo 879 ogeiD naS 921 446,1 30 .nuJ .margorp erahsedir lanoigeR—ogeiD naS 4047 ogeiD naS 031 kcart dnoces dda dna egdirB reviR otiugeiD naS ecalpeR—reviR otiugeiD naS ta raM leD 558 30 .naJ .)gnireenigne yranimilerp dna latnemnorivne( 5689 ogeiD naS 131 541,1 30 .nuJ .sllawdnuos tcurtsnoc ,teertS ramolaP ot eunevA egnarO—atsiV aluhC A534 ogeiD naS 231 /ytilauQ riA noitagitiM noitsegnoC/margorP noitatropsnarT ecafruS lanoigeR—ogeiD naS 14 30 .beF .evreser tcA ytiuqE noitatropsnarT B1047 ogeiD naS 331 /ytilauQ riA noitagitiM noitsegnoC/margorP noitatropsnarT ecafruS lanoigeR—ogeiD naS 22 30 yaM .evreser tcA ytiuqE noitatropsnarT B1047 ogeiD naS *331 /ytilauQ riA noitagitiM noitsegnoC/margorP noitatropsnarT ecafruS lanoigeR—ogeiD naS 142 30 yaM .evreser tcA ytiuqE noitatropsnarT B1047 ogeiD naS *331 latnemnorivne lautpecnoc ,snoitats TRAB yremogtnoM dna oredacrabmE—ocsicnarF naS 005 30 yaM .tfiorter cimsies rof seiduts/sisylana gnireenigne R4102 ocsicnarF naS 431 a tcurtsnoc ,skcart daorliaR cfiicaP nrehtuoS ot tnecajda eunevA lartneC dna teertS htxiS tA—ycarT 549,2 30 .nuJ .noitats ladomitlum 74K2 niuqaoJ naS 531 cfiicaP noinU eht revo ssaprevo enal-ruof tcurtsnoc ,99 etuoR etatS dna 5-I neewteB—porhtaL 002 30 .naJ .eunevA yelniKcM dna teertS ht7 neewteb ,skcart daorliaR 14K3 niuqaoJ naS 631 .ecno detnuoc ,rebmun tcejorp detacilpuD * 5544 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5555 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI ,spmar-ffo dna -no 1 yawhgiH dna ,teertS niaM ,14 etuoR fo noitcesretni eht tA—yaB orroM 144 $ 30 .nuJ .snoitcesretni gnitsixe owt ecalper ot tuobadnuor elgnis a tcurtsnoc 5011 opsibO siuL naS 731 561 30 .nuJ .spmar dna segnahcretni yfidom ,eunevA dnarG dna daoR ocsirB neewteB—ednarG oyorrA A073 opsibO siuL naS 831 noisnetxe tropriA ocsicnarF naS TRAB—earblliM ,onurB naS ,ocsicnarF naS htuoS ,amloC 343,1 30 .nuJ .htap elcycib 5301 oetaM naS 931 enal yrailixua tcurtsnoc ,ssaprednu evirD dlefifehS ot eunevA snavE—dnalremmuS raeN 638 30 .nuJ .)I ssalc( yawekib dna )dnuobhtron( 184 arabraB atnaS 041 232 30 .nuJ .yawdaor etatilibaher ,steerts lacol suoiraV—arabraB atnaS 4911 arabraB atnaS 141 002 30 .nuJ .spmar ssecca dna sklawedis evorpmi dna tcurtsnoc ,snoitacol suoiraV—arabraB atnaS 7911 arabraB atnaS 241 ekib evorpmi ,enaL snevarC dna laeR aiV ot teertS htneveS dna eunevA airetnipraC—airetnipraC 07 30 .rpA .101 yawhgiH ta ssaprevo eunevA zenY atnaS nediw dna htap E322 arabraB atnaS 341 evorpmi ,)dnuobhtron( pmar-no 101 .S.U ot eunevA snavE morf daoR lliH agetrO—dnalremmuS 013 30 yaM .gnikrap dna )II ssalC( senal ekib rof daor nediw ,noitcesretni G322 arabraB atnaS 441 797 30 .nuJ .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—aralC atnaS 8612 aralC atnaS 541 ot eunevA esoJ naS gnidulcni ,kraP edanelpsE eht dna eunevA notkcotS neewteB—alotipaC 06 30 yaM .stnemevorpmi eganiard dna ,gnikrap ,senal ekib ,sklawedis ,eunevA alotipaC 2811 zurC atnaS 641 58 30 .beF .noitazilibats epols dna noitcurtsnocer yawdaoR—daoR sotilarroC raen ,daoR itsemA 4502 zurC atnaS 741 ,kraP nrohneerG ta stimil ytic ot daoR sacuL morf daoR nrohneerG nO—akerY 154 30 .rpA .noitatilibaher tnemevap 5122 uoyiksiS 841 023 30 .beF .yalrevo dna noitatilibaher ,teertS dnoceS dna ,teertS etatS ,teertS elgnairT ,teertS niaM—sirroD 2822 uoyiksiS 941 053 30 .beF .stnemevorpmi eganiard dna yawdaor etatilibaher ,teertS ht9 ot ht6 morF—eugatnoM 8822 uoyiksiS 051 sbruc ecalper ro evomer ,syalrevo etercnoc ,steerts etatilibaher ,steerts suoiraV—ekaleluT 053 30 yaM .srettug dna 0922 uoyiksiS 151 521 30 yaM .epirtser dna ,yalrevo ,riaper ,teertS ysaE dna 99 yawhgiH dlO—ytnuoC uoyiksiS nI 5032 uoyiksiS 251 91 30 yaM .yawdaor etatilibaher ,enaL srevoL ta stimil ytic ot daoR nahallaC morf teertS nahallaC nO—antE 3732 uoyiksiS 351 521 30 .nuJ .seitilicaf sub dna yrreF knilyaB rof erutcurts gnikraP—ojellaV 0622 onaloS 451 egap txen no deunitnoc 5566 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5577 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI 851 $ 30 .beF .yalrevo na htiw etatilibaher ,daoR namttiP ot daoR eihctiR morf yaW lartneC gnolA—dlefiriaF E123 onaloS 551 ,tnemngila dna gnicafrus kcart ,gnitsallab ,tnemecalper eit ,rodirroC 08-I gnolA—ytnuoC onaloS 091 30 .nuJ .noitatilibaher egdirb dna L5406 onaloS 651 323 30 .beF .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—amonoS 2712 amonoS 751 521 30 yaM .tol edir-dna-krap ,egnahcretni yawsserpxE kraP trenhoR eht tA—kraP trenhoR G287 amonoS 851 72 30 .beF .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—sualsinatS 1599 sualsinatS 951 9 30 .rpA .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—sualsinatS 1599 sualsinatS *951 383 30 yaM .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—sualsinatS 1599 sualsinatS *951 5 30 yaM .)hctam ytilauQ riA dna noitagitiM noitsegnoC( evreseR—sualsinatS 1599 sualsinatS *951 000,1 30 yaM .egnahcretni tcurtsnoc ,daoR ogeiR dna 99 etuoR etatS tA—ytnuoC rettuS 44L3 rettuS 061 03 30 .beF .)3 esahP( yawdaor ngilaer ,keerC elbbiD fo kroF htroN eht fo htron daoR yoCcM—ffulB deR raeN 2612 amaheT 161 22 30 yaM .)3 esahP( yawdaor ngilaer ,keerC elbbiD fo kroF htroN eht fo htron daoR yoCcM—ffulB deR raeN 2612 amaheT *161 751 30 .beF .noitatilibaher tnemevap ,evirD reilavaC dna ,steertS htruoF dna drihT ,H ,F ,D ,B—amaheT 3712 amaheT 261 901 30 yaM .noitatilibaher yawdaor ,keerC knaB deR ta tsew 99 yawhgiH—ffulB deR raeN 1912 amaheT 361 281 30 yaM .enal nrut tcurtsnoc ,tsew 99 yawhgiH htiw noitcesretni eht ta daoR relyT—ffulB deR raeN 3912 amaheT 461 2 30 .nuJ .noitatilibaher yawdaor ,63 etuoR ot htron teertS tunlaW morf daoR rekaB—ffulB deR raeN 4912 amaheT 561 063 30 .rpA .yawdaor lairetra enal-owt wen ,3 etuoR etatS ot 992 etuoR etatS morF—ellivrevaeW nretsaE nI 8312 ytinirT 661 734 30 .nuJ .yawdaor nediw dna ngilaer ,daoR mopmayH nO—krofyaH raeN 0412 ytinirT 761 927 30 .rpA .noitatilibaher yawdaor ,daoR mopmayH nO—krofyaH raeN 6122 ytinirT 861 ,eunevA llewdlaC ot eunevA dnaleL morf )daoR eerameD( 801 daoR ytnuoC—eraluT ot ailasiV 053 30 .beF .senal ruof ot owt morf nediw 101 eraluT 961 .ecno detnuoc ,rebmun tcejorp detacilpuD * 5566 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5577 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI ruof ot senal owt morf nediw ,36 etuoR etatS ot 99 etuoR etatS morf eunevA llewdlaC—ailasiV 624 $ 30 yaM .senal 301 eraluT 071 ot senal owt morf nediw ,36 etuoR etatS ot 99 etuoR etatS morf eunevA llewdlaC—ailasiV 004 30 yaM .senal ruof 301 eraluT *071 owt morf nediw ,)eunevA drofwarC( 88 daoR ot eniL ytnuoC onserF morf 614 eunevA—abuniD 531 30 .beF .yawsserpxe enal-ruof ot senal 701 eraluT 171 ,eunevA egadnurB dna eunevA snevetS neewteb )082 eunevA( daoR ailasiV—ellivsremraF 52 30 .rpA .stnemevorpmi lanoitarepo 801 eraluT 271 ladomretni tcurtsnoc ,eunevA niuqaoJ naS dna eunevA ssorC neewteb teertS K—eraluT 409,1 30 yaM .retnec tisnart 