NC Department of Transportation: Will Perdue's transparency efforts help shake its checkered past?

Updated May 13, 2009

Visitors to the DOT web site can also download a copy of the agency’s Transformation Performance Report – which details the state’s efforts to streamline the agency’s operations so that they are more consumer-friendly. There is also an Organizational Performance Dashboard.

NC DOT’s “project letting” web page provides links for obtaining project plans and documents. Visitors to the page can also learn who has been invited to bid on various projects, and who has been awarded the projects. Bid amounts and project cost data are also available on the page.

These developments are a dramatic departure from earlier years where the agency’s business dealings were often handled behind closed doors by political appointees on the DOT Board of Directors.

Mission
The DOT describes its mission as “Connecting people and places in North Carolina - safely and efficiently, with accountability and environmental sensitivity.” The agency also identifies five goals:

• Make our transportation network safer
• Make our transportation network move people and goods more efficiently
• Make our infrastructure last longer
• Make our organization a place that works well
• Make our organization a great place to work

History
The NC Department of Transportation dates back to the establishment of the State Highway Commission in 1915. In 1941, the North Carolina General Assembly created the Department of Motor Vehicles, consolidating services previously provided by the Secretary of State and the Department of Revenue.

The Executive Organization Act of 1971 then combined the State Highway Commission and the Department of Motor Vehicles to form the NC Department of Transportation and Highway Safety. In 1979, "Highway Safety" was dropped from the department's name when the Highway Patrol Division was transferred to the newly created Department of Crime Control and Public Safety.

Background
Governor Beverly Perdue surprised nearly everyone with one of her first orders of business. On her first day in office, Perdue signed an executive order delegating authority over highway construction projects and the approval of contracts directly to her new Secretary of Transportation, Gene Conti.

The move effectively stripped away the powers that have traditionally been close to the hearts of DOT board members.

In 1971, an audit by then-State Auditor Henry Bridges of the State Highway Commission, an earlier incarnation of the DOT, found that “the commission does not have proper internal controls over appropriations, revenues or expenditures.” (News & Observer, 10/15/92).

Nearly four decades later, Bridges’ warning has a prophetic ring to it.

A 2008 State Audit declared that the North Carolina Department of Transportation (DOT) is a multibillion-dollar state agency that “appears to operate on hunches and intuition rather than hard data analysis.”

Then-State Auditor Les Merritt wrote that “taxpayers paid $152.4 million in unnecessary construction costs” during the fiscal years 2003-06.

Further, a 2008 Spotlight report by the John Locke Foundation gave the DOT an “F” for making budget and spending information transparent by posting it online for taxpayers.

Responding to the 2008 audit, Transportation Secretary Lyndo Tippett maintained cost overrun problems were either beyond DOT’s control or have been corrected. Back in 1971, Highway Commission Chairman Lauch Faircloth took a more personal approach, dismissing the Auditor’s findings by labeling him a “moss backed bastard.” (News & Observer, 10/15/92)

News & Observer political columnist Rob Christensen relates a Lauch Faircloth story where the former U.S. Senator recounts a time during his Highway Commissioner days when he and other Commissioners were riding in the wheelhouse of a state ferry named for Faircloth. A tourist yelled, “Hey, fella, how do you get up there?” to which Faircloth hollered back, “Well, you start by managing Kerr Scott's campaign in 1948.”

That bit of folklore explains the influence of political fundraising on transportation policy in North Carolina. Despite repeated promises by governors since Kerr Scott, little has actually changed.

Conflicts & Controversy
Despite recurring promises of reform, seats on the Department of Transportation Board, which is charged with directing the building of roads, remain choice political patronage. A 1998 law required that DOT Board members disclose campaign money they raised in the two prior years for any candidate for statewide or legislative office or for political party executives. Despite this new disclosure requirement, Gov. Mike Easley received $200,000 in campaign contributions from his first nineteen appointees to the Board, demonstrating the failure of the new law to put a halt to the political nature of the appointments.

Governor Easley had found a loophole in the law. When the governor entered office, he directed his legal counsel to ask the state Attorney General to rule on the definition of fundraising. The Attorney General concluded that the term referred to the actual acceptance of money – i.e. collecting cash in your hand. Using this definition, two Easley appointees to the DOT board organized fundraisers that netted $175,000 for the governor while avoiding public disclosure. Others have since voluntarily admitted their fundraising activities, at the same time unwittingly demonstrating how toothless the 1998 reform effort was.

While former DOT Secretary Tippett admits delivering bundles of checks to Governor Mike Easley’s campaign, he says he didn’t peek to see who sent them.

Some seats aren’t just about the money. Getting on the board also appears to be related to whom you know. One Easley appointee told the News & Observer that he got the job after talking to his uncle R. V. Owens, a fundraiser for state Senate president Marc Basnight, and Easley.

One of the most significant recent DOT occurred in 1997 when Columbus County contractor James Cartrette asked Governor Hunt to return $30,000 because he had been denied a board seat that had been promised him by Hunt’s Finance Chair Jim Bennett and DOT Secretary Garland Garrett.

According to the News & Observer, Cartrette said he received a follow-up call from Garrett, who told him, “If you follow through on the commitment made to Jim Bennett, you'll have a seat at the table.” (9/26/97). Cartrette’s son delivered the promised checks to Garrett’s office at DOT. The appointment was never made. Cartrette asked for his money back.

The imbroglio unleashed a wave of scandal that consumed three Hunt fundraisers on the DOT board.

Governor Hunt sternly warned DOT officials “We have high ethical standards - and I will insist that they be honored.” (News & Observer 11/7/97). But later, Hunt himself was caught ordering DOT to fast track bridge construction in Wilson County near his farm so his commutes could be shortened (News & Observer 1/10/98).

