BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 1102
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Desaulnier
VERSION: 2/16/12
Analysis by: Eric Thronson FISCAL: Yes
Hearing date: March 27, 2012
SUBJECT:
Transportation capital support costs
DESCRIPTION:
This bill requires the California Transportation Commission
(CTC) to review and approve the Department of Transportation's
(Caltrans) project construction support cost overruns of 20
percent or more on certain transportation projects.
ANALYSIS:
Existing law assigns 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 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 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.
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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 :
The CTC to allocate construction support funding for
each project in the STIP overseen by Caltrans at the time
it allocates construction capital funding.
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.
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:
1.Purpose . This bill seeks to implement the California State
Auditor's recommendation relating to Caltrans' construction
support costs for STIP projects. According to the author,
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.
2.2011 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
SB 1102 (DESAULNIER) Page 3
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 overruns
greater than 20 percent. Caltrans experienced 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.
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.
4.Similar legislation . SB 1499 (Anderson) similarly attempts to
implement the auditor's recommendation involving Caltrans'
construction support costs.
POSITIONS: (Communicated to the committee before noon on
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Wednesday,
March 21, 2012)
SUPPORT: California Transportation Commission
American Federation of State, County and
Municipal Employees
OPPOSED: None received.