Texas Parks and Wildlife Commission
Finance Committee

August 20, 2008

Texas Parks and Wildlife Commission
Houston Zoo
Brown Education Center
6200 Golf Course Drive
Houston, Harris County, Texas

BE IT REMEMBERED, that heretofore on the 20th day of August, 2008, there came to be heard matters under the regulatory authority of the Texas Parks and Wildlife Commission in the Brown Education Center of the Houston Zoo, to wit:

APPEARANCES:

THE TEXAS PARKS AND WILDLIFE COMMISSION:

THE TEXAS PARKS AND WILDLIFE DEPARTMENT:

P R O C E E D I N G S

COMMISSIONER BROWN: Thank you, Mr. Chairman.

The first order of business is the approval of the minutes from the May 21st and July 17th, 2008 Committee meetings, which have already been distributed.

Is there a motion for approval?

COMMISSIONER FRIEDKIN: So move.

COMMISSIONER BROWN: Commissioner Friedkin. Do I have a second?

COMMISSIONER BIVINS: Second.

COMMISSIONER BROWN: Commissioner Bivins, second. All in favor, please say aye.

(A chorus of ayes.)

COMMISSIONER BROWN: Any opposed?

(No response.)

COMMISSIONER BROWN: Hearing none, the motion carries.

Committee Item Number 1 is the Land and Water Plan Update. Mr. Smith?

MR. SMITH: Mr. Chairman, just in the interest of time, I'm going to go ahead and defer my comments to the presenters, today. Everybody's going to make presentations consistent with key goals in the plan, and so I'll look forward to your review and discussion on those items. Thanks.

COMMISSIONER BROWN: Thank you.

Committee Item Number 2 is the Financial Overview, Ms. Mary Fields.

MS. FIELDS: Good morning, Commissioners. For the record, I'm Mary Fields, Chief Financial Officer ‑‑

COMMISSIONER HOLT: Good morning, Mary.

MS. FIELDS: — and I'm here to provide the Financial Overview.

I've got several items to cover this morning with you. I will start off with the Revenue and Budget Status Report for Fiscal Year 2008. I'll review the Proposed Fiscal Year 2009 Operating and Capital Budget, update you on our Legislative Appropriations Request, or LAR update for fiscal years 2010 and '11; and we'll wrap it up today with the annual review of the Budget and Investment Policies.

So let's go ahead and start off with the 2008 Revenue and Budget Status. When comparing the state park receipts for continued operations through June 30th, at $29.9 million we're up 10.4 percent, or $2.83 million over last year's collections at this same time.

All of the categories of parks receipts exceed the prior year at this time. The most notable are in the entrance fees and facility fees. And I really just have to tell you, I'm really proud of the state parks' revenue performance here, it's just outstanding.

There were very high expectations placed on us by the Legislature, and the parks are certainly meeting the challenge, and I just really want to publicly congratulate them for that; it's just going extremely well.

Our boat revenue as of June 30th is $16.6 million. This is down just a couple of percent by $295,000 compared to last year at this same time. The decline in revenue is related to ‑‑ mainly to boat registrations, and that's down by almost 4 percent. But the revenue for the titling and the sales tax is actually up.

We do continue to transfer 15 percent of the registration and titling revenue to Fund 64, and that amounts to over $2.1 million based on revenues through June.

Our license sales revenues are also up as of the end of June by 2.9 percent or $2.4 million, totaling $87.1 million. All categories of revenue are higher than the previous year except the resident hunting is slightly down, and other items are also slightly down.

Just in correlating and looking at the number of licenses sold, at $2.78 million we're up 6.5 percent as of the end of June. As you can see detailed there on the side of the slide, hunting is slightly down, by 0.8 percent; fishing is up by 9.1 percent; combo sales are also up by 2.9 percent.

We have talked about this earlier in the year; I think maybe some of the hunting numbers, the license population may be heading more toward combo-type licenses versus just hunting. So ‑‑ I'm seeing an offset there.

When comparing our 2008 revenue collections as of the end of June, to our annual revenue estimates we continue to do well, and we should meet our revenue targets. With 83 percent of the fiscal year elapsed, you can see we've collected 98.9 percent of our Fund 9 Game, Fish and Water

Safety Funds; 83.6 percent of our state park funds; and the local park fund is at 88.9 percent. And then the other categories, at 187.7; there is one fund in there that is doing exceptionally well, and that's driving that percentage — it's the Artificial Reef Fund.

Moving into the next area here, our overall budget has increased by over $11.7 million since March. And that takes our budget to $461.2 million. Budget adjustments made during April, May and June are summarized on this slide, and the largest category of adjustments relates to the increase of the budget in relation to the riders, and that's basically, we did bring in our additional revenue above the Comptroller's biennial revenue estimate there, according to Rider 27. So you're seeing that adjustment to the budget.

Another sizable adjustment was just to carry forward some unexpended balances, most of that related to grants, and then there were also a couple of pretty large grants that we brought into the budget.

In reviewing our 2008 budget versus expense, we have 39.5 percent of the budget remaining, and this is with 17 percent of the fiscal year remaining. Most of our operational budget categories are basically on track; there are two notable budget variances that have caused our expenditures to be a bit lower and behind budget.

First, the capital construction projects, primarily relating to state park critical repairs are behind, due to the delay of the issuing of the bonds, and I believe Steve will be giving you an update on the progress of all of that a little bit later in the Finance Committee presentation.

Secondly, a large amount of local park grants and other and other grants are still in process and were being evaluated, and tomorrow you'll see several of those grants up for action by the Commission.

That concludes the 2008 status update. If ‑‑ are there any questions there, before I move ‑‑ yes?

MR. SMITH: Commissioner?

COMMISSIONER PARKER: On the Artificial Reef numbers, can you tell me what that is, the amount?

MS. FIELDS: The ‑‑ just one moment, please. Well, I had that number right in front of me and now I'm having trouble finding it.

The collections on the Artificial Reef are at $3.6 million, and I believe some of that has to do with donations and grants that were brought into that fund ‑‑

COMMISSIONER PARKER: It has to be what?

(No response.)

COMMISSIONER PARKER: What?

MS. FIELDS: The collections in the Artificial Reef Fund are at $3.6 million ‑‑

COMMISSIONER PARKER: I got that part.

MS. FIELDS: — and that, I believe that it's due to some donations and grants that have been placed into that fund.

COMMISSIONER PARKER: Good. Are those funds, they have strings on them, like, have to be matched or anything like that?

MS. FIELDS: I believe most of the Artificial Reef funds are primarily donations, and they do have to be utilized in accordance with the requirements of that fund for Artificial Reef. I don't have a lot of specific detail. Robin?

MR. RIECHERS: If I could, for the record. Robin Riechers with Coastal Fisheries Division. No, Commissioner Parker. Those don't ‑‑ those donation funds aren't required for us to get a match to be able to expend them in any way; we can go ahead and use that money without any sort of match requirements.

COMMISSIONER HOLT: Okay.

MS. FIELDS: Thank you, Robin.

COMMISSIONER BROWN: Any other questions?

MS. FIELDS: Any other questions?

(No response.)

COMMISSIONER BROWN: Go ahead.

MS. FIELDS: Then we will go ahead and move into the 2009 operating and capital budget. On the agenda for the budget today, I will recap our process of preparing the operating budget, review the financing for the budget, provide a few summaries, review the capital budget, recap our budgeted full time equivalents or FTEs, and we'll wrap it up with covering a few key riders.

And just also to note, we did have a budget workshop in July where we covered several of these numbers with members of the Commission, and none of the numbers have changed since that workshop. So just for you all's information, we're still right on target with where we were in July.

As far as the process, it's similar to what we've done in prior years, I'm just going to touch on a couple of key points.

We did use the appropriations received via the 80th Legislature as our starting point. With the appropriations that we received, we were able to establish the operating budgets at or pretty close to 100 percent of our 2008 base budgets for the divisions.

Next, we allocated exceptional item amounts that were approved via the Legislature, and we allocated those to the appropriate divisions.

The divisions that support our agency need to be correctly balanced in funding for our Fund 9 activities that support the resource divisions, and law enforcement versus our Fund 64 activities, that support state parks.

We do have a methodology and a process for distributing and balancing those funds appropriately.

As we have done in past years, the divisions were given the opportunity to request additional funds or supplementals for their budget if the funds came with their own appropriation authority. And a couple of examples of those types of funds would be the federal funds or donations or other types of appropriated receipts.

All of the supplementals that were requested by the divisions were reviewed by budget staff, and approved by executive management prior to adding them to the divisions' budgets.

The last point I'll make about the overall process is that we did budget the capital items at 100 percent of the funding that was available, we do have the authority to increase those line items up to 125 percent, and we may elect to add some capital at some point during the fiscal year if additional revenues permit.

So let's review how the budget was financed. As I mentioned, we start with the amount of appropriations that we received from the Legislature via the General Appropriations Act. You'll recall from last year's discussion, this session was a bit more complicated because some of the appropriations were contingent on bills passing or a certification of funds.

And the funds for the bills were actually outlined, the bills are outlined there in riders that appear at the back of the General Appropriations Act in Article 9. The bills did pass, and most of them resulted in additions, but there were a couple of reductions to the budget. And they include — as you can see they are House Bill 12, relating primarily to state parks; House Bill 15, for data center consolidation; Senate Bill 3 for water resource management; Senate Bill 997, relating to what we call the Party Boat Bill; SJR 65 and Senate Bill 2033 relating to the voter-approved bonds.

The state employees' salary increases were also contingent on Comptroller certification of the funding, and she did certify those funds.

We also have 36 agency-specific riders that limit or direct how our funds can be spent. I'll touch on a few key ones a little bit later in the presentation. And finally, we are capped at the amount of full time equivalents, or FTEs, at 3100.1.

This next slide kind of just gives you the numbers and crosswalks what we just talked about. We do start off with the $251.5 million that was in the Act. As I mentioned, all those contingent bills passed, and the total of those bills amounted to a $28.7 million increase to the budget.

The state employee pay raises ‑‑ and this is the 2 percent on top of the 2 percent from fiscal year 2008 ‑‑ those pay raises were $5.7 million. We added federal funds of $7.8 million, and you will see this category increase over the year as additional federal agreements get signed. And we are adding unexpended balances of $76.2 million for construction and land acquisition; I do have a slide on capital a little bit later that will detail out that number for you.

And finally, we're estimating our benefits and setting those funds aside for the Employees Retirement System. And that's for a total of $39 million. And then there were a few other adjustments, resulting in a decrease of $6 million for a grand total of our operating and capital budget at $402.9 million.

This is a view of our method of finance for the budget. In looking at this slide I think it's important to note that we earned 42 percent of the funding for our budget. That includes our Fund 9 Game, Fish and Water Safety Fund at 31 percent, and Fund 64, our state park revenues at 11 percent.

The remaining funding comes from general revenue you can see, at 22 percent, our other general revenue dedicated accounts at 4 percent; the largest of those is our local parks grant fund. And then the "other" category at 5 percent, and this section includes basically appropriated receipts. A large part of that are land sale proceeds that we have from Eagle Mountain Lake and the sale of the Game Warden Academy. Federal funds are at 15 percent, and bonds are at 13 percent.

In moving on and just looking at a couple of different ways to summarize the budget, this first one here gives a broad overview of our budget by object of expense. And to give you some perspective on the size of each category, I have included the percent of total. Our salaries and benefits are at about 45 percent of our budget. This typically looks more like 50 to 60 percent, but because of the size of the capital portion of our budget, it has driven that percentage down a little bit, in looking at the overall total. Our operating has really just increased slightly from the prior year, and as you can see, the grants ‑‑ they're at 5.4 percent, the capital budget and related debt service is 27 percent of our budget.

These next two slides highlight our budgets by divisions. You can see again the divisions' budgets in millions, and the percent of total agency budget. Just to give you a sense of the size of each of the divisions. This is how the agency really operates with the budget.

Each division has a detailed budget that they manage. I'm not going to cover all the numbers here, but I do want to point out that we do continue to run pretty tight on our administration. All of the administrative divisions combined are less than 10 percent of the total budget.

And in your Commission ‑‑ this is the other half of that picture right here, in your Commission packet for tomorrow's actions, you do have a one-page summary at Exhibit B, which does highlight the divisions' budgets by object of expense. And that's a pretty good summary to see really how the budget got distributed among the divisions. It also includes FTE counts, which we're going to be covering here in a minute.

There is also a summary of the agency's budget at Exhibit A, and this is by strategy. And we have 28 strategies, so I didn't put those on the slides, but that's really how the Legislature views our budget, and that is in your Commission packet for approval tomorrow.

That table also, or that exhibit also, includes the method of finance, which was on that pie chart that we looked at earlier.

In reviewing the divisions' budgets, you may have noted the department-wide budget category, which was pretty sizable at $22.4 million. I have just kind of outlined what the components of that budget are; you can see the largest is debt service. We do have construction in our Fund 9 divisions that we have not distributed yet among the divisions; all those other categories really are categories that support the agency overall, and so we just roll them up into what we call department-wide.

Moving into the capital budget, here I have just provided an overview by category, and in looking at this, the first column are the base amounts that we were able to add into the budget. And then the second column are additions via Rider 20; this rider allows us to grow our capital items for federal or other funds that are designated for a specific capital purpose. Finally, there is unexpended balances there that are going to be carried forward from fiscal year 2008. The land acquisition again relates to the sale of Eagle Mountain Lake, and then a good portion of the construction relates to the un-issued bonds for state park repairs, critical repairs and that's at $44.1 million of that total. So that takes us to a total capital budget of $101.1 million.

Next, recapping our FTEs, the gold text there shows our FTE cap; you can see, it's the same as it was last year. And then in the white text, I'm showing how we actually budgeted those FTEs for 2008 and 2009. We do budget our FTEs above the cap limit because we don't have all of our positions filled all at one time. This allows us to post additional positions when we have positions vacant.

We will watch to ensure that we don't exceed the FTE cap, and these next couple of slides again just show you kind of how those FTEs are funded among the divisions, and ‑‑ basically here, what I will say is, our state parks are ‑‑ you know, it's not surprising they're the highest count at about 40 percent of our FTEs; law enforcement is right behind here at 20 percent. The resource divisions combined represent about a third of our FTEs, and the remaining 12 percent goes to administration and communications divisions.

COMMISSIONER DUGGINS: Mary?

