Tuesday, February 28, 2006

What's Happening at VDOT?

Bad news from VDOT... Peter Bacque with the Richmond Times-Dispatch tells us that VDOT has spent $40 million more on maintenance in the first seven months of the fiscal year than it had planned. Now the agency is trying to make up the deficit by cutting back on maintenance work and equipment purchases.

According to Whirley, VDOT has spent four percent more of its $1 billion annual maintenance budget than it had anticipated shelling out by Jan. 31.

"In December probably, we started notcing that on a statewide level our actual costs were beginning to clumb beyond our spend plan," he said. "What we're doing is what any good business would do. Monitor budget, monitor expenditure and make sure at the end of the year we bring actual expenditures in on budget."

What Bacque doesn't tell us is why VDOT is running over budget. Is this a sign that VDOT is losing budget discipline again and suffering a relapse to the bad ol' days before Eagle Eye Philip Shucet brought control over chaotic finances? Or are the cost overruns beyond VDOT's control, reflecting perhaps inflation in construction costs that exceed VDOT forecasts?

In either case, we have a problem. But we need to know what kind of problem, for the policy implications are very different for one than for the other.

25 Comments:

At 10:42 AM, Blogger Ray Hyde said...

Have you bought any gravel lately? Grinding gravel and transporting gravel is energy intensive. Same for asphalt. I'm not surprised costs are up.

 
At 12:29 PM, Blogger Toomanytaxes said...

Any idea what proportion materials has been of VDOT's historical costs? What did those costs do when energy costs spiked in the 70s and 80s? How about when energy costs effectively declined in the 90s?

 
At 12:51 PM, Anonymous Anonymous said...

TMT, Hyde is right. Fuel and materials prices are hitting everyone. And they have to represent the vast majority of these costs.

 
At 1:19 PM, Blogger spankthatdonkey said...

Labor is always your greatest expense... Maybe we should start looking for savings in the 9300 strong workforce.

Why is it that Coca Cola, Ford, Citibank, United Airlines, etc, can lay off 10% of its work force to restructure and become more profitable (less taxing) and accomplish their goals.

But, if you ever suggest that for Govt. the sky is going to fall??

 
At 2:02 PM, Blogger Jim Wamsley said...

Coca Cola, Ford, Citibank, United Airlines, etc, can lay off 10% of its work force to restructure and become more profitable (less taxing) and accomplish their goals because there is a direct connection between product and price.

When they restructure they “cherry pick” the most profitable workers and lay off the 10% that produce the least profit. They also reduce the product value and raise the price. E.g. Fewer airline flights, higher prices.

When we move to congestion pricing, and miles traveled per highway pricing, we can improve services also.

The biggest problem is that privatization is usually proposed for the areas that Government does better then private enterprise. One example is the Lake Worth Florida power service. If government were a private corporation the City of Lake Worth would raise the rates to the ones charged by Florida power and pocket the difference.

 
At 2:35 PM, Blogger Lucy Jones said...

Comments I found interesting:

Those types of jobs are often performed by small businesses

and having done some work earlier than expected thanks to mild weather

if brush grows so high it would pose a hazard for traffic, VDOT will get it cut.

Monitor budget, monitor expenditure and make sure at the end of the year we bring actual expenditures in on budget

Sounds to me like someone at VDOT is trying to make a point.

Everyone is jumping on them about how much better everything can be done by private business and how much cheaper but do they notice that the brush is never high? Do they notice that they are cleaning drains that small businesses should be paying to have done? Do they notice that the trash is being picked up? What's more important, having these things done or making sure the budget is right to the penny by the project plan?

I hope they do clean the drains. If Richmond had done their job, Gaston wouldn't have flooded Richmond.

 
At 3:04 PM, Blogger Ray Hyde said...

TMT and Jim Wamsley raise valid points. If energy costs were an issue we should be able to document the results as TMT notes. Do we have the metrics? Can we separate them from all the other confounding issues (how much work was done then vs now)

I think the last time I had gravel delivered it was nearly twice what it was two years ago. Of course I only by 20-60 tons at a time.

United laid of a lot of workers and also eliminated a lot of flights. VDOT has some work we would want them to cut, and they probably don't have the option to cherry pick their remaining workers, much.

Also United can become more profitable by eliminating the flights that lose the most money. If VDOT followed that plan they would stop maintaining the roads that are used the least and NOVA and Hampton Roads would get all the money. but it is also true that if VDOT followed that plan they would eliminate maintenance on what are already the most dangerous roads.

I find that it is often best to let your experts do their job. Keep an eye out, of course, but stay out of the way if possible.

 
At 3:05 PM, Blogger Toomanytaxes said...

