BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1102| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1102 Author: DeSaulnier (D) Amended: As introduced Vote: 21 SENATE TRANSPORTATION & HOUSING COMMITTEE : 7-0, 3/27/12 AYES: DeSaulnier, Gaines, Harman, Kehoe, Pavley, Simitian, Wyland NO VOTE RECORDED: Lowenthal, Rubio SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Transportation capital support costs SOURCE : Author DIGEST : This bill requires the California Transportation Commission to review and approve the Department of Transportation's project construction support cost overruns of 20 percent or more on certain transportation projects. ANALYSIS : Existing law assigns the Department of Transportation (Caltrans) the responsibility of overseeing the design, construction, maintenance, and operation of the California state highway system. The capital outlay support (COS) program within Caltrans provides the resources necessary to develop and deliver the majority of highway projects on this system. COS functions encompass all project development efforts required to begin construction of projects, including engineering and design CONTINUED SB 1102 Page 2 work, environmental studies, and right of way acquisition. Once under construction, the COS program also conducts construction support management, such as testing materials used in the project and working with the contractor when changes or problems arise. Private contractors undertake the actual construction of most highway projects. In addition, existing law requires the California Transportation Commission (CTC) to adopt the State Transportation Improvement Program (STIP) every even-numbered year, with each new STIP adding two new years to prior programmed commitments. The STIP is the biennial five-year plan for future allocations of certain state transportation funds for state highway improvements, intercity rail, and regional highway and transit improvements. Besides adopting the STIP every other year, the CTC is also responsible for allocating the construction funding for STIP projects when these projects are fully developed and ready to begin construction. The CTC does not allocate funding for any of the COS functions conducted by Caltrans. These functions are funded separately through the annual budget process, and that annual appropriation is only loosely tied to projects in the STIP. This bill: Requires the CTC to allocate construction support funding for each project in the STIP overseen by Caltrans at the time it allocates construction capital funding. Requires the CTC to review and approve a supplemental project allocation request for a project that experiences a construction support cost overrun of 20 percent or more. Requires Caltrans to report to the Legislature on the difference between construction costs allocated on each project and the actual costs after the project has been completed. Comments CONTINUED SB 1102 Page 3 Local partners most often choose Caltrans to do construction support activities. Local and regional transportation agencies have the ability to either use Caltrans for construction support or hire a private contractor to do the work on STIP projects. If the local agency chooses not to use Caltrans, then the CTC allocates the construction support funds at the same time as the construction capital funding. If the local agency overspends by more than 20 percent, including on construction support, then it must request a supplemental allocation from the CTC which is taken from the county's share of future STIP funds. If a local entity uses Caltrans for construction support, then the support costs are not allocated by the CTC. In addition, as the auditor indicates, if Caltrans spends more than budgeted on construction support, neither Caltrans nor the project sponsor is penalized. Local partners can benefit from this situation and often choose Caltrans to oversee STIP projects, because if Caltrans underestimates the support costs for a project it creates more capacity within the local jurisdiction's allotment of STIP funds to program additional projects. 2011 State Auditor report . In April 2011, the auditor conducted a review of Caltrans' COS program. Among the auditor's conclusions was that neither counties nor Caltrans is held accountable when capital support costs exceed estimates. The CTC does not allocate construction support funds at the time of capital construction allocation. In addition, the CTC cannot change project budgets to reflect variations in construction expenditures after construction funds are allocated, except through supplemental project allocations. Because the CTC does not track support cost budgets, it is unable to charge any cost overruns against either Caltrans' budget or the local project sponsor's share of future funding. Therefore, no one is held accountable for deviating from construction support cost budgets. The auditor examined 55 STIP projects that completed construction during fiscal years 2007-08 through 2009-10 and found that 47 percent of these projects experienced overrun greater than 20 percent. Caltrans experienced CONTINUED SB 1102 Page 4 budget overruns totaling $305 million out of the $1.4 billion expended on the COS program for the highway projects completed between fiscal years 2007-08 and 2009-10. To increase accountability for budget overruns of capital support costs, the auditor recommended legislation that would expressly require the CTC to review and approve project construction support costs when they differ from the amount budgeted by 20 percent or more. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 4/30/12) American Federation of State, County and Municipal Employees California Transportation Commission ARGUMENTS IN SUPPORT : This bill seeks to implement the California State Auditor's recommendation relating to Caltrans' construction support costs for STIP projects. According to the author's office, given limited state transportation funds, overruns on current projects directly diminish the state's ability to undertake future projects. Granting the CTC a greater oversight role during the construction phase of projects that Caltrans oversees will reduce cost overruns on these projects. JJA:do 4/30/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED