Report No. 2010-10
January 2010
Complete Audit Report

Improvements Needed in the Development of Long-Range Transportation Needs and Funding Estimates, and Project Planning and Prioritization

Our audit objectives included (1) evaluating the effectiveness of MoDOT's short-term planning procedures, (2) evaluating whether MoDOT's long-range estimates of future funding requirements were reliable, and (3) evaluating whether MoDOT's long-range planning, prioritization, and funding allocation formula adequately aligned with strategic priorities and/or best practices. Missouri has the 7th largest state-maintained road and bridge system in the nation, with approximately 33,000 miles of roads and over 10,000 bridges. However, with gas and diesel fuel taxes among the lowest in the nation, Missouri's total revenue per mile and revenue per national highway system mile ranks 44th and 33rd nationally, respectively. MoDOT issued a report in June 2008 entitled A Conversation for Moving Missouri Forward (Conversation), which established long-range transportation priorities for the system, identified "bare minimum" long-range system needs, including a listing of 46 specific expansion projects, and estimated the long-range funding available and necessary to provide for these needs. The Conversation document has been used as a marketing tool to discuss the State's long-range transportation funding issues with the public.

Long-range transportation needs and funding estimates not fully developed
The Conversation estimated $12.6 billion will be available for construction over the next 20 years, while the costs of transportation system needs will be approximately $31.3 billion. Based on concerns with the development of the Conversation, MoDOT's estimate of an $18.7 billion funding shortfall may not be reliable. The audit identified the following weaknesses:

• Specific projects listed as long-range "needs" were not selected using established planning and prioritization policies and procedures
• Inflation was not included in long-range cost estimates
• A formal long-range revenue projection was not completed
• Adequate documentation to support long-range cost estimates was not maintained
• The MHTC did not formally approve the Conversation before issuance to the public

Assuming cost inflation of 3 percent annually, costs projected in the Conversation increase from $31.3 billion to $41.9 billion, an increase of 33 percent. A previous 1997 audit also found MoDOT did not consider inflation in its long-range planning (15-year plan) and did not make accurate long-range revenue projections.

The use of Amendment 3 debt has allowed MoDOT to make significant progress towards road condition goals in the short term. However, the final Amendment 3 bond issuance occurred in fiscal year 2010 and additional bonding capacity will not be available until 2029, requiring ongoing taking care of the existing system (TCOS) activity to be funded with pre-Amendment 3 funding levels.

Funding allocation formula emphasizes expansion and is inconsistent with stated priorities
Although TCOS has been established by MoDOT and the public as the top priority, the funding allocation formula continues to provide more funding toward system expansion than TCOS. The fiscal years 2009-2013 Statewide Transportation Improvement Plan provides 52 percent of highway construction funds to system expansion, with 48 percent going towards TCOS. By continually under-funding TCOS activities, and over-funding system expansion, MoDOT has created a situation where additional revenue is needed to cover essential ongoing TCOS activities.

In addition, improvements are needed in MoDOT's project categorization processes to help clarify the purpose of construction projects and improve transparency.

Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov