California Department of Transportation

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In this issue:

Financial photo at right: Gov. Schwarzenegger and legislators wrestled with the $26 billion state deficit at the California State Capitol.

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safety
mobility
delivery
stewardship
service
financial

 

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Leading the Road to Economic Recovery

California received $2.57 billion in federal resources from the American
Recovery and Reinvestment Act (Recovery Act) for highways, local streets and roads.

Assembly Bill 20 of the Third Extraordinary Session (ABX3-20) allocated these funds to Caltrans and to local agencies based on the existing formula for allocation of federal regional surface transportation improvement program funds. The Department received 37.5 percent, or $964 million, of the total funding, with the remaining 62.5 percent, or $1.61 billion, allocated to local agencies.

Of the $964 million made available to the Department, $935 million was used to fund safety rehabilitation and maintenance on the state highway system. ABX3-20 allowed $310 million of these funds to be loaned to fund 2006 transportation bond (Proposition 1B) projects, that would then be repaid when bonds are sold. Once returned to the State Highway Account, the funds will be programmed on State Highway Operation and Protection Program (SHOPP) projects, which the California Transportation Commission will allocate. The remaining $29 million is designated for transportation enhancement projects as required by the Recovery Act.

Between the enactment of the Recovery Act in February 2009, and the end of the fiscal year in June, the Department’s share of Recovery Act funds were nearly fully allocated to SHOPP projects, maintenance projects, transportation enhancement projects, and loaned for bond projects. Only a handful of transportation enhancement projects remained unallocated at the end of the 2008-09 fiscal year.

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Upgrading Financial Systems

By modernizing and improving the way the Department does business, Caltrans is taking a major step toward ensuring that 100 percent of the Department’s financial resources are available when and where needed. To that end, Caltrans is working to replace its outdated accounting computer system, along with approximately 68 subsystems, in an effort to provide essential tools the Department needs to become a more efficient mobility company. The current Caltrans accounting system was established in 1983. It processes all billing, bookkeeping, assets, liabilities, financial reporting, and accounts receivable.

Caltrans started working in June with CGI, Inc., to plan out the Integrated Financial Management System/Enterprise Resource Planning Financial Infrastructure (E-FIS) project. The new system will be implemented in 2010 and will reduce the number of inputs into the system — saving time and money.

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Saving Money Through Audit Findings

During fiscal year 2008-09, Caltrans completed 295 audits and investigations. Financial, operational and performance audits provide tangible and intangible cost savings. Internal audits of the Department’s programs and operations, external audits of contractors and local government agencies to mitigate improper payments, and investigations that identify improper activities all help mitigate further costs from litigation by employees, contractors, and the public. Documented audit savings totaled $65 million. Caltrans also coordinated audits and reviews of the Department by external audit organizations and processed 15 responses and status reports.

Caltrans also coordinates audits and training for consulting firms. Caltrans works with the American Association of State Highway and Transportation Officials (AASHTO), Federal Highway Administration (FHWA), contractor organizations, small businesses, and local agencies to perform reviews and audits, as well as provide presentations about federal and state audit requirements and expectations.

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Putting More Federal Dollars to Work

State_Route_12Caltrans continued the work that began with FHWA in 2006 to reduce the level of inactive federal obligation and increase federal funds for projects that are ready to go to construction. Federal aid highway projects with large unexpended balances of $500,000 or more decreased from more than $400 million in September 2008, to an unprecedented low of $169 million. Furthermore, the number of projects with inactive obligations was reduced from
145 to 92.

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Legal Efforts Protect California's Assets

Caltrans negotiated and prepared more than 1,700 legal contracts during fiscal year 2008-09 to facilitate construction projects, and concluded 461 court cases. The Caltrans Legal Division played a key role in drafting legislation to expedite environmental clearances for eight projects so they could start in 2009, drafted language to establish extended public-private partnerships, and handled the new legal procedures certifying use of federal stimulus funds.

Caltrans attorneys resolved more than $2 billion in highway incident, contract, personnel, inverse condemnation, and other claims against the state for approximately $62 million (just more than 3 percent of the amount sought). Additionally, Caltrans prevailed in 122 eminent domain cases to acquire needed property for transportation projects.

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Value Analysis Accomplishments

Each year, Caltrans reports the results of the Value Analysis (VA) Program to the Federal Highway Administration. Value analysis is a function-oriented, systematic team approach used to analyze and improve value in a project or process. It is a powerful methodology for solving problems and reducing costs while meeting performance requirements. Federal law requires that a value analysis study be performed on all projects on the federal aid system costing more than $25 million.

For the federal fiscal year 2008, the Department completed studies on 39 projects with a total cost (capital and support) of more than $4.3 billion. The Department reported savings of $263 million from these studies representing an average savings of 6 percent. The savings were derived for the “Accepted Alternatives” proposed by theVA teams and implemented by the decision-makers and project development teams. In comparing the project cost savings to the cost to conduct the studies, the Department achieveda return on investment of 135:1.

When a VA study identifies savings, these funds then become available for use on other projects, as in the case of the $263 million that the Department can use to fund additional projects on the state highway system.

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Fiscal Year 2008-09 Budget

In fiscal year 2008-09, the Caltrans budget totaled $14.3 billion. This number is a $3 billion increase from the 2007-08 budget. The 2008-09 budget included a fully funded Proposition 42 transfer and a Proposition 1A loan repayment of $83 million to the Traffic Congestion Relief Program. The Recovery Act was not included in the 2008-09 budget. The Recovery Act added $964 million in federal funds for the Department.

Gov. Schwarzenegger signed the 2009-10 Budget Act in February 2009. Trailer bills were also passed to address a cash crisis in 2008-09. These February mid-year adjustments to the 2008-09 budget included decreases to State Transit Assistance and the Home-to-School Transportation Program resulting in net reallocations of $494 million from the Public Transportation Account to transportation-related General Fund (GF) expenditures. In addition, these mid-year changes authorized the retention of a $100 million pre-Proposition 42 loan repayment in the GF and loans totaling $238 million from transportation accounts to provide GF relief.

Proposition 42 Transfer

Proposition 42, passed by the voters in 2002, allocated sales taxes on gasoline for transportation purposes. The fiscal year 2008-09 Proposition 42 transfer totaled $1.32 billion. In comparison to 2007-08, the revenue for Proposition 42 is down nearly 5 percent because of lower fuel prices and waning consumption. These funds were distributed to local agencies for local street and road projects, the Public Transportation Account, and retained in the Transportation Investment Fund (TIF) for the State Transportation Improvement Program (STIP) for state projects. The breakdown is shown below:

  • $528 million — Local Streets and Roads
  • $264 million — Public Transportation Account
  • $528 million — Retained in the TIF for STIP

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Public Transpotation Account

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The Public Transportation Account (PTA) funds the operating costs of intercity passenger rail services, transportation planning, and transit capital projects. The fiscal year 2008-09 budget included the reallocation of some PTA revenues (including spillover) to transportation-related expenses previously paid through the state General Fund, as well as a loan of $60 million from the Transportation Congestion Relief Fund to keep the PTA solvent. The State Transit Assistance (STA) transfer from the PTA was originally budgeted at $306 million; however, because of lower revenues, February mid-year changes reduced this amount. Revised 2008-09 PTA allotments are shown below:

  • $153 million to STA
  • $203 million to the Department of Education for the Home-to-School Transportation Program
  • $138 million to the Department of Developmental Services for the Regional Center Transportation program

Additional spillover revenues were also redirected to the Mass Transportation Fund (MTF). Approximately $940 million was redirected to the MTF for the repayment of General Obligation transportation bond debt service.

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Proposition 1B 2006 Transportation Bond

Red_Top_RoadFiscal year 2008-09 represented the second year of allocations from the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006 (Proposition 1B). The budget for this fiscal year appropriated a total of $4.7 billion in Proposition 1B funds for capital outlay, local assistance and state operations, including $3.6 billion for programs administered by Caltrans.

Through June 2009, a total of $2.1 billion was allocated as follows:

  • $1,675 million — Capital Outlay
  • $266 million — Local Assistance
  • $115 million — State Operations

The state’s fiscal climate affected the ability of the state treasurer to fund bond loans and to issue related General Obligation (GO) bond financing. The condition of the General Fund also affected the Department’s ability to access cash to meet bond-funded project commitments. As such, the Department went through a period in 2008-09 that put bond-funded projects on hold. In the spring, the state treasurer had great success in selling bonds to provide cash for some of the state’s GO bond programs. In all, the treasurer was able to sell more than $13 billion in bonds, though only about $1.6 billion was provided for transportation. This allowed projects that were already under construction to continue, and provided cash for all projects that had been allocated funding to proceed to construction.

It is important to note, however, that these bond sales provide only funding for the cash flow of the projects, and not the full project costs. Future bond sales are needed to fund these projects to completion. At this time, the state is expected to return to the bond market in September 2009. The success of those sales will determine how many transportation bond projects are funded in fiscal year 2009-10.

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Local Investment on the State Highway System

Maya_Linda_RoadLocal agencies play an increasingly important role in transportation funding for state highway improvements. Local agencies receive state and federal funds that can be used for projects on and off the state highway system. In fiscal year 2008-09 the funds available for local agencies were approximately $1.5 billion, a decrease from $2.1 billion in 2007-08, mostly as a result of one-time funding during that fiscal year. From these funds, local agencies invested approximately $532 million for on-system improvements. In addition, local agencies invest funds from their local sales tax measures, developer fees and other local funds on the state highway system.

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Safety Projects Funded First

Including Proposition 1B and Recovery Act funds, the State Highway Operation and Protection Program (SHOPP) delivered $1.86 billion in projects, effectively delivering the entire fiscal year 2008-09 program and advancing 2009-10 projects that were ready to deliver. Construction has started on many of these projects, and Caltrans is advertising for bidders on the remaining projects.

Caltrans’ local partners receive approximately 40 percent of the federal highway funds distributed to the state of California through the Federal Highway Administration (FHWA) on an annual basis. These federal highway funds are used to design, construct, improve and maintain local streets and roads, bridges, bicycle lanes, and pedestrian pathways, as well as the state highway system. Caltrans has successfully helped local agencies in delivering transportation projects above and beyond the expected target. They do so by utilizing additional funds distributed by FHWA at the end of the federal fiscal year from other states that have unspent funds.

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Despite the fact that allocations to State Transportation Improvement Program (STIP) projects were impeded by the state’s bond difficulties, approximately $900 million in STIP allocations were made in 2008-09 from Proposition 1B and Proposition 42 funds. Many more projects were delivered, but could not receive an allocation because of the shortage of bond availability.

California is experiencing a transportation funding shortfall. The funding from the excise tax on gasoline is declining due to reductions in fuel consumption. Meanwhile the costs to operate and maintain the state highway system are rising at an exponential rate. The 2007 Ten-Year SHOPP identified a need for an annual investment of $6.6 billion for the repair and maintenance of pavements and bridges, the construction of safety and mobility improvements and facility replacement projects. However, Caltrans may have to direct the $1.5 billion per year that is currently available to the highest priority in the SHOPP, which are safety and emergency, along with bridge and pavement maintenance, projects.

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