1368 eraluT 371 ,retneC ytnuoC ,eunevA aiuqecA ,teertS eerameD ,teertS dnaldooW ,eunevA eladnetihW—ailasiV 439 30 yaM .noitatilibaher yawdaor ,teertS mahkniP dna ,eunevA eraluT ,teertS sgniddiG ,teertS reynoC 3368 eraluT 471 tsew gnissorc daorliar yellaV niuqaoJ naS dna teertS eyaJ neewteb eunevA nosredneH—ellivretroP 13 30 yaM .teerts etatilibaher dna rettug dna bruc tcurtsnoc ,teertS niaM fo 0868 eraluT 571 owt morf nediw ,08 daoR ot 99 etuoR etatS morf ,daoR gniggiR dna evirD ytteB nO—ailasiV raeN 484 30 yaM .ngilaer dna senal ruof ot 3868 eraluT 671 naidnI eluT ot 091 etuoR etatS morF—daoR noitavreseR no noitavreseR naidnI reviR eluT raeN 05 30 .rpA .stuonrut dnuobtsew eerht dna dnuobtsae owt dliub ,redrob noitavreseR 6868 eraluT 771 681 30 yaM .metsys noitpmeerp elcihev ycnegreme llatsni ,snoitcesretni 43 tA—ailasiV 8868 eraluT 871 etatS ot htron keerC doowkcaP morf )draveluoB yenooM( 36 etuoR etatS gnolA—ailasiV 06 30 yaM .margorp gnipacsdnal/gnitnalp eert ,891 etuoR 9868 eraluT 971 ot nediw ,yaW etnoM lE ot nehsoG—)yawsserpxE 08 daoR( abuniD dna ailasiV neewteB 004 30 .beF .senal ruof 11L6 eraluT 081 33 30 .naJ .sgnissorc edarg ,yrreF sdraW dlO ot itteniugnaS—aronoS 0989 enmulouT 181 eerht gnidulcni noitatilibaher tnemevap ,teertS yksniloS dna daoR latipsoH nO—aronoS 012 30 yaM .sgnissorc daorliar 49K3 enmulouT 281 579,1 30 .rpA .selcihev retummoc derahs 057 fo tnemyolpeD—denimreted eb ot ediwetats snoitacol suoiraV 7102 suoiraV 381 524 30 yaM .llawdnuos tcurtsnoc ,evirD nidraJ dna eunevA wonS neewteb ,101 .S.U no dnuobhtuoS—dranxO 8313 arutneV 481 airotciV neewteb dna pmar-ffo teertS niaM tsaE ta 621 etuoR etatS no dnuobtseW—arutneV 964 30 .nuJ .sllawdnuos tcurtsnoc ,ssaprevo nairtsedep lliH htuoS dna eunevA 0413 arutneV 581 dna ,daoR kraP utneV ot nnyL morf 101 .S.U dnuobhtron dna dnuobhtuoS—skaO dnasuohT 986,1 30 yaM .sllawdnuos tcurtsnoc ,evirD ydneW ot daoR drahcroB morf 101 .S.U dnuobhtuos 1413 arutneV 681 egap txen no deunitnoc .ecno detnuoc ,rebmun tcejorp detacilpuD * 5588 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5599 detcepxE PITS noitacollA noitacollA htnoM tcejorP tseuqeR raeY dna noitpircseD tcejorP rebmuN ytnuoC metI 006 $ 30 yaM .)2 esahp( noitatilibaher daor lacol ,snoitacol suoiraV—sivaD 08L2 oloY 781 dna 92 daoR ytnuoC ot 72 daoR ytnuoC morf 99 daoR ytnuoC—dnaldooW dna sivaD neewteB 46 30 .rpA .yawekib tcurtsnoc ,311 etuoR etatS ot 99 daoR ytnuoC morf 92 daoR ytnuoC 54L3 oloY 881 ,dnaldooW fo ytiC eht dna 92 daoR ytnuoC morf 89 daoR ytnuoC—dnaldooW dna sivaD neewteB 861 30 .rpA .yawdaor nediw 74L3 oloY 981 58 30 .beF .yawdaor nediw ,sivaD fo ytiC eht ot 501 daoR ytnuoC morf A23 daoR ytnuoC—sivaD fo tsaE 84L3 oloY 091 52 30 yaM .noitatilibaher yawdaor ,daoR agobrA gnola yawdaorB ot daoR elrE morF—tsruhevilO 55L3 abuY 191 ,daoR nelG wolliW gnola daoR nwothcnerF ot daoR ellivsyraM morF—ytnuoC abuY nrehtroN 04 30 yaM .noitatilibaher yawdaor 65L3 abuY 291 morf teertS ht91 tsaE ,eunevA nosnhoJ ot teertS ht61 tsaE morf teertS notsuH—ellivsyraM yawdaor ,teertS nospmaS ot teertS duallivoC morf teertS ht81 tsaE ,teertS duallivoC ot teertS llaH 02 30 yaM .noitatilibaher 75L3 abuY 391 61 30 yaM .noitatilibaher yawdaor ,teertS duallivoC ot teertS llaH morf yaW tuoediR—ellivsyraM 85L3 abuY 491 241,301$ snoitacolla gnidnep stcejorp lla rof latoT APPENDIX B Traffic Congestion Relief Program Projects Needing Allocations to Proceed As of April 2003, 15 Traffic Congestion Relief Program (TCRP) projects have submitted requests for allocations in order to continue work. As shown in Table B.1 on the following pages, these projects need a total of $147 million in order to move to the next phase of their life cycle. 5588 California State Auditor Report 2002-126 California State Auditor Report 2002-126 5599 6600 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6611 1.B ELBAT deecorP ot snoitacollA gnideeN stcejorP PRCT )sdnasuohT ni sralloD( fo tnuomA PRCT latoT detseuqeR serutidnepxE tnuomA snoitacollA gnidneP dna PRCT elbaliavA PRCT yb dedeeN gniniameR fo sa seciovnI fo sa snoitacollA hguorhT ro ytnuoC tcejorP 3002 ,03 enuJ sdeeN noitacollA 2002 ,13 rebmeceD 2002 ,13 rebmeceD waL etatS noitpircseD noigeR rebmuN dna dnalkaO neewteb enil liar yticretni evorpmI—rodirroC lotipaC ni snoitats ellivyremE dna erauqS nodnoL kcaJ ta dna ,esoJ naS aerA yaB 529,2$ 529,2 $ 867 $ 570,22$ 000,52 $ .seitnuoc aralC atnaS dna ademalA lanoigeR – 9 dna ytilibisaef etelpmoC—gnissorC nrehtuoS yaB ocsicnarF naS ,egdirb wen( gnissorc yaB ocsicnarF naS wen rof seiduts laicnanfi ro ,noitcennoc lanimret ,egdirb tisnart/elcihev ycnapucco-hgih oetaM naS ro ocsicnarF naS dna ademalA ni )ebut TRAB dnoces aerA yaB 008,1 008,1 002,3 002,3 000,5 .seitnuoc lanoigeR – 11 ademalA ni tcejorp tnemecnahne tisnart dna ytefaS—daoR ocsaV /ademalA 414,2 435,8 328 664,2 000,11 .seitnuoc atsoC artnoC dna atsoC artnoC 72 dipar sub dliuB—stnemevorpmI tisnarT ytiC-diM selegnA soL noitisopxe/edistsew/ytic-dim ni tisnart liar thgil ro metsys tisnart 000,41 008,832 979,1 002,71 000,652 .ytnuoC selegnA soL ni srodirroc selegnA soL 73 notgnilruB no snoitarapes edarg dliuB—tsaE rodirroC ademalA nwotnwod ,senil daorliaR cfiicaP noinU dna eF atnaS-nrehtroN 438,6 724,88 155,3 375,16 000,051 .ytnuoC selegnA soL ni enil ytnuoc selegnA soL ot selegnA soL selegnA soL 45 ogeiD naS nihtiw enil liar yticretni kcart elbuoD—reniflruS cfiicaP 637,4 255,34 119,1 844,3 000,74 .ytnuoC ogeiD naS ni dray ecnanetniam dda ;ytnuoc ogeiD naS 47 sesub noissime-wol 58 tuoba eriuqcA—sesuB tisnarT ogeiD naS 007,7 007,7 915,4 003,22 000,03 .ytnuoc ogeiD naS ni ecivres tisnart ogeiD naS rof ogeiD naS 57 morf enil liar thgil elim-02 wen dliuB—liaR thgiL ytnuoC htroN 000,08 000,08 — — 000,08 .ytnuoC ogeiD naS ni odidnocsE ot edisnaecO ogeiD naS 97 6600 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6611 fo tnuomA PRCT latoT detseuqeR serutidnepxE tnuomA snoitacollA gnidneP dna PRCT elbaliavA PRCT yb dedeeN gniniameR fo sa seciovnI fo sa snoitacollA hguorhT ro ytnuoC tcejorP 3002 ,03 enuJ sdeeN noitacollA 2002 ,13 rebmeceD 2002 ,13 rebmeceD waL etatS noitpircseD noigeR rebmuN htron yaweerf 51-I no enal deganam hcet-hgih ddA—51 etuoR ogeiD naS ni 87 etuoR ot 361 etuoR morf )1 egatS( ogeiD naS fo 008,7 $ 000,03 $ 288,12$ 000,04 $ 000,07 $ .ytnuoC ogeiD naS 38 gnola slangis dna kcart evorpmI—rodirroC niuqaoJ naS 000,01 000,01 — — 000,01 .ytnuoC sgniK ni drofnaH raen enil liar yticretni niuqaoJ naS sgniK 29 stnemevorpmi lanoitarepO— onserF ,ytisrevinU etatS ainrofilaC wotsraB dna ,eunevA wolliW ,eunevA tuntsehC ,eunevA wahS no 53 799,5 324,3 300,4 000,01 .ytnuoC onserF ni onserF ,ytisrevinU etatS ainrofilaC raen eunevA onserF 79 nairtsedep dda dna lairetra enal-ruof ot nediW—eunevA hcaeP 062 004,9 — 006 000,01 .ytnuoC onserF ni sloohcs eerht rof sgnissorcrevo onserF 89 gnola slangis dna kcart evorpmI—rodirroC niuqaoJ naS niuqaoJ naS 000,7 000,21 541,1 000,3 000,51 .seitnuoc neves fo eno liar yticretni niuqaoJ naS lanoigeR – 99 dna ,snoitcesretni evorpmi ,senal gnissap ruof ddA—56 etuoR senal ruof ot gninediw etamitlu rof seiduts latnemnorivne tcudnoc 892,1 426,11 663 673 000,21 .ytnuoC nreK ni enil ytnuoC eraluT ot dlefisrekaB ni 99 etuoR morf nreK 411 002 088,1 021 021 000,2 .senil liar cfiicaP noinU revo egdirb nairtsedeP—ytiC noinU ademalA 141 200,741$ 936,255$ 786,34$ 163,081$ 000,337$ slatoT Blank page inserted for reproduction purposes only. 6622 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6633 Agency’s comments provided as text only. Business, Transportation and Housing Agency 980 9th Street, Suite 2450 Sacramento, California 95814-2719 June 23, 2003 Elaine M. Howle* State Auditor Bureau of State Audits 555 Capitol Mall, Suite 300 Sacramento, CA 95814 Dear Ms. Howle: Attached is the Department of Transportation’s (Department) response to your draft report, Department of Transportation: Low Cash Balances Threaten the Department’s Ability to Promptly Deliver Planned Transportation Projects (#2002-126). I appreciate your understanding of the issues the Department currently faces in its efforts to deliver transportation projects, and that you acknowledged the alternative funding solutions the Department is pursuing. Additionally, I share the concerns that you have raised regarding the adverse effects associated with delays in project delivery. The Department and the Business, Transportation and Housing Agency (Agency) are committed to doing what is necessary to continue to improve mobility across California. Although your draft report raises the specter of the permanent loss of transportation revenues, it is important to note that, related to the statutorily required transfer of gasoline sales tax revenues from the General Fund to the Transportation Investment Fund (TIF), Governor Gray Davis’ current budget proposal seeks to: 1. Suspend only a portion of the transfer in fiscal year 2003-04 while transferring $207 million from the General Fund to the TIF, and then from the TIF to the Transportation Congestion Relief Fund (TCRF). 2. Require the suspended portion to be repaid by the General Fund to the TIF in the future. Therefore, if the Legislature is “currently deliberating on whether… to forgive the loan repayment to the TCRF,” as your draft report suggests, that deliberation is not based on the Governor’s current budget proposal. Similarly, while it is technically accurate that, to avoid any permanent loss of the revenues for transportation funding purposes, the Legislature would need to “(take) action to 1 obligate the General Fund to repay the suspended amounts,” one such action would be to simply accept the Governor’s current proposal. * California State Auditor’s comments begin on page 69. 6622 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6633 Elaine M. Howle June 23, 2003 Page 2 Finally, as its response indicates, the Department is putting substantial effort into ensuring the accuracy of cash forecasts and the alignment of priority transportation projects with available funds. In addition, the Department is preparing to use a variety of financing options, including those suggested in your draft report. Thank you for the opportunity to provide you with this response addressing your findings and recommendations. If you need additional information, please do not hesitate to contact me or Michael Tritz, Chief of the