Report 99022 Summary - October 1999

Department of Transportation:

Seismic Retrofit Expenditures Are Generally in Compliance With the Bond Act

RESULTS IN BRIEF

Legislation passed in 1995 requires the California State Auditor to ensure that projects funded by the Seismic Retrofit Bond Act of 1996 (Bond Act) are consistent with that measure's purposes, which are to reconstruct, replace, or retrofit state-owned highways and bridges, including toll bridges. This is the fourth in a series of annual reports on the Department of Transportation's (department) revenues and expenditures, authorized by the Bond Act, for retrofitting California's highways and bridges.

As of June 30, 1999, the department had spent $1.14 billion for projects on more than 1,100 bridges and 7 state-owned toll bridges, completing 96 percent of the retrofitting for highway bridges and having all of the toll bridges either in retrofit design or under construction. In general, the department has done a good job of ensuring that seismic retrofit projects do meet the criteria for funding under the Bond Act. However, we found that not all expenditures charged to those projects were eligible for such funding. Through minor recording errors, the department incorrectly charged approximately $38,000 for expenses not allowed under the Bond Act.

Also, the department has not resolved a long-standing issue of reimbursing other accounts for interim funding obtained during fiscal years 1994-95 and 1995-96. During those years, the State Highway Account (highway account) and the Consolidated Toll Bridge Fund (toll bridge fund) provided a total of $114 million in expenditures and commitments for retrofitting California's bridges. The Bond Act requires that the department use bond proceeds to reimburse the highway account and the toll bridge fund for these prior expenditures.

In attempting to make the reimbursements, however, the department discovered two objections: one by the State Treasurer's Office, which pointed to a possible loss of the bonds' tax-exempt status; and a second by the Department of Finance, which objected that the department's source of reimbursement funds could be used only for current expenditures. Although both of these objections were removed by provisions in 1997 legislation, the department had not taken any action as of June 30, 1999, to reimburse the expenses.

AGENCY COMMENTS

In their response, the department addressed the current status of reimbursing other accounts for interim funding obtained during fiscal years 1994-95 and 1995-96. The department acknowledged that it originally planned to reimburse the highway account and toll bridge fund during fiscal year 1998-99. However, the department states that the criteria it developed to select the projects to facilitate this reimbursement process was complex and required additional time. Therefore, the department currently anticipates that it will accomplish this reimbursement in fiscal year 1999-2000.


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