June 29 Transcript

Texas Department of Transportation Commission Meeting

MR. WILLIAMSON: Good morning.

AUDIENCE: Good morning.

MR. WILLIAMSON: It is 9:08 a.m.,and I would like to call the June 2006 meeting of the Texas Transportation Commission to order. It is a pleasure to have each and every one of you here with us this morning.

Please note for the record public notice of this meeting, containing all items on the agenda, was filed with the Office of Secretary of State at 11:37 a.m. on June 21, 2006.

As we always do, before we begin today's meeting, the commission would appreciate it if each of you would join with us in reaching into your pocket or your purse or your bag and removing your cell phone, your pager, your PDA, your Dewberry, whatever you carry, and putting it on the silent or vibrate mode so as not to disrupt our proceedings during the day or tomorrow.

MR. JOHNSON: Excuse me?

(General laughter.)

MR. WILLIAMSON: I just wondered if anybody was listening, you know.

Thank you very much.

Our second custom is to open up our meetings with comments from each commissioner, and we traditionally start with the commissioner located furthest to the east, and so Mr. Houghton, followed by Ms. Andrade, followed by Mr. Johnson. Have at it, Ted.

MR. HOUGHTON: My geography was off. Furthest and east I guess is Mr. Johnson; Mr. Johnson said in this building.

Good morning to you all, and good morning to my fellow El Pasoans, glad to have you here. We're going to have some fun today, going to have a lot of new stuff -- when I say stuff, initiatives that will be hopefully approved. But I welcome you all to a very historic day that you may have been reading about in the local media.

MS. ANDRADE: I'd also like to echo Ted's comments and that is to welcome you all, and this is a history-making day in Austin, and certainly I have left San Antonio very happy with what's going to occur today. But I also want to take a few minutes to thank my fellow commissioner, Ted Houghton, for everything that he's done on this project in making sure that we protect the assets of Texas. So Ted, San Antonio thanks you.

And we've got many special guests today but we also have some representatives from a group that's been working on public transportation, on regional coordination, and Mr. Chairman, if it's okay, I'd like to ask them to stand.

MR. WILLIAMSON: Please.

MS. ANDRADE: For all those that are involved in public transportation for the next day and a half, would you please stand?

MR. WILLIAMSON: Thank you for your willingness to participate; we appreciate it.

(Applause.)

MS. ANDRADE: Mr. Chairman, they've done a great job, they've dedicated a lot of time and effort, and this group, as you know, is led by Michael Morris and he's done a great job for us. Thank you all very much.

MR. JOHNSON: I guess what I'm going to do is echo the echo. Pleasure to see so many people here that it continues to amaze me how much of what goes on in this state is dependent upon transportation, and your keen interest in those affairs and your presence here, I think, emphasize that to a great degree.

I'm sorry that I missed the social evening that our friends from the Mountain Time Zone sponsored last night. I had a reception in Houston that I couldn't leave until past eight o'clock, so I was late getting here. I know I missed a blue ribbon, five star event, and I apologize for it.

As my fellow commissioners have referred to, we have a very busy and full agenda, a lot of very meaningful things are going to come before the commission today, and I'm looking forward to the dialogue that we'll have and continuing to accomplish a lot and making the quality of life for all Texans better. