An audit has found what City Manager Sara Hensley called “bad administration” in Denton’s streets and drainage divisions.
The city audit was conducted to evaluate the effectiveness of maintenance activities for streets and drainage infrastructure. According to the results, Denton hasn’t been effective in a number of areas, including a shortage of routine inspections, incomplete and missing key data, and a lack of both documentation and resource optimization.
Drainage fee rates also haven’t been updated in more than 20 years, so those fees are likely applied inconsistently while maintenance costs have been tied to debt. That debt leaves city utility customers financially burdened by non-city utility customers, according to the audit.
“Which is an issue because maintenance shouldn’t be funded by people who are not receiving a benefit from it,” City Auditor Madison Rorschach told the Denton City Council last week. “Essentially, we’re having people in the future pay for the maintenance that we are doing now, which for construction makes sense … but for maintenance it doesn’t make sense. That’s why it’s illegal to use debt to fund maintenance. ... We’re not using debt, but we’re tying debt issuance to the maintenance revenue.”
The audit offers 25 recommendations for implementation, including improving street condition monitoring; developing performance standards for drainage asset inspections, cleanings, repairs and storm checks; and improving drainage fund transparency while also increasing revenue.
Hensley told the council it was “basically poor management, poor oversight, and now we’re recognizing we have a problem.”
“It was a mess,” Hensley said. “I’m not sure any of the data that you received prior was completely accurate. If you want to know the truth, I don’t know that any of us could say that, and so we saw a problem. Now we’ve got to fix it.”
Hensley, who plans to retire next year, told the council that the “person who was over this is no longer with the city.”
That director took a job with another city, according to the city spokesperson.
“Without going into much detail, we got here because we had the wrong people doing it,” Hensley said.
Without naming the person, Hensley said she didn’t want to “throw blame on anybody” but pointed out they weren’t staying on top of it.
“The financial part of it wasn’t being managed appropriately. The procurement wasn’t being handled appropriately. So in every aspect, there were balls being dropped,” Hensley said.
“No one really in this room is to blame.”
Stephen Gay, the city’s general manager of water utilities, stepped in six months ago. Deputy City Manager Cassey Ogden also got involved shortly before Gay. She recognized some serious issues and requested the city audit.
“What Madison found will help us move forward,” Ogden told council members.
Since 2005, Denton residents have authorized more than $443 million in streets and drainage improvements, according to a presentation Tuesday.
But it is money that hasn’t been well spent.
For example, while the streets division staff applies cost-effective maintenance techniques, Rorschach reported they weren’t applying the planned road maintenance at the correct phase of the street’s conditions.
Of the 136 street segments that received crack-sealing or micro-sealing, about 93% were completed on road segments that were still new or simply in the preventive stage.
There also wasn’t a concise method for listing and tracking pending projects.
“Timely, appropriate maintenance is critical to preserving the usefulness of a street, including minimizing overall costs, increasing roadway lifespan and positively influencing public perception of road conditions,” Rorschach wrote.
Rorschach pointed out that long-term sustainable funding is needed for quality roads. The auditor offered information about the Government Finance Officers Association, which established a system that assesses capital assets to plan and budget for capital maintenance and replacement needs.
There are two approaches for doing so: the benefit approach, in which an individual user pays the cost; and the ability-to-pay approach, where individuals with greater resources subsidize the cost for those with fewer resources.
“The GFOA stresses that future generations should not be responsible for paying for benefits received in the past, such as issuing debt with payback periods longer than the asset’s useful life,” Rorschach wrote.
The city auditor found that current maintenance funding levels were insufficient to achieve goals for recommended conditions and continues to rely on debt funding for street reconstructions to meet these goals.
Over the last 20 years, Rorschach reported, Denton voters have approved almost $309 million to invest in street and transportation improvements as part of five different bond programs. Yet the investments were primarily focused on arterial and collector roads, while most of the new lane miles were arterial or residential.
Between 2019 and 2025, a concrete surface, which requires lower maintenance, was used for 87% of the new lane miles constructed, while asphalt, which is high-maintenance, was used for 74% of reconstructed lane miles.
And while this approach has allowed the city to increase its roads’ overall condition index, or OCI, from 63.5 to 69.5, the percentage of lane miles in rehabilitative condition has remained similar.
“This illustrates the need for additional preventative and corrective maintenance as the city cannot reconstruct streets fast enough to outpace natural degradation without this maintenance,” Rorschach wrote.
The streets division staff was reduced by five people in 2018, which has impacted the division’s ability to perform the maintenance needed, she said.
The city’s budgeting practice was to transfer a certain percentage of franchise fee revenue to streets, making it difficult to predict available resources for street maintenance. Another street funding mechanism increases the city’s tax-backed debt burden.
As Rorschach explained it, the city uses council-approved bonds for utilities to take advantage of lower interest costs than revenue bonds and transfers the estimated savings between these amounts to help fund street maintenance.
But Denton utility customers aren’t seeing these savings because the full cost of the debt is still being paid, 7% of funding for street maintenance — about $1.2 million annually — depends on the city continuing to issue debt, and the city’s tax-backed debt burden increases for all residents even though it benefits only utility customers.
“The practice raises issues of fairness as the city’s utility customers are thus responsible for subsidizing street maintenance for non-city utility customers,” Rorschach wrote.
“Some revenue is tied to debt issuance, which has a longer payback period than the benefit period of most asset maintenance.”
To increase revenue, Rorschach pointed to a 2023 consultant’s report that recommended the city implement a roadway user fee. It is based on traffic patterns associated with a property’s land use. Other options include increasing property taxes, designating a portion of sales taxes and increasing franchise fee percentage.
In 2023, the City Council directed city staffers to pursue adding $5 million in annual revenue for funding streets, but a source was never identified.
In the audit, Rorschach said the city recently established goals for the street maintenance program but has not planned for long-term maintenance needs.
“This has led to significant investment in street reconstruction over the last 10 years, improving street conditions overall,” Rorschach wrote. “Still, without additional, appropriately used maintenance funding, a large investment will be needed again in 15 to 20 years; however, at that time, the City may not be able to make such large investments due to the significant amounts of debt it has issued in recent years.”
Although the state inspects bridges every four years and alerts the drainage division to issues, the city didn’t have a system to track these issues to ensure they are addressed. The city created one during the audit.
There is also a lack of a formal dam process to ensure optimization of the dams’ lifecycles, which increases the risk of missing a preventable major repair or drainage failure.
Limited information about drainage pipe conditions is available since the city didn’t start inspecting them until 2024. Rorschach pointed out it was the first time in the city’s history to do so.
“Due to incomplete asset information and limited inspections, the Drainage Division does not develop an annual work plan. Instead, work is primarily reactive, hindering the Division’s ability to optimize resource usage and increasing the risk of flooding,” Rorschach wrote.
The city charges a drainage fee to about 40,000 utility accounts, but Rorschach said that about 7,600 accounts are not currently being charged, yet customer service has no guidance for how to determine if a drainage fee should be charged or how it should be calculated.
Hensley and Ogden had a meeting with Gay to discuss Rorschach’s findings and recommendations in the audit.
“We’re headed to take every one of these suggestions, just like we did with animal services, put a plan to it and get it fixed,” Hensley said.