Audit: Low budget estimates led to York Co. Pennies overruns

“The cost estimates for the original referendum budget were inaccurate,” York County’s manager told the County Council. “Basically, they were too low.”

County Manager Bill Shanahan was quoting an audit into improvements on S.C. 5 dating from 1997’s first Pennies for Progress list. But those comments could be applied to any of the six projects auditors analyzed from the first 19 years of the road improvement program, or to the program as a whole.

Auditors with the accounting firm Greene, Finney and Horton found budget figures submitted to voters for approval in more than one previous referendum underestimated the costs of the projects – and often neglected to include the costs of ancillary items like utility relocation or right-of-way acquisition.

Those faults have led projects from the first two rounds of Pennies, approved by voters in 1997 and 2003, to run over their approved budgets by around $200 million.

The auditors looked at two projects from Pennies 1 – S.C. 5 and Cherry Road – three from Pennies 2 – the Gold Hill Road/Tega Cay connector, the Fort Mill Southern Bypass and the realignment of White Street in Rock Hill – and one from Pennies 3 – Sutton Springs Road.

Auditors were critical of all the projects. Voters approved spending $24 million to widen S.C. 5 from York to the Cherokee County line, but the project ultimately cost $57 million, and the county tapped into $45 million from the S.C. State Infrastructure Bank to complete that and other Pennies 1 projects.

Auditors determined “no design work or detailed estimates were used in arriving at the original referendum amount,” while planners used “generic” figures to budget $900,000 for the widening of Cherry Road – “basically just a shot in the dark,” the audit states. That project was completed in 2012 at a cost of $4.8 million.

County officials have pointed out that projects from the first two Pennies rounds were managed by the consultant firm CME, and York County didn’t take over direct management of the program until 2009.

Auditors found the project on Sutton Springs Road, approved in 2011, was completed $1 million under budget.

“It is clear that the processes that the county has in place currently are significantly improved,” the audit concludes.

But the report is critical of past county administration as well.

In 2009, the York County Council approved a plan to turn the realignment of White Street over to the city of Rock Hill at a cost of $5.9 million – an increase from the approved 2003 budget of $2.5 million.

But when Rock Hill asked the county for reimbursement in 2013, the actual cost had increased to $9.1 million.

The initial estimate “did not include design costs, right-of-way costs, or relocation of utilities,” the auditors concluded. “The county should have provided accurate and complete information to County Council in 2009 when they requested approval for this project.”

Efforts to reach former Pennies manager Phil Leazer and former County Manager Jim Baker were unsuccessful Wednesday.

The report included suggestions for improving the Pennies program. Auditors suggest developing an electronic system to better keep up with the progress and status of projects, keep better track of files in line with state retention schedules, and assign projects to consultants one at a time rather than all at once.

Shanahan further suggests adopting “a risk management estimation model” to determine the accuracy of current budgets and apply it to the fourth slate of Pennies projects set to be unveiled in 2017; including administrative fees in the cost estimates for the next referendum; and coordinating project estimates with the state Department of Transportation.

The county manager also told the council hiring an in-house right-of-way manager could save York County money on future projects. Councilwoman Christi Cox, who chairs the county’s Pennies committee, estimated right-of-way acquisition and utility relocation together amounted to 30 to 40 percent of projects’ additional costs.

“Too many projects increased in scope after the referendum,” Cox said. “And the county bends over backwards to do favors for the municipalities,” citing the ballooning cost of the Tega Cay connector from $1.4 million in 2003 to the $8.1 million contract approved last year.

The auditors also proved critical of that project: “The county project files did not include any documentation or support as to why the county agreed to assume project management and to pay for the entire project, when the original intent was for the county to only pay for a portion of the new road.”

While Cox is upset with the audit’s findings, she hopes the improvements the county has made to the program will carry over to Pennies 4.

“These cost estimates came from outside consultants, not our current administration or staff,” she said.

Councilman William “Bump” Roddey was equally concerned about how the audit would affect future projects.

“We’re not here to kick Pennies in the knees,” Roddey said. “We don’t want people to give up on the Pennies program. We have a new one coming up. I want to keep the faith in Pennies.”

This story was originally published April 20, 2016 at 5:45 PM with the headline "Audit: Low budget estimates led to York Co. Pennies overruns."