MS. FIELDS: Yes, sir.

COMMISSIONER DUGGINS: How is that cap set, and why?

MS. FIELDS: The Legislature actually sets the FTE cap, and I think there was some concern in prior years that maybe we had too many state employees on record, and so the Legislature elected to look at the agencies and actually cap the amount of full time equivalents.

So they literally, for us to be able to add additional FTEs, if it's already established within the biennium as this is, we have to request to exceed the cap. The Commission actually has to make the request to the Legislative Budget Board and the Governor's Office.

We do have an opportunity to ask for additional FTEs during the Legislative Appropriation Request process, and ‑‑ in relation to exceptional items, and we do have a request for additional FTEs in some of the programs. But it's basically a legislative-type control, I believe.

In covering the key riders, we do have several of them, I'm not going to go through these one by one. I did want to just list the audit-related items that we have. And just mention that we did receive a lot of additional appropriations this biennium, and we did receive directives on how that money could be spent, as well as expectations that audit recommendations would be implemented, studies would be conducted, and reports would be submitted to the oversight agencies.

As you know, in fiscal year 2008 we've submitted several of those plans and studies which required approval from the Legislative Budget Board and the Governor's Office prior to the release of funds for a specific purpose. And we'll continue to submit reports, and there's still a couple of studies outstanding that we will perform in fiscal year 2009.

Moving into ‑‑ the next riders here are just a few key ones for our agency specifically. Rider 19 allows us to carry forward unexpended balances from the sale of the Game Warden Academy; it directs us to use those proceeds on the new academy, and we are doing that.

Rider 20 I mentioned during the capital budget. It basically exempts us from capital provisions for gifts, grants, inter-local and federal funds that are specified for a specific capital purpose, excluding land acquisition.

Rider 22 appropriates all balances and revenues from the sale of TPWD lands to TPWD.

Rider 23 requires us to implement recommendations from the Legislative Budget Board that they provided to us during a review that was conducted about a year and a half ago, I believe.

Finally, Rider 24 requires us to collect usage statistics such as number of hours of operation on all of our major equipment and to report to the Legislative Budget Board and Governor's Office no later than October 1st of the year for the preceding fiscal year.

And that concludes the operating and capital budget part. Are there any other questions before I move into the Legislative Appropriation Requests?

(No response.)

MS. FIELDS: Okay. Here we go. We pushed, "Send" yesterday, by the way, Commissioner Holt, at about 6:45 last night, we did push "Send," and we ‑‑

COMMISSIONER HOLT: Did you get it in?

MS. FIELDS: — did close.

COMMISSIONER HOLT: Good.

MS. FIELDS: Today, we will be sending all the official supporting documents and that sort of thing via email, and it will go to print and we'll have it distributed as required, and it will actually be out on our website by August 25th. So ‑‑

COMMISSIONER HOLT: Okay. I signed it today.

MS. FIELDS: — yes, you did. Thank you very much.

(Laughter.)

MS. FIELDS: So ‑‑

COMMISSIONER HOLT: Yes, we do. Yes.

MS. FIELDS: — as we move on here, I just want to make a couple of comments about the baseline request for fiscal year '10 and '11. It is based on projected expenditures from fiscal year 2008 and our fiscal year 2009 operating budget, which we just reviewed.

Any amounts that we need to request above our base are requested as exceptional items; we do have some of those, which I'll review.

We did get directions this time to complete the LAR with 100 percent of our base amounts, but they did require a special schedule that lays out a 10 percent reduction of general-revenue-related funds, and again ‑‑ and we'll cover a little bit about that and again the LAR is due today.

So, ta-dah, there it is, a very high-level view ‑‑

(Laughter.)

MS. FIELDS: — of our Legislative Appropriations Request. The base request totals $643.9 million, and our exceptional items total $131.9 million for a total request over the biennium of $775.8 million. And that is a very high-level view of a very detailed document.

So next, let's talk a little bit about the exceptional items. They are listed here in priority order. Again, note that these totals are biennial totals, and as I go through this, so ‑‑

Our highest priority exceptional item is to continue our salary equity and total compensation package for the agency. We will be compensating the remaining positions that need salary equity adjustments. We'll be dealing with some of the compression issues that arise when adjustments are made and positions overlap that didn't get an adjustment. And finally, we'll be looking to activate a merit program.

The second exceptional item deals with increased operational costs due to rising prices of fuel, commodities and other service items.

The third item is to continue our capital repair program for all TPWD facilities.

Our fourth item requests funding and FTEs for several programs to expand public access for quality outdoor recreational opportunities on public and private lands and waters.

The fifth exceptional item requests funding and FTEs to improve compliance with the new fiscal controls in state parks and to meet other critical park services needs, just to make sure those are being met while these fiscal controls are also being put in place.

The sixth exceptional item is to support information technology initiatives and to deal with increasing data center consolidation costs.

The seventh item funds the cost of deploying a turnkey computer system in our law enforcement vehicles.

The eighth item is for land acquisition and development to improve access to the outdoors as laid out in our Land and Water Resources Conservation and Recreation Plan.

And finally, the ninth exceptional item is to support the Governor's Border Security Initiative by placing more game wardens on the Texas border, along with necessary capital equipment, and funding their operational needs.

So that is also a high level view of our exceptional items. We will provide more detailed information to the Commission in ‑‑ within hearings, and obviously it is in our request as well in more detail.

Next here ‑‑

COMMISSIONER BROWN: Mary, a question.

MS. FIELDS: Yes, sir.

COMMISSIONER BROWN: Under Governor's Border Security Initiative, is that primarily for equipment and other additional items, or what ‑‑

COMMISSIONER HOLT: Additional game wardens.

MS. FIELDS: There are ‑‑ I know in the second year of this request there will be 25 additional positions, and then there's also, I believe, a helicopter and a few boats that are included within that request.

COMMISSIONER BROWN: Okay.

MS. FIELDS: And then just operational and support needs ‑‑

COMMISSIONER BROWN: Right.

MS. FIELDS: — to go along with those wardens.

COMMISSIONER BROWN: Okay.

MS. FIELDS: Okay?

COMMISSIONER BROWN: Thank you.

MS. FIELDS: This next slide does outline the general revenue-related reduction amounts that were targeted on the 10 percent reduction schedule. The total reduction amounts to $47 million, with general revenue dedicated at $32.6 million, and general revenue at $14.4 million.

We did outline 17 different items on the reduction schedule, so I'm not going to cover that entire list with you today.

I thought what I would do is just mention that our ‑‑ kind of our overall strategy for that reduction in deciding how we put programs on the list, and basically the key strategy here was to minimize the impact on our core and high-priority operations as much as possible. And also we wanted to ensure that our focus remains on our Land and Water Conservation Plan initiatives and make sure that those priorities can still be fulfilled. So, you know, we've completed the information as required, and we'll see what happens during the session with that schedule.

And that concludes the LAR update. Are there any questions there?

(No response.)

MS. FIELDS: If not, this is the final segment that I'll be covering today. Annually, we are required to review the budget and investment policies; a copy of these policies again are included in your handout for action items for tomorrow's meeting. I'll touch on just a few key points regarding the budget policy.

Within that policy, the Commission authorizes the executive director to approve and execute necessary expenditures, budget adjustments and transfers. There are several different types of transactions that are detailed in that policy.

