COLUMBIA -- Legislators will launch an inquiry into why the state Department of Transportation went broke and had to turn to the federal government to bail the agency out and save highway construction jobs.
The issue: The state Department of Transportation faced a significant cash flow crunch that resulted in late payments to contractors and the agency falling behind on its construction loans. Transportation officials turned to the federal government to provide $52 million in cash reimbursements in one lump sum this week rather than spread out over the next 12 months.The problem: Contractors and subcontractors report that the late payments put their businesses in jeopardy. Allegations also persist that the agency is slipping back into its old ways of bowing to pressure from powerful lawmakers to build roads in their districts, rather than according to state needs.What's next: Sen. Larry Grooms, R-Bonneau, will convene a panel of legislators on Sept. 1 to investigate. Transportation officials are adjusting internal practices to better estimate cash balances and build a reserve. The agency is developing recommendations to ease the state's reliance on fuel taxes to build roads and bridges.
Senate Transportation Committee Chairman Larry Grooms, R-Bonneau, said Thursday he will convene a panel of legislators on Sept. 1 to review the situation surrounding the department decision to ask the federal government for a $52 million cash advance.
Grooms said cronyism may have crept into the Transportation Department's process for deciding what road and bridge projects to approve. His allegation came about the same time Thursday that the department's governing commission almost indefinitely delayed efforts to begin construction of controversial Interstate 73.
The commission narrowly defeated a proposal to back off from seeking a loan to pay for I-73 construction, among other projects, after concerns were raised about the department's ability to pay for it. The vote derailed an attempt to quash the project.
Grooms' call for a legislative fact-finding mission comes four years after major mismanagement at the agency led to a head-to-toe overhaul amid allegations that South Carolina roads were being built based on political clout rather than actual need.
"I've got contractors, DOT employees, former employees who are telling me their perspectives," Grooms said. "I am in the process of separating fact and fiction."
Meanwhile, the cash-strapped agency announced it will defer $24 million in construction projects through September to catch up on its bills. The projects are secondary road resurfacing, road markings and a fence repair. None are in Berkeley, Charleston or Dorchester counties.
The Post and Courier first revealed the agency's cash flow troubles last week. Transportation officials say construction during the summer peak season outstripped the agency's ability to pay contractors for their work within the typical 30-day window. Some contractors and subcontractors told the newspaper they were facing grave situations if they weren't paid, despite the Transportation Department's efforts to make sure no companies were put out of business as a result of the cash flow problems.
The agency also fell more than $12 million behind making payments in recent months on major construction loans to the state Transportation Infrastructure Bank.
With Gov. Nikki Haley's blessing, the Transportation department secured the $52 million from the federal government. The money is for a year's worth of reimbursements to the state for major construction projects that the federal government usually would have paid out over the next 12 months.
At fault for the cash crunch are projects finishing ahead of schedule and the diminishing buying power of the state's 16 cents gasoline tax, set in 1987. The state's gas tax is fourth lowest in the nation.
What's more, the governor's Transportation Secretary Robert St. Onge said the agency's eagerness to update and repair the state's roads and bridges was too aggressive and outpaced the short-term resources. Going forward, he said he wants to build a cash reserve of about $60 million. The agency's engineering and finance officials also will work more closely to manage project estimates.
For a long-term resolution, St. Onge said the agency is putting together recommendations to take to Haley and the Legislature about a new way to pay for road and bridge construction and repair, to ease the agency's reliance on the fuel tax.
Commissioner Sarah Nuckles of Rock Hill blames poor planning for the cash crunch. She has advocated for two years that the agency take precautionary steps to avoid late payments to contractors.
Nuckles said the agency should abandon its plans to borrow $344 million, more than $100 million of which would be used to pay for I-73 to connect Interstate 95 to the Grand Strand. She said taking out that bond would eat up as much as $35 million of the agency's annual cash flow into the future.
The decision should be placed with the Legislature and the governor, not the commission, Nuckles said. She said powerful legislators pressured the commission into approving the bond.
Nuckles also noted that the federal government is toying with the idea of reducing the cash it sends back to South Carolina by $200 million a year. The Transportation department's annual budget is currently $1.1 billion, including about $440 million in state funds.
Commissioner John Edwards of Travelers Rest said the $344 million loan should wait for a time when the state's financial house is in order.
"I think in this financial environment we're going to have to do a lot of things to get the faith of the people of South Carolina back on our side," Edwards said.
Commission Chairman Danny Isaac of Myrtle Beach cast the tie-breaking vote to keep the I-73 plans on the books. He scolded Nuckles during the meeting for speaking out publicly about the agency's financial problems.
Isaac, who participated in the meeting by conference call, blamed the economy, not agency management for the cash crunch. He challenged Nuckles' facts on the situation, but did not provide specifics.
"To go to the media and show the disparity of your personal opinions is counter productive," Isaac said. "... It's an absolute insult. Verify your facts. That's all I ask."
Isaac, who represents the 1st District, has not returned phone calls from The Post and Courier on the situation.
Nuckles reported being bullied by fellow commissioners. She said after Thursday's meeting, one whispered in her ear: "You don't deserve to be a commissioner."
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