Richland County might save more than $4 million a year by nixing penny tax group
Richland County believes it will save more than $4 million a year in its cash-strapped transportation program by cutting ties with a group of private companies that has been in charge.
For the past four years, the county has paid between $5 million and $6 million a year to a group of three private companies, collectively known as the Program Development Team (or PDT), contracted to manage the countywide transportation improvement program.
The construction projects — and the management of them — are funded by a 1 percent countywide sales tax that was narrowly passed by Richland County voters in 2012. While dozens of construction projects have been completed and are ongoing around the county, they are costing much more than officials originally estimated at the time voters agreed to the $1 billion, 22-year program and project list.
Meanwhile, the PDT’s five-year management contract expires in November. Rather than negotiate a new contract with the same group or seek out a new private management group, County Council earlier this month voted to bring the transportation penny program entirely under Richland County staff management.
Bidding and negotiating a new deal with an outside management group would have left the county extremely time-crunched to avoid a lapse in management by November, county leaders have said.
Instead, the county plans to create eight new staff positions immediately to join seven current positions in its transportation department. With a total of 15 employees, including a yet-to-be-hired director, the transportation department will have a personnel budget of just over $1.2 million annually — at least a $4.1 million savings, initially, compared to what the county is paying the PDT for its salaries, benefits, overhead costs and profits.
John Thompson, an assistant county administrator who formerly was the county’s transportation director, recently told County Council members that the county likely will hire more transportation staff in the future, up to a total of around 30. That would raise the cost of transportation salaries and benefits to around $2.5 million a year, he estimated.
Comparatively, the PDT has about 50 employees.
County Council Chairman Paul Livingston questioned whether “we’re convinced that we can do it with less than half” the staff of the PDT. Thompson said he believed the county could.
The county will probably outsource some of the tasks that have been done by the PDT as part of its contract, Thompson said, which the county will have to pay for on top of its internal salary costs.
In addition to saving on salary, benefits and administration costs, the county says its in-house move will save 11 percent in costs on each road construction project, which the PDT currently collects on top of the more than $5 million it’s paid each year.
For instance, the county said in a news release this week, “the PDT earns 4.5 percent of the latest approved budget project cost for construction resource management and utility relocation coordination. The contractor also earns 6.5 percent of the latest approved budget project cost for construction engineering and inspection.”
That means for a $30 million road project, the PDT can cost the penny program an extra $3.3 million.
The money comes out of an already tight program budget, which is expected to run out of money before all the projects that are supposed to be included are completed.
A year ago, Thompson told County Council that the penny program was on track for $194 million in cost overruns. As a result, several major road widening projects are in danger of not being completed because of a lack of funding, Thompson said then.
Controversial contractors
The PDT has overseen hundreds of road pavings, dozens of road widenings and intersection improvements, as well as bikeways, greenways and sidewalk construction across the county for the past four years.
“The program has been a success,” said David Beaty, the PDT’s program manager. “We’re fully supportive of council’s decisions and direction. The PDT has appreciated the opportunity to have assisted with developing the program to this point, and we’re fully supportive of the county moving forward.”
For all the work that’s been done, the county’s relationship with the PDT was questioned from its beginning and has continued to attract criticism.
In 2014, County Council went around its normal procurement procedures to award the $30 million penny program management contract to this group — a collaboration of the companies ICA Engineering (now called HDR Engineering), Brownstone Construction Group and M.B. Kahn Construction Co. — amid a messy bidding and selection process.
The next year, the S.C. Department of Revenue began investigating the program and accused the county of misspending penny tax money and of possible public corruption. The program was dinged for paying $50,000 a month to a pair of public relations firms — $25,000 each per month — for doing work that the revenue department said was not an appropriate use of penny tax dollars, even though that public relations work was part of the PDT’s contract.
In February 2018, under pressure by the revenue department and courts, Richland County stopped paying that $600,000 a year for public relations out of the penny tax fund. The county is beginning to reimburse more than $3 million in misspent penny taxes; those repayments are coming from the county’s general fund that covers the majority of county operations.
Last summer and fall, the PDT stirred up skepticism among some County Council members when it asked for three years’ worth of raises for its employees. At that time, The State newspaper revealed the PDT had knowingly provided incorrect information to County Council about how much money its employees actually made. The PDT said its secretary earned $52,000, when in reality she earned much less.
Some council members said that discrepancy raised an issue of trust and could weigh on their decision of whether to pursue a new contract with the PDT in 2019. After putting off the PDT’s request for raises for several months, County Council ultimately turned it down.
Despite the array of controversies surrounding the management of the penny program, some County Council members say criticisms of the program should not be directed at the PDT, but instead at the county-approved management contract.
“The PDT did not do anything that was not in the contract or allowable in the contract,” said Councilman Jim Manning, who was the sole council member to vote against an in-house management move earlier this month.
He was a member of County Council at the time the penny program commenced and the PDT was selected. “It was the Richland County government that negotiated and presented a deal for them to sign. So anybody that’s got any concerns about the contract and the deal should have all that concern with the Richland County government, not the Program Development Team.”
“The reality is it’s an extremely lucrative contract in favor of the PDT, hence my desire to terminate that contractual relationship,” Councilman Joe Walker, a newcomer to county leadership, said. “It is not the people of the PDT. It is not the companies of the PDT. It is the contract with the PDT that, in my opinion, has set us up for failure since its inception.”
Moving on from the PDT
With the PDT’s five-year contract expiring this November, county leaders have been considering their next move for at least a year.
One year ago, then-county administrator Gerald Seals and then-transportation director Thompson outlined a plan for transferring management of the penny program to in-house staff.
Richland County leaders looked to Charleston County as an example of how to transition from contracted management to staff-led management. Charleston County made that move in its $1.3 billion transportation improvement program about a decade ago.
Earlier this month, Richland County Council voted to move forward with its own transportation transition.
Council members Joyce Dickerson, Bill Malinowski, Dalhi Myers, Chakisse Newton, Allison Terracio and Walker voted in favor of bringing the program in-house. Manning voted against it. And Chip Jackson, Gwen Kennedy, Livingston and Yvonne McBride abstained from voting, giving no reason during the March 5 meeting for not casting a vote.
Livingston later told The State that he “wanted some more time to get a few more answers for clarification on a couple things. I wanted to be sure about the probability of getting the required staff in place in a timely manner.”
Manning echoed a concern about not having all the answers he sought in time to vote for an in-house move. He also expressed reservations about growing the size of the local government by increasing the transportation department.
“Had I been provided information (sooner), I may have been, you know, ready to make a motion to bring it in-house. I don’t know,” Manning said. “It was just that the information wasn’t there.”
The county’s next steps include hiring a transportation director to replace Thompson, along with eight new county staff members.
The county’s internal transportation department will work closely with the PDT over the next several months to transition responsibilities and information while at the same time overseeing ongoing transportation projects.
This story was originally published March 21, 2019 at 4:47 PM.