Budget adjustments, excluding federal grants and bonds that exceed $250,000 do require approval ‑‑ prior approval ‑‑ from the Chairman of the Commission and the Chairman of the Finance Committee. And as Ann mentioned in her presentation, we have made an addition to the budget policy. And this really is to improve our process of accepting and then budgeting donations.

We have added a requirement for the Chairman of the Commission and the Chairman of the Finance Committee to accept donations or gifts that exceed $500,000, or excuse me, $500, basically on a monthly basis. And by doing that, we can go ahead and budget those donations. We still will present all of those donations to the Commission for acknowledgment in every Commission meeting just as we do now. And I think this will be really a positive change for the various programs and donations associated with them.

Moving on to the investment policy, this policy really has not changed since the prior year, but as the governing body of this department you are required by statute to review this policy annually. All funds administered by Parks and Wildlife are required to be deposited in the State Treasury, except for the three funds that are highlighted on this slide.

I believe in the packet in your binder there, there is one fund that is showing up on your slide that I removed, and that's the Varner-Hogg State Park Trust Account. We did transfer that to the Texas Historical Commission, so it's not up on the slide in the presentation but I do think it's still in your book.

And while we're not required, all of these funds do really reside in the Treasury except for Operation Game Thief, and those funds are invested in CDs in several bank accounts.

Finally, here, all of the bank accounts must be authorized by delegated investment officers, and they must be properly collateralized. And there are also some specific reporting requirements that are also included in that policy.

And with that, that concludes my presentation. Are there any questions?

COMMISSIONER BROWN: Any questions by the Commission?

(No response.)

COMMISSIONER BROWN: Thank you, Mary. That was a very good presentation, and thank you for your ‑‑

MS. FIELDS: Thank you. I do want to say in closing before I leave the podium here, I do want to thank Lance Goodrum and the budget team that just did an outstanding job on pulling together the operating budget and the LAR this summer.

Also, Julie Horsley and her team, Julie just has been wonderful in helping us with the exceptional items, and some of her team helped with revenue collection schedules and riders and all that sort of thing, so ‑‑ they've just really worked hard this summer.

The divisions and their coordinators, budget coordinators, have provided a lot of information to us this summer to accomplish all of this, and I just want to thank all of them.

COMMISSIONER BROWN: A good team effort.

MS. FIELDS: Thank you.

COMMISSIONER BROWN: Yes, thank you.

If there are no further questions or comments, I will place the fiscal year '09 operating and capital budget and the budget and investment policy resolutions portions of this item on the Thursday Commission meeting agenda for public comment and action.

Committee Item Number 3 is the Internal Audit Report, Mr. Carlos Contreras is going to make the presentation.

MR. CONTRERAS: Good morning, Chairman Holt and Commission members. For the record, my name is Carlos Contreras. I'm the Director of Internal Audit.

Since our last Commission meeting we've been able to complete and distribute two reports on the parks. Round 2 of the park audits found that we had ‑‑ just one of the eight parks was fully compliant with procedures outlined in the fiscal control plan and the visitation reporting plan for the two large areas that we examined during the park audits.

Individually, for revenue collection and reporting, we had five parks that had implemented the new procedures, and three of them had delayed, actually delayed, implementation of some of the basic controls. The revenue processes still needed strengthening to prevent occurrence of fraud or theft, and most of the parks needed improvement in the internal control areas of supervision, and documentation.

On the visitation, collection and reporting side, we had seven of the parks reflected tabulation and recording errors, but most resulting in underreporting of visitation data.

Four of the park areas were considered large enough to have a possible impact on individual park visitation data during the audit period itself.

Now, to give a little context to Round 2, the audit time ‑‑ the records that we reviewed were in October, and the work ‑‑ the training and the workshops that were conducted were in September. So this was a month after the workshops were conduct.

COMMISSIONER HOLT: Carlos, can I stop you there? This is important so I need to have an understanding.

MR. CONTRERAS: Okay.

COMMISSIONER HOLT: Okay, it says, "Round 2, Park Audits."

MR. CONTRERAS: Right.

COMMISSIONER HOLT: In Round 1, did we get all the parks audited? And was that the goal? That's what I can't remember.

MR. CONTRERAS: No, sir. What we've done is, there were over 90 parks that we had to look at ‑‑

COMMISSIONER HOLT: Right.

MR. CONTRERAS: — we're conducting eight rounds, during the fiscal year.

COMMISSIONER HOLT: Okay.

MR. CONTRERAS: And what we've done as far as actual completion and distribution of the reports is, through Round 3 and actually as we speak, I think that the Round 4 audit report has been forwarded to Carter and executive management for their review. So we're about halfway through the process ‑‑

COMMISSIONER HOLT: So each round is just, so many parks in each round.

MR. CONTRERAS: Yes, sir.

COMMISSIONER HOLT: Not going back through ‑‑

MR. CONTRERAS: No, sir.

COMMISSIONER HOLT: — it's the first audit of that particular park.

MR. CONTRERAS: Yes, sir.

COMMISSIONER HOLT: Okay, I got it.

MR. CONTRERAS: Round 5 is the one where we went back and had some follow-ups on some of the parks we did earlier.

COMMISSIONER HOLT: Okay. Just so everybody on the Commission understands, I mean, this will be one of the major issues that we'll have to have a discussion about going into January '09 with the Legislature is the audits, the accounts, what showed up in the audits, because that's where we get a lot of questioning in the ‑‑ kind of last Legislative Session. So, you know ‑‑

VOICE: Okay.

COMMISSIONER BIVINS: Mr. Chairman?

COMMISSIONER HOLT: Yes, sir?

COMMISSIONER BIVINS: When will the ‑‑ when will all of the audits be completed?

MR. CONTRERAS: Well, all of the field work has been completed through eight rounds and what we looked at was 82 parks. However, the review process hasn't been completed; we're halfway through there. I was able to work with the LBB analyst and work through the SAL to discuss the intent of the rider and what we need is representation, at least by one auditor, in each of the regions.

So what I'm doing is getting some of the other auditors to participate in the review process, and that ought to bring the Rounds 5 through 9 to completion much faster.

What was happening is the 14 field auditors, all their work was being reviewed by the two audit managers here ‑‑ well, in Austin, and that was a little bit of a bottleneck.

COMMISSIONER BIVINS: Right.

MR. CONTRERAS: And the review process takes some time.

COMMISSIONER BIVINS: So we will have a full data set prior to the beginning of the Legislative Session?

MR. CONTRERAS: Yes, sir.

COMMISSIONER BIVINS: Okay. Thank you.

COMMISSIONER FALCON: Carlos, I'd like to ask a question in terms of, you guys get really specific with even pennies ‑‑

MR. CONTRERAS: Yes, sir.

COMMISSIONER FALCON: — and sometimes an audit will show 20 problems that maybe will amount to problems that are small in size, but in the report they come out as problems.

If you have ‑‑ from what you've seen so far, if you had to take a dollar amount of what the state is missing out in revenues, through your audits, a round, hard figure would be?

MR. CONTRERAS: Well, that's a very difficult question to answer since each of the parks is specific, you know, has specific amenities and different entrance fees, things of that nature.

And so it's sort of hard to estimate what we're lacking. What I can tell you is everything that's brought forward to the reports has been seen and is a repetitive thing as opposed to nickel and dime-ing people in the report, and I understand where you're coming from.

What we do is, when we go through, if there's an instance of perhaps, you know, no double-entry or no signature, things of that ‑‑ and the amount is immaterial for that park, we usually don't bring it forward to the report.

COMMISSIONER FALCON: If somebody asked us, like the Chairman was concerned ‑‑ if somebody asked us if we're losing millions, are we?

MR. CONTRERAS: I'm sorry, I didn't ‑‑

COMMISSIONER FALCON: If somebody asked us, are we losing millions, are we?

MR. CONTRERAS: No, I wouldn't characterize that loss as being that great.

COMMISSIONER HOLT: God, I hope not. We're in big time trouble, aren't we, Carlos?

(Laughter.)

COMMISSIONER FALCON: So at least we got it narrowed down to less than.

MR. CONTRERAS: Oh, right. I think so.

COMMISSIONER HOLT: A lot of our issues, Tony ‑‑ or Antonio, were lack of consistency across the parks. So a big part of what we've done, besides bringing the auditors aboard, was the fiscal controls and training that was put in place.

And that's just kicking in, so a lot of people are ‑‑ I mean, this is a learning process, literally on the, as ‑‑ OJT. And so I think Carlos and his group have done a good job that really ‑‑ I mean, Carlos is new in the job. Except for the two auditors that have been here for quite a while, everybody else is new.

And so ‑‑ and then the fiscal controls that have been put in place in all the parks are all new to the operations of the parks. So we're in the midst of all of this, literally churning along, and it's truly a learning process.

MR. SMITH: Commissioners, if I could add something to that, I don't think the issue so much is revenue collection, but it has to do really with segregation of duties and also just documenting all of the decisions and all of the transactions that are happening inside the parks.

Much of our processes are manual in nature right now; we are in the throes of developing a new revenue documentation and visitation system that you've heard a little bit about, called TxParks, that we hope to roll out in the late winter time period and so we're hoping certainly that automation is going to help that.

But I think, you know, to be fair, what Carlos is saying is there are a few sort of patterns that we're seeing throughout these audits that we need to work to address. But revenue collection and those problems at the magnitude that you're talking about is not the issue.

COMMISSIONER FALCON: And so when the state asked us to do this, they really weren't concerned about revenue, as much as making the process more uniform throughout the state ‑‑

MR. SMITH: Yes. I think they were ‑‑ had some concerns about revenue and whether we were documenting all the visitors coming in and we were collecting revenue for all of those visitors, and then are we consistent in the waivers we would grant to ‑‑

COMMISSIONER HOLT: How we did it.

MR. SMITH: — groups that would come into the park. So I think to be fair there was some concern about that.

COMMISSIONER FALCON: Okay.

COMMISSIONER HOLT: But not at the numbers that you're talking about. I think it was much more the credibility relative to consistency across the system, I think was the bigger issue.

COMMISSIONER BROWN: Thank you, Carlos.

MR. CONTRERAS: All right. In Round 3, we found that of the 11 parks that we looked, none of them were compliant. On the revenue side, we had nine parks that had implemented the procedures and two parks still hadn't completely implemented all of the basic controls.

The revenue processes still needed strengthening, to prevent occurrences of theft or fraud, and all of the parks needed improvement in internal control areas of supervision and documentation.

On the visitation side, three of the parks collected and reported visitation data correctly during the test period. Five of the parks reflected tabulation recording errors that were underreported by an insignificant amount. However, there were three parks that had visitation errors resulting in underreporting that were considered large enough to be brought forward to the report.

And when we looked at the information that we examined at the time, that was from December. So this is a three months down the road from the workshop dates that were in September.

COMMISSIONER BROWN: Let me ask you, from a workshop standpoint, how often are we going to have this type of training, you know, for the park system? It's obvious, I mean, we've had a round of workshops, we've still got a lot of work to do to get to where we need to be, and so on what kind of ‑‑ going forward, as far as additional training, what are we going to be doing?

MR. CONTRERAS: Well, currently what we have is, in the revenue section of the parks area, there is a resource ‑‑ there's individuals that can be contacted for guidance and direction, specifically related to the fiscal control plan.

And what we plan to do or we're going to participate in as an agency is the training for the Texas Park Systems that Carter had mentioned just a minute ago; that's going to be implemented sometime in the spring.

Now, that automated system will reduce the amount of actual manual work that has to be done in a number of the logs. It will create a much better and stronger audit trail for us and will also provide, you know, a little more security as far as the stores and the lease concessions, a lot of that revenue that comes in through those manners.

COMMISSIONER BROWN: Commissioner Parker?

COMMISSIONER PARKER: Carlos, as you are making your way through these parks, on Round 2 and 3, 4, are you doubling down? Passing that information along to other state parks, we found that Park A and Park C were doing thus and so, and you've got to correct this, and be sure everybody else is doing this.

MR. CONTRERAS: Yes, sir. All the reports ‑‑

COMMISSIONER PARKER: So that when you get to the end, hopefully, you will have hopefully a lot of parks already in compliance with the changes that we are looking for.

MR. CONTRERAS: Yes, sir. We share a lot of the findings with the regional directors of the parks, and I know, to give you an example, one of the regional directors has ‑‑ the other park superintendents go and at different time audit the parks within her region for this compliance. And they do it independent of ourselves, and so they share a lot of that.

The other thing that we do is, our auditors, since they're in a region, they'll go to different parks within the same region, and then share that information through the regional director, of what they've found.

But again, all of our reports are a matter of public record, so it's a, you know, we can send them out to whoever we need to.

COMMISSIONER PARKER: What you're saying is, it's being done, bottom up. What about, top-down?

MR. CONTRERAS: Well, again, I've provided ‑‑ we provide a lot of this information to executive management, and we allow them to review our reports, prior to any of the distribution. So I think all of the concerns that are out there for the ‑‑ in the specific areas, you know, we've noted that.

MR. SMITH: Carlos, can I get Scott just to address that in terms of sort of, he and Walt's handling of this?

MR. BORUFF: Commissioners, for the record my name is Scott Boruff, Deputy Executive Director for Operations. To kind of answer several of the questions, Commissioner Parker, yes, it is a top-down effort as well as a bottom-up effort. We worked closely with Carlos and his staff early on in the process to be sure that as they go to one park, and find different trends and patterns, that that information is passed on to Walt Dabney as the Director of the Division, and the regional directors, who of course are the main contacts out in the field, as well as sharing that with the local park staff.

And so in terms of the specific question, yes, we are looking at that. I would also, relative to a couple of the other questions, remind ‑‑ and particularly renew the new Commissioners' recollection that when we went through the State Auditor's process there were four main findings, there:

Financial controls, fiscal controls were certainly their main concern. Visitation and revenue were the second set of concerns. The third was the way we do capital programs, and the fourth was park management.

But the two main areas that these audits came back to us in were in fiscal controls and revenue and visitation measurements. What I can say is that, while what you see there says none of the 11 parks ‑‑ I'm just using that particular slide, were compliant, I think what you would see what I have been seeing in the reports that come back to me and are passed on to Mr. Dabney, is continued improvement.

Just because those parks didn't get 100 percent compliance doesn't mean they were totally out of compliance in terms of, nothing was happening right. It is a relatively new process, as the Chairman has mentioned. I think there's a very strong commitment in the state parks division from the top down, to make sure that this is corrected.

In the meantime, it is significant workload and kind of a resource issue right now because all these processes are manual. Many of the things that are out of compliance that I have seen tend to be mis-documentation, things that weren't documented right in this bulk of paperwork that's having to flow around.

The new TxParks system, which several folks have referenced here, should be online, we're hoping, right around the beginning of the Session if not before, and we are hopeful that that will relieve the burden on the staff, and it will also help some of these inadvertent ‑‑ we hope inadvertent ‑‑ documentation errors, decline.

MR. SMITH: Commissioners, if I could just add one thing to it. I've asked, with Carlos and Scott and Gene and Walt, to get together after the Commission meeting to sort of talk about where we are, the sort of recurring patterns that we're seeing in the audits, and what else we can do to help address those, and alleviate those, problems going ahead. So I do want you to know ‑‑

COMMISSIONER PARKER: Do you understand what I'm talking about?

MR. SMITH: I absolutely understand. Absolutely.

COMMISSIONER PARKER: So that ‑‑

MR. SMITH: Yes.

COMMISSIONER PARKER: — you know, the burden begins to diminish before we get to the end, because we've found these problems up here. Are we communicating on down the line ‑‑

MR. SMITH: Yes.

COMMISSIONER PARKER: — get these corrected before we get there.

MR. SMITH: Absolutely. The lessons learned; there's no doubt about it. And I ‑‑ that's critically important, that we're learning from mistakes and that we're having early on ‑‑ and making sure that other parks have a chance to address those. No, your point is well-taken.

MR. CONTRERAS: Well, in support of Scott's statements ‑‑ and this particular slide is a little dated, we've already completed all of the review and actually the report is ready for distribution. In Round 4, we found that none of the 11 parks that we took a look at were compliant.

But we did find incremental improvements in revenue collection and reporting, individual ‑‑ we had three parks that exhibited a high degree of implementation, that had a minimum amount of errors that we found, that didn't ‑‑ that never made it to the report.

Four of the parks had not implemented still some of the basic controls related to the revenue collection and reporting. We still found that revenue processes need strengthening to prevent any occurrence of risk or theft, and internal controls that the park-operated stores also needed improvement.

Now, as far as visitation, four of the parks collected and reported the data, four of the 11, correctly during the test period. And we found that at three parks there were tabulation and recording errors that resulted in misreporting visitation data by an immaterial amount that never made it to the report. And ‑‑ but four of the parks actually had errors resulting in both over- and underreporting of visitors that was large enough to be considered ‑‑ to be included in the reported.

COMMISSIONER HOLT: I'm going to stop you there, Carlos. So, some would overreport and some would underreport? In other words, there was not a consistent one way or the other?

MR. CONTRERAS: Yes, sir.

COMMISSIONER HOLT: So it's not a system problem then; it's an operational problem.

MR. CONTRERAS: Right. And we have to take into consideration the records that we reviewed at this time were from February.

COMMISSIONER HOLT: So that's right after the training, then. Again ‑‑

MR. CONTRERAS: Yes, the ‑‑

COMMISSIONER HOLT: — okay.

MR. CONTRERAS: — first, Round 2 was in October.

COMMISSIONER HOLT: Yes.

MR. CONTRERAS: Round 3 was in December, and Round 4 is from February. But ‑‑ and I can't speak definitively, but when I've talked to the audit managers, they've seen in the review process that's going on for these later rounds that there has been an improvement, you know, in the implementation of the controls.

COMMISSIONER FALCON: Mr. Chairman?

COMMISSIONER BROWN: Yes?

COMMISSIONER FALCON: Yes, I think like when ‑‑ on some of the slides here, when you say that none of the parks that were audited were compliant, you probably mean none were 100 percent compliant.

MR. CONTRERAS: None were 100 percent compliant. That's ‑‑

COMMISSIONER FALCON: But within that, there is some good. And I think ‑‑ I'd like to see some of the good also in some of the slides versus, "none were compliant" which may send the wrong signal to people that may not fully understand what those lines mean.

I know that ‑‑ when Medicare does an audit at a nursing home, if the nursing home gets gigged for not giving a vitamin on time it's very different than if they didn't give a blood thinner on time.

Two totally ‑‑ it's reported the same way, but with two very different implications.

MR. CONTRERAS: Uh-huh.

COMMISSIONER FALCON: And so maybe as time goes on we can develop a system on the severity of scores and say, "Two scored very bad, two scored okay and two scored substandard," or some sort of nomenclature ‑‑

COMMISSIONER BROWN: Yes.

COMMISSIONER FALCON: — where it's very hard for everybody to do 100 percent.

COMMISSIONER BROWN: Right.

COMMISSIONER FALCON: Because nobody will ever get to 100 percent. Especially with these guys that count pennies.

(Laughter.)

COMMISSIONER BROWN: That's a good point ‑‑

MR. CONTRERAS: Well, we can ‑‑ I can certainly discuss with Carter any changes that we need in our reporting structure, and, you know, we can take that into consideration. As long as they fit with our professional standards, I don't have any problem with changing any of the reporting.

Rounds 5 through 7, the field work actually Round 5 through 8 all of the field work has been completed, and the work papers are in the review process for now. And like I said, we have redirected some of our resources to participate in the review process, so that we can get the ‑‑ Rounds 5 through 8, those reports out, before the ‑‑ hopefully before the beginning of the Session.

The last one that we did was Round 8. It consisted of 13 audits. What we did is, we've ‑‑ in a discussion with Carter and the Deputy Executive Directors, we have decided to scope out 11 of the parks that didn't have any revenue, or relied on donations, or were below a certain threshold that we had all talked about previously.

So what we did for the last round was, we took the last ‑‑ the final nine parks that hadn't been audited, and what we did is, we rolled in two follow-up audits, two from Round 1 and two from Round 3, to get an idea of whether in that interim there they had implemented the processes and there was an improvement in what we saw.

Additional audits that we're working on, two of them are concession items, Cedar Hills State Park and Eisenhower State Park. Both of those we expect to release a report in the first quarter of FY '09; we're in the process of getting our final comments and responses from management.

We're going to conduct an audit of the Central Reservation Center for the State Parks, but we ‑‑ what we've done with that is done our planning, and we're going to go ahead and carry it over into '09 because the implementation of the Texas Parks System that's coming in the spring is going to affect the process as to the way they do business. So we're just going to hold off and see what changes occur to their basic processes as a result of the implementation of that system.

And one other audit that we're working on, and we're ‑‑ actually we've nearly completed ‑‑ is a sand and gravel Audit, and we are looking at Richmond Materials and Brazos Sand. And they've had some problems with payment, so we're up to about $130,000 that we found that we'll recoup for the agency.

We have some advisory projects that we've participated in. One of them ‑‑ I guess the most important one we've had lately is being the liaison with the State Auditor's Office and any external audit or oversight agencies.

I'm a member of the Advisory Committee for Information Technology within the agency; we also participate on the Texas Parks System Management Group. I've been involved to a certain extent with the Project Business Information System development, and I'll also work with IT on the data consolidation services by attending meetings and providing comments, and providing any guidance that I can.

We've had one investigation that had to do with Recreational Grants, Internal Affairs asked us just to look at some of the records of a grantee. We've completed our examination, and we went ahead and shared the results with Recreational Grants and Internal Affairs and they're moving forward to complete that report.

Professional Service, one of the staff members, David Heater, completed his tenure as a board member and treasurer for ACFE, the Association of Certified Fraud Examiners, for 2008. And Mr. Heater also retired the 14th of this month after 35 years of service with Parks and Wildlife.

I completed my tenure as a board member and treasurer for the Information Systems Audit Control Association, and I was elected the recorder for the SAIAF Committee, which is a subcommittee of the State Agency Coordinating Committee.

We were able to get a group membership for the Institute of Internal Auditors for our whole staff. We discussed audit charter revisions and I've got a tacit approval from Carter to go ahead and proceed.

We'll have internal audit policies and procedures. We'll have that finalized here for the beginning of FY '09. There are discussions currently with Carter and management about a Fraud, Waste and Abuse Email Box, and possibly a phone number, to help augment what was RP 36 back in July 2004, which was the executive order to try and control fraud, waste and abuse.

And finally, what I do is, we monitor our CPE requirements, as people get trained, and that's part of our professional standards, and we also make sure that we report all the hours taken to the applicable oversight agencies.

Now, I'm open for any questions you may have.

COMMISSIONER BROWN: Commissioner Duggins?

COMMISSIONER DUGGINS: Was the ‑‑ were you given an audit plan to use in connection with the state park audits, or is that something that you and others in your department developed?

MR. CONTRERAS: No, sir. When I came on the job the audit plan for FY '08 had already been developed by Dennis, my predecessor, Dennis O'Neil, and they had already actually conducted the Round 1 audits and gotten the report out when I came on.

I've been here through Round 2 through the current activities.

COMMISSIONER DUGGINS: Well, going forward would you ‑‑ having gone through this, several rounds of using this plan, would you make or propose changes to it in the future?

MR. CONTRERAS: Yes. Yes, we've already been discussing that, and actually there ‑‑ what we plan to do is, in consultation with executive management, we're going to see whether we need to go do some follow-ups at some of the more problematic parks that we found; what we're also going to do is increase our coverage of the lease-concession audits.

Those are ‑‑ the concessions work in concert with the parks, and bring in revenue. And so we're also examining those. That's why we did the two at Cedar Hill and Eisenhower and we're going to go ahead and incorporate some of those.

In addition, I think there's going to be some work that we need to do at headquarters that covers the visitation and revenue areas. And that's going to be, you know, in concert with the management group for the parks at headquarters.

COMMISSIONER DUGGINS: Thank you.

COMMISSIONER BROWN: Any other questions?

(No response.)

COMMISSIONER BROWN: Carlos, thank you for your presentation. Appreciate the work you guys are doing and look forward to seeing improvement in all those areas.

MR. CONTRERAS: Yes, sir.

COMMISSIONER BROWN: Thank you.

MR. CONTRERAS: Thank you.

COMMISSIONER HOLT: Carlos.

COMMISSIONER BROWN: Committee Item Number 4 is an update on the Sunset Commission Review of the Texas Parks and Wildlife Department. Mr. Gene McCarty.

MR. McCARTY: Mr. Chairman, Commissioners, for the record my name is Gene McCarty. I'm Deputy Executive Director of Administration.

The item before you today is just an update on our Sunset Review process. Before I get started, I'd like to introduce several people in the audience here. Harold Stone with Texas Parks and Wildlife Department, our Director of Intergovernmental Affairs, is also serving as our liaison for the Sunset Review process.

And we also have with ‑‑ from the Sunset Commission we have Steve Hopson and Chloe Lieberknecht with us today, and you may have all had the opportunity to meet them at this point, or you will have, because they will be conducting hopefully some interviews with each of you through the process.

Today, I'd like to just kind of give you an update on where we are in the Sunset process and kind of give you a little bit of an idea of where it's going. To start with, just let me kind of review the timeline of Sunset.

The Sunset Review itself started back in August when we turned in our self-evaluation report. At that particular point in time, Sunset Commission began reviewing all the agencies that were in Sunset for this coming year and kind of set out a time schedule and we ‑‑ Texas Parks and Wildlife was placed into the second round of reviews.

So as you can see from August '07 until May '08, we were kind of in limbo as they reviewed a whole bunch of other agencies. They actually began their preliminary review process in May, with a preliminary overview of the agency, working with myself and Carter and Scott.

And then they ‑‑ and at the same time they went through and reviewed every division, and then from June ‑‑ in June through August they did secondary reviews, they went down to the programmatic level within each division.

In June and August they also began conducting site visits around the state. August through October, the period we're in right now, they will be conducting a lot of scoping meetings with constituents and leadership, and that's a period of time when they'll be talking with you and many of our constituents around the state, just getting an idea of what those people who we are serving think about the function and operations of Parks and Wildlife Department.

In November, they will be working on their staff report, basically making their recommendations or developing their recommendations; those recommendations will be presented to the Sunset Commission on December 16th and 17th of 2008 in the public hearing for Texas Parks and Wildlife Department.

And then on January 14th, 2009, the decision meeting of the Sunset Commission will occur, and that will basically be when the Sunset Commission adopts the staff report or makes any recommended changes to that report.

Just in summary of where we are, Sunset staff have held 36 different scoping meetings within Texas Parks and Wildlife Department, including an agency overview, nine preliminary divisional overviews and 26 secondary overviews, meeting with agency program staff.

They've conducted five field trips, visiting 14 Parks and Wildlife field locations, including Kerr Wildlife Management Area, LBJ State Park, Enchanted Rock State Natural Area, the Laredo Joint ‑‑ the Border Joint Enforcement Project, where they were involved in lake and land patrols; Falcon State Park, Chaparral Wildlife Management Area, A.E. Wood Fish Hatchery, Government Canyon, the Coastal Fisheries Field Station at Port O'Connor, the Sea Center and Coastal Fisheries at Dickinson, law enforcement offices in Lamar ‑‑ the Port, our border security and port security programs in Houston, Galveston and Texas City, and Parrie-Haynes Ranch.

So you can see from the cross-section of places that they've visited, they've got a ‑‑ they've done a very thorough job of just taking a good cross-section of the agency.

What's next? As I indicated, you know, they're going to be continuing their scoping work with constituents and with leadership and yourself. They're going to be developing issues. And so the next couple of months are going to be pretty critical for them kind of homing in on what they think are the key issues that they would ‑‑ that they find, with Texas Parks and Wildlife.

We'll have an opportunity to review those issues with them, kind of tell them our side of the story, talk about what those issues are, maybe work with what might be some statutory changes that could address those issues. Then they will develop the staff report, as I indicated, and that staff report will be submitted to Sunset Commission on December 16th, at that public hearing, and then in January they will have their final decision meeting.

That's kind of it as where we are. As I said, both Steve and Chloe are here and hopefully you'll have an opportunity to visit with them in the next couple of days and ask any questions of them or any questions of myself or Harold. And if I can answer any questions, let me know.

COMMISSIONER BROWN: Thank you. Any questions for Gene?

(No response.)

COMMISSIONER BROWN: Thank you for your presentation, Gene.

MR. McCARTY: Thank you, sir.