Agency’s Office of Internal Audits, at (916) 324-7517. Sincerely, (Signed by: Michael R. Tritz for) MARIA CONTRERAS-SWEET Secretary Attachment 6644 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6655 Department of Transportation Office of the Director 1120 N Street P. O. Box 942873 Sacramento, CA 94273-0001 June 20, 2003 Maria Contreras-Sweet, Secretary Business, Transportation and Housing Agency 980 - 9th Street, Suite 2450 Sacramento, CA 95814 Dear Secretary Contreras-Sweet: I am pleased to provide the California Department of Transportation’s (Department) response on implementing the audit recommendation noted in the Bureau of State Audits’ (BSA) Report No. 2002-126 entitled, “Department of Transportation: Low Cash Balances Threaten the Department’s Ability to Promptly Deliver Planned Transportation Projects.” The report identified the following issues: • Cash Shortages Are Delaying Many of the Department’s Planned Transportation Projects • Delayed or Cancelled Projects Will Affect the State’s Aging Transportation System • Several Factors Caused the Cash Shortage That Has Delayed Transportation Project Delivery • The Department is Overly Optimistic About Its Future Revenue • The Department Has Alternatives for Short-Term Project Funding BSA recommended the following: To meet its short-term cash needs, the Department should do the following: • Continue its efforts to become more precise in revising its revenue and expenditure estimates and ensure that these revisions are properly supported and presented in cash forecast updates submitted to the California Transportation Commission (CTC). • Continue to cautiously pursue other funding alternatives (Grant Anticipation Revenue Vehicle (GARVEE) bonds, State Infrastructure Bank (SIB) loans, direct-cash reimbursement and replacement projects, and rescinding allocations) to meet short-term project funding needs, but continue to set limits on these alternatives to avoid making future project scheduling inflexible or unfair. 6644 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6655 Maria Contreras-Sweet June 20, 2003 Page 2 Department Response: The Department has taken actions to reduce commitments against the State Highway Account (SHA) because of the forecasted low account balances due to decreasing federal revenues and State revenues (weight fees), increasing project expenditures and loans made to the General Fund and the TCRF. Two significant steps have been taken in the past six months to ensure the availability of cash in the SHA to cover obligations. As pointed out in the draft audit report, the Department presented a cash forecast to the CTC in December 2002 to apprise that body of the status of the SHA and the level of funds available to vote allocations to projects. As a result of this presentation, the CTC suspended making allocations from the SHA. As a first step, in March 2003, the Department presented to the CTC an updated forecast of the SHA balance for the end of Fiscal Year 2003-04 reflecting a positive balance of $546 million. This 2 forecast was the result of significant analysis and evaluation of expenditure commitments and cash flow trends of approved projects. The forecast also incorporated input from workshops with the CTC and other State, regional and local transportation partners. The purpose of these workshops was to provide the transportation partners the opportunity to provide input on the cash forecast assumptions