$1 billion error caused cash crunch

Agency officials say they double-counted bond revenue; legislators remain skeptical about legitimacy of fiscal 'crisis'

February 06, 2008

By Ben Wear, AMERICAN-STATESMAN STAFF

The Texas Department of Transportation made a billion-dollar error, officials of the agency admitted Tuesday under stern questioning from legislators, a mistake they said contributed significantly to TxDOT's sudden cash crunch.

TxDOT officials say agency planners inadvertently counted $1.1 billion of revenue twice, a mistake that caused them to commit to more road projects than the agency could handle.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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