12:51 I wasn't disagreeing with Ray Hyde. I just wanted to know whether there was any breakdown as to VDOT's maintenance cost mix and how the components fluctuate relative to energy prices over time.

Lucy Jones Are some of these services ones that VDOT should bill back to local governments or to property owners? Fairfax County, for example, has two police helicopters that are often used to assist other governments, federal, state and local. But the county then seeks, and generally obtains, reimbursement for the use of its equipment and crews. Does VDOT do this, and, if not, should it?

 
At 5:12 PM, Blogger Lucy Jones said...

I don't know if the localities pay VDOT back or not. Seems like if they did, VDOT wouldn't be holding back on the work. If it's the locality's work though, VDOT should be leaving it alone. They're certainly not going to get any atta boys from the press or the politicians.

I think my county, Henrico, actually does all of it's own road maintenance and I think there's still some arguing over the drainage situation that caused the Gaston flooding as well. I'm not sure who's supposed to do what...

Heck, we're glad to see snow plows within a week of the snow falling!

 
At 1:10 AM, Anonymous Anonymous said...

Perhaps they could save a few dollars and forego planting flowers in the medians and along roadsides this year.

 
At 4:19 AM, Blogger Larry Gross said...

Here's the deal: VDOT released the info voluntarily. One could speculate as to why they did since it tends to causes questions.

It's true that costs go up.

It's also true that most well-run companies do two things with regard to costs.

1. - they plan for those increased costs in their budget forecasting.

2. - they establish and use contingency funds to deal with unanticipated expenses.

Poory run companies who don't do this - go broke.

Now go read the Virginia Auditor of Public Accounts analysis of VDOT practices.

Goose Eggs on both issues.

So... the "game plan" is to give VDOT more money to deal with the "transportation crisis" - and the conventential wisdom is that the issue is primarily one of inadequate funding that can be mitigated with more money.

I won't argue that more money is not needed but I would argue that more money for bad practices is not s solution either.

And the bigger issue that I don't think anyone is really dealing with is the simple fact that O&M (operation and maintenance) costs are a BIG cost that are projected to consume MOST of VDOT's budget by 2020 (I think).

Here's the reality:

The MORE roads you build - the HIGHER you O&M costs will be.

Even if VDOT becomes the KING cost-effective stratgies... say besting Wal-Mart etc... the fundamental reality is that the more you build, you more it will cost to maintain.

WalMart builds the cost of facility maintenance into it's budget ... and no.. you cannot cut costs by sweeping the floors less or letting broken doors stay broke or shutting down your check-out lines because some of your computers have gone belly-up.

VDOT has the SAME MISSION folks!

yes.. the can delay tunnel washings and mowing the medians.. but think about this... if the grass grows higher or the tunnels get dirtier.. isn't it going to take more time and money to maintain them on a more infrequent basis?

 
At 1:28 PM, Blogger Ray Hyde said...

Isn't VDOT including O&M in its budget forecasting? Isn't that why it takes up most of the money by 2020? Isn't that part of what is causing the transportation crisis? Isn't the reason they need more money so that they WON'T have to resort to bad practices like mowing less?

As long as the roads are not generating enogh revenue to pay their own maintenance, then VDOT goes farther in the hole every time it adds lane miles. Even if the lane miles in fact generate more revenue, it is not being redirected back to the source.

We argue that those who use ought to pay, but that does no good unless the pay goes back to those who provide the services.

If I put up pretty fences around the farm, the value of the neighborhood goes up, but it doesn't actually do much for the farm income, and my O&M goes up.


As for the flowers, I think it may be one of their most cost effective practices. It may even soothe the savage beast baking in a backup, if he can rest his eyes by perusing the petunias.

 
At 3:24 PM, Blogger Toomanytaxes said...

Let's not forget the need for the Commonwealth to impose fees or taxes on heavy trucks that are sufficient for VDOT to recover the maintenance and repair costs caused by such heavy vehicles. What might VDOT's O&M budget look like in the event it received revenues from heavy truck operators that paid for the ENTIRE cost of the road damage that they cause?

 
At 4:21 PM, Blogger Ray Hyde said...

I agree, heavy trucks really are getting a free ride.

 
At 8:18 PM, Anonymous Anonymous said...

Well, I like the flowers too, but unless they serve a purpose such as an anchoring groundcover, they are an unnecessary expenditure. But I do like them. If only flowers could be like Willy Wonka's everlasting gobstopper -- never-ending blooms! Then, I would surely quit whining that they were "unnecessary".

And yes, in the scheme of things, I'm sure the flowers aren't a high cost item - but there is a business adage that has saved massive amounts of money - and that governments & politicians would do well to heed:

"It is easier to find 100 ways to save $1, than to find 1 way to save $100."

