N E W S W I R E
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ODOT Director Gordon Proctor's entire budget testimony
Mr. Chairman, members of the House Finance Committee, my name is Gordon Proctor. I am the interim director of the Ohio Department of Transportation. Thank you for this opportunity to present the proposed ODOT budget for state fiscal years 2000 and 2001.
I like to think of ODOT as a corporation, a corporation that provides service to the public. If ODOT were a publicly traded company, our stock would be at an all-time high. Our costs are down, our production is up. We have a product that is in great demand. You, as the board of directors of this corporation, would be pleased by the increased shareholder value and customer satisfaction this corporation has generated. ODOT has tried to learn from successful corporations, such as Honda and Saturn and IBM, on how to listen to its customers, to create a partnership with its workforce and to embrace quality.
As I hope you know, ODOT has greatly streamlined its operations. We have reduced our workforce from 7,700 people to 6,400 people in the past four years. At the same time, our delivery of transportation projects has risen to new levels, which consistently exceed $900 million a year. We have eliminated layers of bureaucracy, made our selection of major projects more objective and we have focused more on our customers. Let me give you just one example of how we have listened to our customers. Each week during the winter, we contact 700 citizen observers to ask them how we are doing with snow and ice control. They rate us each week and we use their feedback to improve our service. Out of a scale of 10, we have been ranked 8.6 overall by these weather observers. I am proud of such a high rating and it is attributable to the 2,300 men and women of ODOT who were involved in our extraordinary efforts this winter to combat snow and ice. Our county crews use the feedback from our spotter network to measure their efforts, to compare best practices and to continually improve their performance.
Continuous improvement and customer focus are the hallmarks of a department -wide partnership with our workforce. We believe that a well-performing department that is efficient and effective is in the best interests of the taxpayer, the traveler and our own workforce.
Governor Taft has made it clear with this budget that ODOT will continue its efforts to be efficient, effective and responsive. In terms of operating costs, this is a frugal, responsible budget. As you know, in the 1996/97 biennium, ODOT reduced its operating budget by $108 million. In State Fiscal Year 1998 we reduced our operating budget another $48 million and so far in State Fiscal Year 1999 we have reduced another $47 million. This is a total operating savings of $203 million over four years. To put that in perspective, it represents the equivalent of three cents on the motor fuel tax to ODOT.
In this proposal, the operating budget is held to a 2 percent growth above the State Fiscal Year 1999 budget. ODOT has budgeted for 6,650 people and not for the full quota of 7,000. Our costs for non-essential equipment such as cars, furniture and travel are held to minimal increases. We have lowered our operating budget in the past four years and we are determined to restrain it in the future.
Let me clarify, however, that our budget is going up substantially overall - and that is good news. Our budget is going up in the areas that you and the public care about the most. It is going up about $200 million a year on the capital side of the budget - not on the operating side. Those increases will be focused on investing in maintenance, in major new construction and in local projects.
This increase in funding represents a major Congressional victory for Ohio. As we have told you in past years, Ohio used to get back from Washington much less in transportation funding than we sent in. In the past, Ohio would contribute about $1 billion annually in federal motor fuel tax funds. In exchange, we received back about $625 million in highway funds. In May, Congress enacted a new six-year transportation law known as the Transportation Equity Act for the 21st Century. This act unlocked billions of the unspent dollars that were sitting in the federal Highway Trust Fund. This new bill releases much more of the trust fund balances and returns that money to the state transportation programs.
In simple terms, Ohio now is getting close to $900 million in State Fiscal 2000 and $915 million in 2001. This represents about a $270 million annual increase in federal transportation funding. As I said, this represents a significant victory for Ohio and I commend the Ohio Congressional delegation, the Ohio General Assembly and former Governor Voinovich for their efforts on the states behalf.
What does this budget do with the extra revenue? First, let me tell you what Governor Taft does not intend to happen. The extra revenue will not go into salaries, buildings or operational expenses. It all will go into projects. We have increased our basic maintenance expenditures by 3 percent, we have maintained our major new construction program at nearly $300 million a year and we have increased our contribution to local projects by 23 percent. In other words, the new revenue is used to ensure that our basic system needs are met and then we provide as much revenue as possible to new construction and local projects.
The additional revenue allows us to sustain a total construction program near $1 billion while at the same time we start to diminish our reliance on additional bonding. In this budget, our bond appropriations are $225 million in State Fiscal Year 2000 and decrease to $103 million in 2001. As you recall, the enactment of State Issue II in 1996 by the General Assembly, and then by the electorate, allowed ODOT to raise its bonding levels. With the advent of the increased federal revenue, we can lower ODOTs bond indebtedness to traditional levels. Our bond payments will peak in 2003 and will steadily decline thereafter.
You will recall that in the past biennium, we were concerned about the future of the major new construction program. As our bonding capacity reached its limit, and as our need for system maintenance rose, our new construction program was expected to diminish to near zero by 2002. We are happy to note that with the additional federal revenue that situation has changed dramatically. We currently are able to budget about $300 million a year for new construction in this biennium and we expect similar levels in the next biennium as well.
One area of concern for us is the federal transit revenue. Although the highway revenue has increased, the federal transit revenue to Ohio declined slightly in federal fiscal year 1999 compared to fiscal 1998. We hope that the basic operating funding will increase steadily over the next five years but the capital funding decisions are made on an annual basis by Congress. Predicting which capital expansion projects will be funded by Congress in the future is very difficult. We will work with the Ohio Congressional delegation and our transit providers to compete for these funds.
We have one major initiative this year to bring before you. We would like to expand our ability to use the design/build process to expedite certain types of projects. Under the traditional process, one firm designs the construction plans, turns them over to ODOT and then has no involvement with the construction of a project. Under design/build, the design firm and the contractor work as a team to design and build a project concurrently. Based on the success of six pilot projects, we know design/build can save time and reduce change orders. We ask in our budget for language to expand design/build beyond the pilot stage.
Before I conclude, I would like to briefly update you on a major initiative that was included in our budget two years ago - that was the creation of the Transportation Review Advisory Council, or TRAC. The General Assemblys support on this issue is greatly appreciated and, I believe, well deserved. As you recall, the TRAC was created to manage and oversee the selection of major new construction projects in Ohio. The TRAC recently completed its first year of operation and it was a great success. The TRAC conducted six public hearings across the state and provided an unprecedented degree of openness and accountability to the selection of new construction projects. The TRAC efforts culminated in the Dec. 1, 1998 release of a new, four-year projects list. I have heard overwhelmingly positive comments about the TRAC and I thank the General Assembly for the authority to create this important body.
The ODOT budget is big and complex but the underlying approach is very simple. We want to hold down our costs, maximize our investment in the transportation system and make the Department responsive to the public. That is the direction of this budget.
Thank you for your patience. I would be happy to answer any questions you may have.