Report 2001-010 Summary - December 2001

Department of Transportation: Its Seismic Retrofit Expenditures Generally Comply With the Bond Act, and It Has Begun to Reimburse the Interim Funding for Fiscal Years 1994-95 and 1995-96


In March 1996 California voters approved the Seismic Retrofit Bond Act (Bond Act), which authorized the State to sell $2 billion in general obligation bonds to reconstruct, replace, or retrofit state-owned highways and bridges. Legislation passed in 1995 requires the Bureau of State Audits to ensure that projects funded by the Bond Act are consistent with that measure's purposes. This is the sixth in a series of annual reports on the Department of Transportation's (department) revenues and expenditures authorized by the Bond Act.

Overall, the department has moved forward toward its goal of retrofitting more than 1,150 state-owned highway bridges and 7 state-owned toll bridges. As of June 30, 2001, the department had spent $1.49 billion for retrofit projects and had completed work on 98.1 percent of the highway bridges. It had also finished retrofitting 2 of the 7 toll bridges, while the other 5 bridges were either in retrofit design or under construction.

In general, the department has done a good job of ensuring that its seismic retrofit projects meet the criteria for funding outlined by the Bond Act. However, we did find two instances in which the department charged expenditures to the Bond Act that were not eligible for such funding. In both instances, department staff stated that they were unaware of the department's policies requiring the allocation of certain types of facility costs. As a result, the staff inappropriately charged approximately $6,800 for a lease payment and a repair bill entirely to seismic projects rather than allocating the amount among seismic and nonseismic projects that benefited from the expenditure.

The department has also begun to reimburse 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 for the retrofitting of California's bridges. Although the Bond Act requires that the department use bond proceeds to reimburse these expenditures, the State Treasurer's Office objected to reimbursing these funds directly because it believes such an action could jeopardize the bonds' tax-exempt status. To avoid this problem, the department decided to use Bond Act proceeds to fund future projects that would normally have been paid for by the highway account and toll bridge fund. As of June 30, 2001, the department had used this method to reimburse the highway account $26.3 million. It intends to fully reimburse both the highway account and the toll bridge fund before the Bond Act expires in 2005.


To ensure that Bond Act proceeds are used only to pay for eligible expenditures under the Bond Act, the department should direct its staff to follow its policy of allocating facility costs among all projects benefiting from the expenditure.


The department agrees with the report and recommendation and states that it is taking steps to correct the identified problems.