TxDOT's Budgetary Crisis
March 20, 2008
Over the past few months, fear has been mounting in relation to the Texas Department of Transportation’s (TxDOT) fiscal year 2008 highway letting budget. Our interview with Amadeo Saenz published in the January 7, 2008 issue of Texas Contractor warned of lean times ahead. Amadeo Saenz, executive director of TxDOT, who took over the top post at TxDOT last October, blamed the shortfall on a complexity of factors, including stagnating revenue from the gasoline tax, escalating costs of construction materials, and cuts in expected federal aid as resources.
Then during an unusual joint meeting of the Senate Finance committee and Senate Transportation and Homeland Security committee February 5, Texas legislators strongly criticized Saenz for this highway budgeting crisis. During that February joint committee meeting, Saenz and TxDOT CFO James Bass admitted to a $1.1 billion error in bookkeeping. They explained that $1.1 billion had been inadvertently counted twice as money borrowed through selling bonds. Consequently, TxDOT’s FY 2008 highway letting calendar, which had $4.2 billion scheduled, will have to be reduced by $1.1 billion between February and August 2008.
The Issue With Highway Bonds
State Senator Steve Ogden (R-College Station) contended that TxDOT did not even make use of the $3 billion in [Proposition 14] bonds that the Legislature gave the authority for TxDOT to sell in 2007. But it seems to be this very bond issue that is giving TxDOT pause.
“Once we issue those Proposition 14 bonds, we [TxDOT] start paying debt service,” said Saenz. “The $3 billion that we issued [during 2005 and 2006] will cost us $250 million a year for the next 20 years in debt service. Once I spend that money, I have less money available for more projects. The Legislature this past session did grant us an additional $3 billion authority. The [Texas Transportation] Commission has not moved on using that money to advance the program because we want to see what impact it will have on our future cash flow. That first $3 billion is costing us $250 million a year; the next $3 billion would cost us another $250 million, so that means I would have $500 million a year in debt service.”
This is one more apple in the cart of TxDOT problems along with shrinking revenue from the gasoline tax, escalating costs of construction materials, and cuts in federal funds.
Fast Fix
Before the end of February, Lieutenant Governor David Dewhurst, Speaker of the House Tom Craddick, Senate Finance Chairman Steve Ogden, and House Appropriations Chairman Warren Chisum jointly sent a letter to the Texas Transportation Commission Chairwoman Hope Andrade. The letter states that they had begun taking steps to appropriate $300 million of General Revenue funds to offset the cost of the debt service so that TxDOT could begin issuing more bonds.
According to AGC of Texas president Tracy Helmcamp-Schieffer, “Upon receipt of the letter, TxDOT deferred to Governor Perry who issued a statement indicating no interest in additional bonding, explaining that bonding will not address the roots of the funding crisis but only defers it for another couple of years.” Schieffer has implored AGC members to contact their legislators and impress upon them how sorely this quick financial infusion is needed for contractors who will have to begin laying off employees and sell off expensive machinery.
Posted by Liz Moucka on March 20, 2008 | Comments (0)
