Dewhurst, Craddick Order Complete Audit of TxDOT
Wed February 20, 2008 3:52 pm

In a dramatic split from Governor Rick Perry, Lieutenant Governor Dewhurst and Speaker Craddick today sent a letter to state auditor John Keel asking for a top-to-bottom audit of the Texas Department of Transportation, the agency that is responsible for carrying out Perry's grand vision for curing Texas's transportation woes, the Trans-Texas Corridor and privatized toll roads.

The language of the letter clearly signifies a lack of confidence in Tx-DOT. It
comes less than two months after the death of Texas Transportation Commission chairman Ric Williamson, the most adept defender of Perry's transportation plan.
The attached letter, signed by Lt. Governor David Dewhurst and Speaker Tom Craddick was delivered to State Auditor John Keel on Wednesday, February 20, 2008.

Mr. John Keel
State Auditor

Dear John:

Last week the Senate Finance and Senate Transportation and Homeland Security Committees held a joint hearing to investigate the Texas Department of Transportation's current financial status. During the committeee hearing, based on the Senator's questions and the responses from TxDOT Commissioners and staff, it became evident that significant weakness and questionable accounting practices exist in the forecasting and reporting of the agency.

As Joint-Chairs of the Legislative Audit Committee, we are requesting that the entire financial process of TxDOT undergo a comprehensive review by the State Auditor. There are several concerns and shortcomings which justify this comprehensive review, for example:

Cash Forecasting

TxDOT officials had projected a $3.6 billion shortfall by the year 2015, and increased maintenance needs, which require reductions in new construction contract letting. But the forecasting estimate worksheet used to produce these numbers does not seem to show a complete and accurate financial picture. It does not include $3 billion in Proposition 14 bond proceeds, nor all of the Mobility Fund bond proceeds, nor the $5 billion in General Obligation bonds, all authorized by Texas voters.

Such items as an inflation factor of 5% included in TxDOT financial forecasts should be questioned and documented. Is inclusion of an inflation factor a sound accounting decision and consistent with past TxDOT practices? Have all the appropriate discount factors for construction costs and/or the debt service paid for prjects completed early due to the availability of bond revenues been considered? Forecasts on the revenue side need to be reviewed and either challenged or verified for accuracy.

Fund Allocation and Commitments

TxDOT's practice of assigning funds by formula to a district, then moving some or all of those funds to another district based on available projects, has generated many questions for the Legislature regarding project management and funding. This method created an imbalance and a potential future funding impact for the Legislature and should be reviewed. Does TxDOT have proper controls over the shifting of funds between districts, and accounting controls to keep track of such shifts between districts? Is there any amount of new highway construction, obligations, formal or informal, that differs from the dollar amount on signed contracts?

Maintenance

We are concerned with TxDOT's reported increased need for increased funding. The agency claims to have experienced roughly 60% inflation of highway costs between 2002 and 2007. Do TxDOT's claims of inflation track general trends in the construction business?

There was also a definitional change to maintenance at the state level in 2006 which needs to be reviewed to make sure that a base level of funding is establisher. How has the definitional change affected the district budgets?

We would also like to follow up with you to determine if, and to what degree, TxDOT has addressed the findings of audit report 07-031 relating to a reported long term funding gap. We appreciate your assistance in ensuring that the Members of the Legislature and the public receive accurate, transparent, and understandable information to make the policy decisions for a fiscally sound and effective transportation system for Texas. We are requesting that you initiate a comprehensive audit of the Texas Department of Transportation at your earliest convenience. The audit should include funding construction cost and funding allocations by geographic region.

/s/ David Dewhurst
/s/ Tom Craddick

************************

What we are seeing here is that TxDOT without Ric Williamson is a paper tiger. There is nobody who understands the Legislature from the inside out the way Williamson did--or, for that matter, can defend the Perry plan the way he could, as a true believer. I don't see how Deirdre Delisi or Mike Krusee can fill his shoes. I seriously doubt that the Senate will confirm anyone to the Transportation Commission who is viewed as a Perry sidekick. This letter, and the looming Sunset review of the agency, do not bode well for TxDOT. I don't think that it is any coincidence that this letter was sent during a primary election. Both Craddick and Dewhurst are hearing from members that the public is still mad as hell about toll roads.

The audit is only the first step in the reform of TxDot. The next step must be a serious discussion of financing options other than -- or in addition to -- privatization of roads. Raising the gasoline tax and indexing it to inflation must be a part of this discussion. Toll roads will be another. TxDOT's self-destruction of its credibility has cost the state valuable time in dealing with its mobility issues.

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