and allocation criteria. At the same time, the CTC solicited input on project priorities from the regional and local transportation agencies. At the end of this process, the CTC adopted a Project Allocation Plan, which is designed to bring the level of project delivery in line with the level of available resources. This allocation plan calls for allocating $1.8 billion of the $4.2 billion in planned projects between March 2003 and July 2004. As part of this allocation plan, the Department will provide the CTC with a quarterly update of the cash forecast for the SHA with recommendations on the amount of available cash that can be utilized for project allocations. The next scheduled update is for the CTC meeting on June 26, 2003. As a second step, the Department has established a Cash Management Team, composed of staff from the Department’s Divisions of Accounting and Budgets, which has been charged with closely monitoring and forecasting the daily cash balances and expenditure activity to ensure the Department is in a position to meet its current obligations while maintaining project delivery. The Department’s Office of Innovative Finance has worked to identify creative financing options to continue the delivery of high priority transportation projects. In fact, the Department, upon enactment of the Fiscal Year 2003-04 budget, is set to implement the Transportation Finance Bank Revolving Program that will offer to public/private partnerships flexible, short-term loans with below-market interest rates for the purpose of improving mobility across California. In addition to the ground breaking loan program, the Department and the CTC are preparing to authorize several GARVEE-financed projects and, during the April 2003 CTC meeting, approved a major transit- oriented project for AB 3090 financing (direct cash reimbursement). The Department will continue to seek every financing option available, all the while maintaining a fiscally prudent position in order to maintain the long-term viability of transportation funding. 6666 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6677 Maria Contreras-Sweet June 20, 2003 Page 3 In closing, the draft audit report mentions that revenue forecasts for the SHA could be improved. It should be noted that for the two major State revenue sources, fuel excise taxes and commercial motor vehicle weight fees, the Department of Finance (DOF) is the State agency charged with the issuance of the official State forecasts for these revenues. The official forecasts for these revenues 3 are issued twice yearly. A forecast is issued with the Governor’s Budget in January and then is updated in the May Revise of the Governor’s Budget. The Department must rely on these forecasts for inclusion in its cash forecasts. Further, these estimates come from DOF’s Demographic Research and Census Data Center. The Department does not have the same level of resources to devote to forecasting State revenues as DOF nor does it duplicate the work of DOF. If you have any questions, or require further information, please contact Gerald Long, External Audit Liaison, at (916) 323-7122. Sincerely, (Signed by: Jeff Morales) JEFF MORALES Director 6666 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6677 Blank page inserted for reproduction purposes only. 6688 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6699 COMMENTS California State Auditor’s Comments on the Response From the Business, Transportation and Housing Agency To provide clarity and perspective, we are commenting on the Business, Transportation and Housing Agency’s (agency) and the attached California Department of Transportation’s (department) response to our audit report. The numbers below correspond to the numbers we have placed in the margin of the agency’s and department’s response. 