Report 2004-010 Summary - December 2004

Department of Transportation: Its Seismic Retrofit Expenditures Comply With the Bond Act and Its Reimbursement of Interim Funding for Fiscal Years 1994-95 and 1995-96 Is Nearly Complete

RESULTS IN BRIEF

In March 1996, California voters approved the Seismic Retrofit Bond Act of 1996 (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 ninth 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 toward its goal of retrofitting more than 1,150 state-owned highway bridges and seven state-owned toll bridges. As of June 30, 2004, the department had spent $1.93 billion for retrofit projects and had completed work on 98.4 percent of the highway bridges. It also has finished retrofitting five of the seven toll bridges. The other two bridges were in retrofit design or under construction.

Our review found that the department has done a good job of ensuring that its seismic retrofit projects meet the criteria for funding outlined by the Bond Act. The department also has continued 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 retrofitting 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 normally would have been paid for by the highway account and toll bridge fund. As of June 30, 2004, the department had used this method to reimburse the highway account $87.5 million and the toll bridge fund $8.2 million.

AGENCY COMMENTS

The department and the Business, Transportation and Housing Agency agree with the information provided in our report.