COLUMBIA -- The state Department of Transportation is having trouble paying its bills on time, falling behind on payments of major construction loans and potentially putting jobs at risk and road and bridge improvements in peril.
Some suggest the agency is slipping back into its old culture of cronyism by putting political priorities ahead of critical construction needs, a claim one commissioner strongly contests.
Contractors statewide are being paid 45 days after they complete the work, rather than the usual 30, and sometimes only partially. Meanwhile, the agency is about 2 1/2 months late paying back loans to the S.C. Transportation Infrastructure Bank, which finances the state's largest construction projects, such as the proposed completion of Interstate 526.
The impact locally from the cash crunch is unclear.
Commissioner Sarah Nuckles, a Rock Hill businesswoman who represents the 5th Congressional District on the transportation board, urged her fellow board members to take out a line of credit to make sure road projects aren't halted and workers receive paychecks on time. She said her concerns were dismissed, even as the board voted to take out a $344 million loan for five projects across South Carolina that are not the state's most critical and will further erode its cash resources in the future.
DOT acknowledges cash flow problems, addressing them online in an open message to contractors, but the agency is not pursuing a line of credit. Instead, spokesman Pete Poore said, DOT has been speaking to contractors individually to work out payment plans. The contractors have responded well, Poore said.
"We're not putting anyone out of business that we know of," he said.
Blame the economy
Poore said the cash crunch is a result of the peak summer construction season and the national economic climate, creating a drag on DOT's resources from the state and federal gasoline taxes. Transportation departments across the country are facing similar situations, he said. What's more, the state's gasoline tax has not been increased since 1987 when it was set at 16.75 cents a gallon and its buying power has been greatly diminished.
Also playing a role, Poore said, were a high volume of invoices coming in for projects that finished early. That put additional pressure on the agency in May and June, he said.
Poore said the agency aims to have its cash flow issues sorted out by the end of the year. The agency plans to this month pay the Infrastructure Bank the $12.6 million it owes.
Gov. Nikki Haley met last week with her Cabinet director, Robert J. St. Onge, the retired Army major general she appointed transportation secretary in January.
"He assured her that transportation officials have met with contractors, that any issues would be swiftly resolved without borrowing funds and that the new administration is going to put safeguards in place to keep the agency solvent," Haley's press secretary Rob Godfrey said in a statement.
A dangerous situation
Still, Rep. Chip Limehouse, a Charleston Republican, said he has big concerns that this could place DOT in "a very dangerous and precarious financial situation." Limehouse introduced the legislation to create the State Infrastructure Bank, a model that he said has been reproduced across the country and one the federal government is looking at for managing an aging highway system. While the bank's credit rating is not in immediate jeopardy, Limehouse said if the problem continues it could impact the rate the Infrastructure Bank pays to borrow money.
Contractors are reluctant to speak publicly about the situation for fear of jeopardizing future work from the DOT. The Carolinas Associated General Contractors, a lobbying group for the trade, did not immediately respond to questions.
Nuckles, the transportation commissioner, said DOT's situation stands to get worse. She said the agency's leadership made a poor decision earlier this year to pursue a $344 million loan for five projects, including $105 million for Interstate 73, a controversial plan to connect Interstate 95 motorists to the Grand Strand. Nuckles said most of projects are not ranked high on the state's priority list, a keystone to the Legislature's 2007 overhaul of the then-mismanaged agency to limit political sway over the process. State oversight panels must still give final approval to the $344 million loan.
"I warned them. You are putting this up to our maximum. If we had a disaster, a hurricane or an economic disaster, we maxed out our bond credit cards," Nuckles said.
The original problem came from the agency not building in a financial cushion when estimating future costs, Nuckles said. She raised the idea of a line of credit to handle cash flow problems two years ago and again three months ago.
Poore, the agency spokesman, said the cash crunch started in June. He did not have an estimate for how much the agency was behind, saying that the number was a fluid target that changes daily. Nuckles said she thinks a floating $50 million line of credit could cover the fluctuations and make sure checks go out on time.
The issue could be raised at today's Budget and Control Board meeting. A line of credit likely would have to be approved by that panel.
Commissioner Eddie Adams of Seneca said the agency is "absolutely not" falling back into the bad habits that led to its legislative overhaul in 2007. Decisions are based on what is best for the state, he said.
Adams, who represents the 3rd Congressional District, said he stands by the decisions made by the transportation oversight board with its eye toward South Carolina's long-term future. He disputed Nuckles' concerns.
Adams said the stimulus projects the DOT took on helped zap cash accounts. The projects are reimbursed by the federal government on the back end. And, he said, the $344 million loan for I-73 and the other four projects is a red herring: That loan hasn't yet been approved and no borrowing has taken place.