1 While simply accepting the governor’s proposal may be sufficient to avoid the permanent loss of revenues for transportation funding, it will not guarantee that funding for the Traffic Congestion Relief Fund (TCRF) projects is restored. As we discuss on pages 25 and 26, the governor’s May revision to the governor’s budget does call for the Legislature to suspend $938 million of the more than $1 billion transfer to the Transportation Investment Fund (TIF) originally called for, and requests that the Legislature obligate the State’s General Fund (General Fund) to repay the TIF in the future. However, the governor’s May revision does not request the Legislature to require the TIF to repay the TCRF. Because state law specifies the years and the amounts of the annual transfers to be made from the TIF to the TCRF, any amount that is suspended or delayed in the current year is not guaranteed to be repaid to the TCRF in future years, unless the Legislature takes action to obligate the General Fund or the TIF to repay the TCRF. 2 As discussed on page 34, we believe this March 2003 cash forecast is overly optimistic. Specifically, the department over- estimated federal revenues and cannot support its assumptions of increases in state fuel excise tax or commercial-vehicle weight fee revenues. Consequently, the department may end fiscal year 2003–04 with a negative cash balance. 3 The department’s response is misleading. Although the department started with the state fuel excise tax revenue projections from the Department of Finance (Finance), it added two assumptions, which we describe on page 36. Namely, it assumed that state fuel excise tax revenues will increase 0.5 percent in fiscal year 2003–04 and future years and that the conflict in Iraq would 6688 California State Auditor Report 2002-126 California State Auditor Report 2002-126 6699 not negatively affect the fuel supply or cause higher fuel prices that would lower consumption. However, the department could not provide any analysis or other evidence to support its assumptions. Further, as we state on page 39, the depart- ment is projecting that it will receive an increase of $114 million in commercial-vehicle weight fees in fiscal year 2003–04. The department’s projection is based on the assumption that the Legislature will act by December 2003 to pass a trailer bill proposed by Finance to increase the current fee schedule by approximately 60 percent, an assumption we believe is not reasonable given the time required to pass legislation and the California Trucking Association’s opposition to the fee increase. 7700 California State Auditor Report 2002-126 California State Auditor Report 2002-126 7711 cc: Members of the Legislature Office of the Lieutenant Governor Milton Marks Commission on California State Government Organization and Economy Department of Finance Attorney General State Controller State Treasurer Legislative Analyst Senate Office of Research California Research Bureau Capitol Press 7700 California State Auditor Report 2002-126 California State Auditor Report 2002-126 7711