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Big change to penny tax roads program is coming. Is Richland County ready?

In a matter of weeks, Richland County’s $1 billion penny tax program will see its biggest change in years.

On Nov. 2, the county’s contract with a private management group to run the penny tax-funded roads program will end, and Richland County’s own transportation department will take on the task of completing work on hundreds of roads.

For five years, the spending plan approved by voters in a 2012 referendum was run by the Program Development Team, a consortium of three local construction companies hired to take on the massive project. But now, finishing many of the projects — some of which face spiraling costs — will fall on a county department trying to staff up for the challenge.

Richland County Council voted to end the county’s contract with the Program Development Team, or PDT, earlier this year, arguing the county could save around $4 million annually by moving management of the $1 billion program in house.

Rick Ott, a senior vice president at the construction firm M.B. Kahn and the principal executive at the PDT, is skeptical the county will find the savings. In an interview with The State, he also expressed concern about the county’s ability to immediately take over the program and the consequences of the county being unprepared.

“I wish them luck,” Ott said of finding the savings. “In effect, they have everything rolled up under the PDT right now, and they’re going out for all these other services, and they’re also hiring county staff. So I don’t see where they’re going to get the savings.”

Ott said the PDT only made $200,000 in profit a year, money that has to be split between the three major firms in the management group: Brownstone, HDR/ICA and M.B. Kahn. Plus, those firms contract with about a dozen other firms to get the work done.

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In March, county officials said they could spend $1.2 million annually for additional personnel in the county’s revamped transportation department to oversee the road construction program. The county’s former transportation director, John Thompson, said additional salaries and benefits would eventually raise the costs to around $2.5 million a year.

That compares to the $5 million to $6 million the county paid to the PDT.

County transportation director Michael Niermeier said the county won’t need to duplicate all of the functions that were provided by the PDT.

“As a county, we have a lot of those functions in place,” including finance, procurement and public information services already on the county payroll, Niermeier said. “What was originally one to four people at the PDT can now be handled by a function within the county.”

But the county will have to add some positions. Niermeier said the department has added four construction, engineering and inspection positions, and has hired three of four project managers. Another engineer on staff could fill in temporarily once the county takes over in two weeks.

The county has agreements with the S.C. Department of Transportation and the city of Columbia to provide some services when working on those agencies’ roads, like engineering, construction and inspection — services currently provided by the PDT.

“There were a lot of services the PDT was providing and that’s a really big pill for the county to try to take on and not stumble as we’re passing that baton over,” Ott said.

Ott says there is a competitive market for construction staff and service firms in South Carolina right now, especially with South Carolina incrementally raising the gas tax to pay for work on roadways statewide. He fears Richland County won’t have the people or the contracts lined up to do the work before the PDT’s contract ends on Nov. 2.

Niermeier says the county is contracting with outside firms for on-call engineering and inspection work, plus a “staff augmentation” will temporarily contract out five to seven positions as needed.

“It’s either that or I hire 20 to 40 inspectors over the next five years, and I don’t want to do that,” Niermeier said.

Richland County is still reviewing proposals for those services, and Niermeier couldn’t say this week how soon the contracts will be signed.

Richland County Council Chairman Paul Livingston does not expect the transition to be seamless.

“With the magnitude of the penny program itself, with hundreds of projects and all this money and six different on-call firms, you’re going to have some hiccups,” Livingston said.

Livingston said the transportation department “probably have enough” staff to get through the transition, but says current staffing is “not all they need to have” long term.

“I give the staff credit for all the work they’re doing,” he said. “We should try to keep as many (projects) going as we can, but you’ll see less than with the PDT.”

Livingston said he would have preferred to see a longer-term transition that would have had the PDT turn over responsibilities to county staff over time. Livingston abstained when the county voted in March not to renew the PDT contract.

But he notes that work can continue on current projects because the county has contracts with construction firms, engineering teams and other vendors separate from its management agreement with the PDT.

“People assume it’s all the PDT, but there are six other on-call engineering teams in the program,” Livingston said. “There will still be work going on.”