The improprieties and scandal did not end with the end of Jim Hunt’s term. In 2004, Easley DOT Board appointee Frank Johnson was forced to resign after an email surfaced where he solicited funds for Easley’s campaign. His pitch included claims that he needed to raise the money so he could retain his seat on the DOT board and his home county could continue to benefit from his position. Despite the content of the Johnson email, Governor Easley and other Board members denied accusations that transportation improvements were tied to fundraising.

Eddie Thomas, a Greene County DOT employee and fundraiser for both governors Hunt and Easley, reportedly traded state jobs for campaign cash as late as 2004, after which he hastily retired.

In September 2008, right in the middle of the campaign season, the News & Observer reported that Louis Sewell of Onslow County, a former Easley fundraiser who the governor appointed to the DOT Board just after the 2000 election, apparently worked to steer $375,000 of state transportation money toward road improvements near property owned by himself or his son. The N&O found no mention of the clear conflicts-of-interest in the minutes of the DOT meetings where the projects were approved.

Sewell’s problem extended to the campaign of Lt. Governor Beverly Perdue during her bid for the gubernatorial top spot in 2008. Records show that Sewell and his family members contributed $37,500 to Perdue from 2003 to 2008. On the eve of a fundraiser for Perdue at his home in Jacksonville, Sewell cancelled the event after Perdue failed to confirm her attendance, and he resigned from the DOT Board.

Political patronage at the DOT has been bipartisan. A 1992 state audit by Democrat Ed Renfrew accused the administration of Republican Jim Martin of using DOT’s ferry division as a “dumping ground for political hacks”. Governor Martin’s four top fundraisers all served on the DOT board.

The slushy isn’t a just a drink sold at your local 7-11. It is also applies to the funds the Board of Transportation and its Secretary ladle out to their friends from DOT’s discretionary, or aptly named “slush” fund.

Efforts to reform DOT have been regularly and effectively quashed by the political process in Raleigh. In 2005, former Rep. John Rhodes tried to offer an amendment to eliminate a DOT slush fund. It was killed in the state House by a procedural tactic.

Another strange tale from the graveyard of DOT hits involves the ill-fated Corolla ferry project, which was investigated in depth by the Carolina Journal.

Originally funded with $800,000 tacked onto a highway-borrowing bill in 2003 by Senate President pro-tem Marc Basnight of Dare County, the ferry was purportedly authorized for the purpose of shortening commuting time between the outer banks and the mainland for schoolchildren. When it was later revealed that only one child might have actually used the ferry, many began to wonder if its real purpose was to transport hospitality workers living on the mainland to their wealthy outer banks employers more quickly.

But it wasn’t enough to just purchase a ferry no one would ride.

Upon discovering that the boat the DOT purchased had a boat too deep for the channel, DOT dredged the channel to allow the ferry to pass, bypassing the proper federal environmental permits - thus making the dredging illegal. Though no one has yet to claim responsibility for authorizing the dredging, DOT’s ferry chief was convicted of lying to the feds about the project. The whole debacle resulted in the convictions of three DOT employees various federal charges. And who was stuck with the bill for environmental fines and restoring the channel to its former pristine state? Why, North Carolina taxpayers, of course.

These are just a few of the scandals known to the public. Countless others have likely gone unreported to the taxpayers of North Carolina. In 2007, state taxpayers forked over $3.6 million to a private consultant to review the operations of the DOT. After a year of prodding, the report, which disclosed countless instances of waste and mismanagement at the department, was released in August 2008. Now it’s up to the legislature to take action.

Staff & Governance
NCDOT employs more than 14,000 people who oversee all modes of transportation in North Carolina, including highways, rail, aviation, ferries, public transit, and bicycle and pedestrian transportation. The department also oversees North Carolina’s Division of Motor Vehicles.

NCDOT’s operations are led by the Secretary of Transportation, a member of the governor’s cabinet. A 19-member Board of Transportation is the department’s governing body and is responsible for assisting in the transportation decision-making process and approving fund allocation. The governor appoints board members.

Units within the department are aligned according to six strategic functions:

• Organization, Monitoring, Communication & Control
• Transportation Strategy and Investment Analysis
• Transportation Business Administration
• Process Management
• Transportation Program and Asset Management
• Transportation Program Delivery

The NC Department of Transportation has an annual operating budget of nearly $4 billion. This money comes from three primary sources:

• The Highway Fund: $1,858,000,000 annually
• The Highway Trust Fund: $1,073,000,000 annually
• Federal funds: $943,000,000 annually

Summary
Early moves by the Perdue administration signal a desire to change standard operating procedure at the state Department of Transportation, but it will apparently take much more to change the culture at the agency.

WTVD reported that Department employees, in 2009, used state vehicles to drive themselves and their families to a conference in a luxury beachside hotel. This happened after Governor Perdue had ordered a 9-percent cut in agency spending to help accommodate an anticipated $2 billion-plus shortfall in the state budget.

In a scathing letter denouncing DOT scandals during Governor Hunt’s administration, Columbus County prosecutor Rex Gore noted, “I've heard it referred to as ‘playing the game’. If we want to restore public confidence in the political system, we must stop ‘playing the game’ and change the rules. Most folks believe that the man who greases the wheel gets the smoothest ride through the political system. The appearance that seats can be bought on the DOT or any other board must be brought to an end.” (Charlotte Observer 10/26/97)

That was more than a dozen years ago, and we're still talking about the same issues. Let’s see what effect Governor Perdue’s rhetoric and actions related to transparency have on NCDOT.

Contact the NC Department of Transportation