 
At 4:46 AM, Blogger Larry Gross said...

VDOT's budget is basically divided into new construction and O&M.

If not mistaken, most O&M comes from state gas taxes and most new construction money comes from the Feds.

O&M costs are rising quite quickly not only from inflation and higher material costs but because VDOT accepts about 200 new lane miles of roads every year.

The fact that VDOT has a budget and a process for forecasting is not the issue. The issue is HOW they do forecasting and how they deal with rising prices and unexpected expenses - and this is not only for O&M but for new construction.

The State Auditor found that many of their estimates were essentially "low ball" estimates NOT adjusting for annual inflation and no creation of contigency funds - standard industry practices for dealing with such issues where estimates are used.

Folks need to recognize that with respect to O&M that every single state agency, every single school district, etc must deal with issues like rising costs.

If a local school system would come out before the end of the school year saying that they ran out of money for utilities or that a new school ran out of allocated construction money - not only would eyebrows go up; there would be an investigation and eventually hell to pay.

Flash back to VDOT - a state level Agency that routinely violates normal industry practices with regard to budget and forecasting.

Again, it's not the fact that they have these processes - it's the fact that the practices do not conform to normal and expected industry practices.

Great strides were made with Phillip Schucet to correct the worst problems but much remained to be done and whether or not VDOT stays on track will depend greatly on who the new Commisioner will be.

Now, it's a sad state of affairs when everything depends of the new head of an agency to correct a culture of not accepting accountability.

In other words, VDOT is backslide unless the "right" new leader is selected.

What does that tell you?

It tells me that there are a bunch of career employees at the highest level that will not change unless someone is standing on their necks.

Giving VDOT more money along with selecting a weak or ineffective leader - no matter what the GA is going to do with legislation is not a recipe for optimism in my opinion.

What's NOT my opinion is what the State Auditor and JLARC has said about VDOT. It's these reports that helped me form an opinion in the first place.

 
At 7:25 AM, Blogger Toomanytaxes said...

Larry: Might a large part of our problem with VDOT's operations stem from the fact that we (Virginia) have no common understanding and statement of the purpose(s) of transportation infrastructure? The audit reports suggest that most transportation decisions from the CTB are political in nature. Let's build this thing in this location because it benefits my clients/stakeholders. That's hardly a formula for successful operation of a state department. Moreover, why should citizens pay more to fund a dysfunctional system? In short, maybe VDOT does what it does because the GA has failed to give VDOT a rational charter.

 
At 6:40 PM, Anonymous Anonymous said...

I've heard more than one state legislator talking about the "rising costs of asphalt and steel."

 
At 5:32 AM, Blogger Larry Gross said...

"Larry: Might a large part of our problem with VDOT's operations stem from the fact that we (Virginia) have no common understanding and statement of the purpose(s) of transportation infrastructure? The audit reports suggest that most transportation decisions from the CTB are political in nature. Let's build this thing in this location because it benefits my clients/stakeholders."

That's EXACTLY how VDOT operates and as you stated, it EXACTLY what the State Auditor determined.

ANY/ALL road projects are determined to be NEEDED and from that point on, it's purely a political decision about which ones get built and which ones stay "on the list".

The State Auditor also stated that VDOT does not have an objective process for determining cost-effectiveness much less RANK and PRIORITIZE on that basis.

Go to ANY 6yr plan (also called a TIP) or any CLRP (20 year long range plan) and try to determine how project selection was made and good luck... there simply is not a rational process.

And it's worse than that because BOTH the TIP and CLRP are supposed to be cost constrained - which means all the projects in the TIP and CLRP cannot total more than identified funds available.

So, that means that BOTH the initial cost estimations AND the annual effects of inflation/higher costs should be calculated - and "in theory" as time goes by and funding stays static - the result would have to be the removal of some projects - to keep the cost contrained framework intact.

But that would require determining which projects are important enough to retain and which ones would have to be removed - and that does not happen.

The ONLY time this actually DID happen is on a one-time basis is VDOT got to the point where they literally were running on a daily cash basis - and Mr. Schucet forced VDOT to flush a bunch of projects - but again - the removal of projects was NOT based on ranking and prioritization.

In fact, the process for determining which to remove and which to keep - as far as I know - was never explained.

I'd liken this to say WalMart trying to determine how many new stores it could open.. in a year, in five years, etc and the PROCESS they would use to ASSURE that they did not have any more projects on their "build" list than they could afford AND a process to determine WHICH ones were the most important to open first.

You know.. even local School Boards have to go through such a process .. ditto for our local Boards of Supervisors... with their capital facilities plans.

To NOT do so would result in serious problems with the ability of the schools to perform their mission.