COMMISSIONER BROWN: Committee Item Number 5 is the Capital Program Update and Bond Project Review. Mr. Steve Whiston will make the presentation.

MR. WHISTON: Thank you, Mr. Chairman. Good morning, Commissioners. For the record, I am Steve Whiston, Director of Infrastructure Division. I'll be presenting this morning a very brief end of year update of our capital program.

Commissioners, I'm really pleased to report that we continue to make great progress in the implementation of our FY '06 General Obligation Bond Issue. This was made available to us back in April of '06; we received a little over $18 million for 71 projects for all divisions.

This is the only remaining bond issue that was previously appropriated to us prior to this current fiscal year. We still anticipate that the majority of these bond projects will ‑‑ with the exception of two, will be under construction and the funds fully encumbered prior to the start of the Legislative Session.

COMMISSIONER HOLT: Of this $18 million?

MR. WHISTON: Yes, sir.

COMMISSIONER HOLT: Right, okay.

MR. WHISTON: Great progress with that. Those two projects that still remain or will still be ongoing were delayed during the design process, but the good news is that those projects will be under construction contract by March or early April, and along with the remaining or unexpended balances of the bond issue, we expect these funds to be fully expended by the end of the fiscal year, of 2009, so there will be no or very minimal UB going into the next biennium for these funds.

So we're very grateful for the support, and pleased with the progress of closing out this bond issue.

If you recall, Commissioners, we were very fortunate to be appropriated for our current biennium, or the '08-

'09 biennium, $69.12 million of new bond revenues for state park repairs. That included $17 million for repairs in state parks from the old, unauthorized Prop 8, as well as $52.12 million of new bond appropriations from Prop 4, that was approved by the Texas voters in November.

These funds provide $27 ‑‑ a little over $27 million for state park repairs, and $25 million, as you recall, for the Battleship Texas.

Just to give you a little idea of our ‑‑ summarize our delivery strategy for these projects as we've discussed in the past, these 94 projects we took a very careful and very comprehensive look, and adopted a new methodology for implementing these projects which is now well underway. Out of the 94 projects we bundled together or packaged 63 of those projects into three large regional construction projects.

We're now in the process of evaluating the design consultants and anticipate awarding the design contracts for those shortly, and I'll show you that in the next slide, but that methodology is one that we are very hopeful and anticipate, you know, success in accelerating the delivery and the implementation of these projects.

Seventeen of the projects were ‑‑ we elected to be accomplished through our FORCE account program. This is our in-house construction program. Those projects will get underway in September; we'll actually start construction of those projects, a little under $5 million of those 17 projects in our FORCE account.

There were 13 of the projects in the package or in the program that really just didn't fit into those bundles, so we'll be executing those using traditional design bid delivery methodologies, using the competitive seal proposals, and implementing those immediately as well. And so we anticipate again success in stepping up the delivery of these projects.

Just to give you an idea about what that schedule looks like, as you well know, on May 20th our business plan for these projects was approved by the LBB, and I'm very excited and very pleased to report that since our last meeting on July 17th, our bond issue was approved by the Texas Public Finance Authority and the Bond Review Board. Those monies we expect to begin receiving this month, and in fact, next week anticipating the first $5 million, a $5 million issue, to set these projects in motion.

As I mentioned before, we expect to award the design contracts for those bundled projects in early November this year and start construction for the FORCE account in September and then the construction will start being phased out and we will be under construction by November 2009 for all the projects. And then expect completion beginning in early 2010, through the next year. So we're very optimistic again that this is going to provide us with opportunities to ‑‑ in response to, you know, the slight delay we incurred at the beginning, but to catch up and get these dollars spent and some really good work accomplished in the state park system.

Commissioners, if I may just shift gears slightly, to ‑‑ and lastly, to brief you on the Battleship Texas, on this remaining $25 million project. We received our ‑‑ as you know, we received our engineering report on the condition of the Battleship Texas on May 15th. That ‑‑ after evaluation of the findings in that report, we presented our project plan that outlined our steps in going forward in implementing this project that was submitted to the LBB on July 11th. And we're waiting now for their approval, and pending their approval, we are prepared to rapidly move forward, as necessary to move forward with the implementation of the project.

Assuming that we get LBB approval in the near future, we can anticipate as early as September starting the request for financing, and then depending on the scheduling and then actually the approval process here, we could anticipate going before the Bond Review Board as early as September, as late as November, and then receiving approvals from them and actual then be able to obtain the issue of the bonds as early as October or as late as December, again pending the subsequent approval here of LBB.

So we are poised to go forward with this project, anticipate going through an RFQ process to select a qualified marine engineering firm to help us through the design process and all of the clearances necessary to be able to implement this project as well and finally address the long-term preservation needs of the ship.

COMMISSIONER HOLT: Yes, leaving it in place, and dry-docking it essentially.

MR. WHISTON: Yes, sir. That is still our intention, we believe, to be the best interest of this ship and of this very important historic landmark, to create and build a permanent dry berth at the present slip there at San Jacinto, to take it out of the water and preserve it there.

COMMISSIONER HOLT: And in our studies that we've done, we think the $25 million is going to cover it?

MR. WHISTON: Yes, sir, we do. We are very optimistic. Yes, the engineer, as a supplement to his condition assessment report, developed, and I shared with you in the last meeting in May, several different options that we believe can be managed very effectively within this $25 million budget.

And in addition, please be aware that the Battleship Texas Foundation has pledged, and we have appropriation authority, for an additional $4 million. So we're looking at about a $29 million budget for the dry-berthing and additional repairs that we think we're going to be able to accomplish for the ship.

Commissioners, that concludes my presentation and I'd be happy to answer any questions.

COMMISSIONER BROWN: Thanks, Steve.

Did you want to make some comments, Scott?

MR. BORUFF: I did want to add one comment just for clarification. Steve mentioned it, but if and when these bonds are issued and we go forward with the project, there are a couple of important components that would happen, obviously before the construction started there, and those would include the cultural natural resource clearances.

And so I just wanted the Commission, particularly the new folks on the Commission, to understand that on any project that we do on any publicly owned land, the Texas Parks ‑‑ which our land is a Texas Parks and Wildlife, through the Infrastructure Division, that process is well-defined both at the state and the federal levels.

So there is a permitting process that we have to go through to ensure that we're not going to negatively impact cultural and natural resources there, and that if that does become an issue, that we address that issue in an appropriate fashion either through mitigation or changing our plans or whatever.

So just because the bonds are issued and we begin to move forward does not mean that we're just going to go out there and start tearing up the landscape to do this, and I wanted that to be clear, particularly to the new Commissioners.

COMMISSIONER BROWN: Thank you.

Any other questions?

(No response.)

COMMISSIONER BROWN: Thank you, Steve.

MR. WHISTON: Thank you.

COMMISSIONER BROWN: Mr. Chairman, this Committee has completed its business.

(Whereupon, the committee meeting was adjourned.)

C E R T I F I C A T E

MEETING OF: Texas Parks and Wildlife Commission
Finance Committee
LOCATION: Houston, Texas
DATE: August 20, 2008

I do hereby certify that the foregoing pages, numbers 1 through 60, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Leslie Berridge before the Texas Parks and Wildlife Commission.

9/02/2008
(Transcriber) (Date)
On the Record Reporting
3307 Northland, Suite 315
Austin, Texas 78731


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