Two of the bigger projects underway are North Main Street and Clemson Road. The widening of North Main Street is currently under construction and is 70% complete, according to progress reports on the penny program website. Widening of Clemson Road is 45% complete, but the county has stopped work on the intersection with Sparkleberry Lane, and planning staff have suggested dropping the planned sidewalks at the intersection to save money.

Rising costs, shrinking projects

The roads program has struggled for years, almost since voters approved it in 2012. Projected costs are now $154 million over what the amount voters approved. The shortfall has led the county to freeze work on some projects and consider scaling back others.

Ott says he believes the initial estimates failed to take into account price escalation over the 20-year life of the program and some of the specific hurdles some projects would face. The group has said the county could get most penny projects completed by dropping a combined $19.5 million in projects from the list.

The county council has long had disagreements with the PDT. Earlier this year, the county voted to deny the program managers a 10 percent pay raise after receiving discrepancies in pay information from the team, including listing a $52,000 salary for the PDT’s secretary. Although documents provided by the PDT to the county showed the secretary made that amount, the PDT that’s not what she was paid and that it had provided incorrect information to the county.

Earlier this month, Richland County Council voted to withhold payment for the final month of the PDT’s contract, costing the consortium around $900,000. Council members cited an ongoing S.C. Department of Revenue audit of the penny program, saying they want to be able to recoup funds if the state finds any misspending in the program.

Ott says the state audit is focused on spending decisions made by the county, not the PDT, which only makes decisions in line with its contract with the county and with county approval. The PDT also is not involved in paying contractors the county hires outside of the PDT.

The executive expects the PDT to eventually get paid, but “timeliness is a huge issue.”

“The PDT is formed by 13 different companies,” he said. “Many are smaller vendors. If we don’t have the money to pay them, they are the ones who are really suffering. Those kinds of cash flow issues could put some of these companies out of business.”

All access

In August, Richland County Council called on the PDT to turn over documents about the consortium’s spending decisions.

In response, the management group turned over a terabyte of information to the county, or approximately 1.5 million digital pages.

But Ott said the county has always had access to all documents related to the penny program. The PDT and county transportation staff share space in the same building, and county staff have access to the same computer system in which the PDT stores all its documentation.

“At any point in time, county transportation staff could have provided any of that information to county council or anybody else, because they have access to everything that we have access to,” Ott said. “I don’t think they were aware of that, or at least council was not aware of that, or they would not have made that demand for all this information.”

Niermeier confirmed that county engineers who worked alongside the PDT have access to the consortium’s file system. He said the company’s server just recently became available for staff to access remotely from outside the PDT office.

“Everything they’ve turned over is what they say we’ve had access to,” he said. “But historically, there hasn’t been a lot of reasons for us to look at it. That’s part of the knowledge transfer we’ve been working on since March.”

Ott believes the amount of turnover among top Richland County officials has been a problem because he doesn’t think administrators and the newer county council members have the same understanding as those who were there when the program was set up.

“In the five years that we have been doing this, there have been five county administrators, four directors of transportation, there’s been 100 percent transportation staff turnover, there have been three county finance directors, four OSBO (Office of Small Business Opportunity) directors, and three procurement directors,” Ott said. “There has been so much turnover within Richland County staff, that nobody truly understands what took place and how it all transpired.”

‘That’s what got us into where we are now’

Once the county moves the program in-house in November, Niermeier’s goal is to keep any possible delays to road work to a minimum. That’s why the county is racing to add staff and sign new contracts before the transition in two weeks.

“We’ve looked at that risk and I actually have two branch plans in place in case” there are delays, Niermeier said. “We have the ability to use our own inspectors for a short period of time, or we have a contract mechanism that we can use to ensure we have inspectors out there.

“Whenever there’s a schedule delay, there’s always a dollar value associated with it,” Niermeier said. “But I can’t anticipate any right now.”

But Livingston worries “the savings projected originally will be difficult to achieve.”

“There will likely be cost escalations because the projects will be extended further,” Livingston said. “And that’s what got us into where we are now.”

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Bristow Marchant is currently split between covering Richland County and the 2020 presidential race. He has more than 10 years’ experience covering South Carolina. He won the S.C. Press Association’s 2015 award for Best Series on a toxic Chester County landfill fire, and was part of The State’s award-winning 2016 election coverage.
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