This IS, in fact, VDOT's problem and as stated, clearly confirmed with the State Auditor and several JLARC studies (all ignored by VDOT).

I don't know how you 'fix' this and I think members of the GA (who have also read these reports) are in a similar quandry.

We've got to have roads. We've got to have critically important new roads but we also have to spend money effectively and stay within a budget.

In the end, it's not the money, it's how it is spent and VDOT, despite Schucets tenure remains mostly "broke" - literally and figuratively.

Kaines, MOST IMPORTANT task will be to determine WHO succeeds Schucet in my opinion.

 
At 7:33 AM, Blogger Tom James (aka Brave Hart) said...

http://carolinejustice.blogspot.com/2006/03/state-fair-info-emailed-to-me-by.html

State Fair info emailed to me by a concerned citizen
Tom, I can fill in some of the blanks in the state fair's actions and actions of alot of the parties involved.

The trail to Mark Warner looks like it came throughTim Kaine's law firm. They handle a lot of the fairs affairs. There appears to be a donation made to Warner's PAC (political action committee). The fair has about $36 million to seek favors with.

The money from VDOT appears to have come from not doing maintenance on a lot of roads in Richmond and Fred. area. This is where a bulk of the cash was transferred from.

A word of caution about this maneuver. This occurred before Caroline Supv got involved. Not that it mattered a whole lot.

The whole process started in 1999 with Henrico County. Henrico realized that the fair was a tax exempt racket. They wanted the fair to pay some of the expense of moving to a new location and fair said no way. We don't pay taxes and taxpayers deserve to pay our expenses.

Supposedly, the fair then went looking at 20 or more locations. The only location they were interested in was to find a bunch of suckers on planning commission and Board of Supv. to give them tax money. They found it wrapped with roses and ribbons in Caroline County. Have you noticed that some members of the board of supervisors lied throughout the process. I give you three guesses.

When the vote for planning commission was held, only three members voted. Our Reedy Church rep was MIA. If you want to cry, I'll send you the proffersthat Acors said was the deciding factor for him. It's totally amazing.

The fair people are very good business people and must be laughing all the way to thebank on how they are getting a 17 million dollar driveway and county tax moneyto assist them with police and fire.

County tax payers are screaming about the rise in assessments. A lot of that money will go for the state fair. Don't let anyone tell you differently.

The arrangement with the state police still is a puzzle because the fair rents the cops but VA tax payers hire, train and pay retirement for the police.

According to the proffer statement, the fair people won't seek tax exempt status with county (just wait).

I'll send you my take on this because I broke down the list.

F,T,A should be run out of town for voting yes on this crap. They never broke down the numbers.

 
At 2:49 AM, Blogger Tom James (aka Brave Hart) said...

Tom.
It's only a matter of time before they ask for TAX EXEMPT status as far as land. Maybe they'll put it in LAND USE instead. Yep I just looked and they are.

Property Information - Tax Map# 100 A 1A - Account# 14893
Property Owner:
Atlantic Rural Exposition Inc

Owners Address:
Po Box 26805
Richmond, Va 23261

Total Land Area:
102.0549Acres
*Land Use*
$ 97873

Physical Location:
13185 Dawn Blvd

Magisterial District:
Reedy Church






Here's another one.........

Property Information - Tax Map# 100 A 1A2 - Account# 22072
Property Owner:
Atlantic Rural Exposition Inc

Owners Address:
Po Box 26805
Richmond, Va 23261

Total Land Area:
10.00Acres

Physical Location:
13111 Dawn Blvd

Magisterial District:
Reedy Church





Here's the 3rd one. Let me know if you got the three. The Land use value is what they are paying taxes on. Now I have a question..... Is their land assessed like everyone else's of comparable size???? In other words are they paying the same percentage?
Property Information - Tax Map# 100 A 2 - Account# 14894
Property Owner:
Atlantic Rural Exposition Inc

Owners Address:
Po Box 26805
Richmond, Va 23261

Total Land Area:
217.6042Acres
*Land Use*
$ 207637

Physical Location:
13050 Dawn Blvd

Magisterial District:
Reedy Church Legal Description:
G E Taylor
Parcel B

Assessment Values:

Other Improvements: 86,964
Land Value: 1,218,300
Total Value: 1,305,264





I just looked at a piece of land I found in comparable size (but not river frontage) and the piece I looked at has 232 Acres in it and the land is assessd at $337,500 and is in Land Use for $122,760 (meanng the taxes paid are based on this amount). It is mostly open farm land backing up to a creek though... Both Zoned RP but this 232 acre piece I just looked up doesn't face a major road. It faces a back country road. HMMMMMmmmmmm.

http://carolinejustice.blogspot.com/2006/04/more-on-state-fair-emailed-to-me-by.html

 
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