The head of the embattled South Carolina Department of Transportation met with state legislators Thursday in a special hearing before the Senate Transportation Committee.
The agency came under fire last month when word leaked out that it was nearly two months behind in paying contractors and had missed several debt payments. SCDOT eventually had to request $52 million in advance payments from the federal government last month as a temporary solution to pay off the contractors. It also delayed more than $24 million in new projects for September.
“We’re not out of the woods, yet,” Transportation Secretary Robert St. Onge told lawmakers, promising to take corrective action at SCDOT. However, he warned that the problems which led to the agency’s cash-flow problems earlier this summer could be an issue again next year.
Onge took personal responsibility for the problems occurring under his watch, but blamed a “perfect storm” of issues plaguing the agency over the summer. The primary reason came in how SCDOT pays contractors. For a project such as repaving, which depends upon warm temperatures and clear weather, the agency often gives companies a three-year window to do the work. St. Onge said that caused a shortfall when many of those bills came in earlier than expected this summer.
The aggressive workload was combined with gas tax revenue below analysts’ predictions and several financial staffers leaving the agency. “The late payments, in my opinion, were not caused by cash balance,” St. Onge said, “They were caused by inattentiveness.”
SCDOT says it currently has $47 million on hand. (See SCDOT slide presentation for more information)
Sen. Larry Grooms (R-Berkeley) chairs the Transportation Committee. Grooms said he was not happy to learn that the agency’s cash-flow problems dated back to July 2009, when its balance suddenly dropped by roughly $93 million. SCDOT officials could not say Thursday why that had occurred.
“Over the last year, the DOT has had nine occasions where the cash balance was at zero,” Grooms told reporters afterward, “Nine times over a year when you’ve got no money in the bank. There’s a problem.”
Legislators did not blame St. Onge exclusively, as the former general was appointed by Governor Nikki Haley to lead the agency in the spring, by which time the cash-flow problems had already become a crisis. However, Grooms said he also had little confidence the agency would be able to manage its payments over the next twelve months.
The chairman said he expects lawmakers to make some changes to the agency, including requiring it to undergo independent audits on a regular basis “at minimum.” SCDOT currently has an internal auditor.
Some senators are going so far as to call for the agency to be placed completely under the governor’s control. Although the governor appoints the secretary, most of SCDOT’s planning decisions are made by a commission appointed by the Legislature (although the governor gets one at-large appointee on the seven-member board).
Several legislators, notably Sen. Harvey Peeler (R-Cherokee) accuse the commission of favoring construction projects from some members’ districts while ignoring those from commissioners who “won’t play ball with the boys.”
Grooms said he was especially concerned that SCDOT fell behind on over $8 million in debt payments to the State Infrastructure Bank for projects already completed – – because no one realized the bonds had not been paid on time. St. Onge said a part-time employee was responsible for the payments after some personnel losses, and said a lack of communication between staff led to the missed payments.
South Carolina Treasurer Curtis Loftis also testified at the hearing. He said he understood that state agencies occasionally run into financial trouble, but added it was “unacceptable” for SCDOT to keep the public in the dark about its cash-flow problems. He pointed out that it took a Charleston Post & Courier article to bring the issue to the public’s attention. “If it had not been for a leak, we would not be here,” he told legislators, “I can’t stress that enough.”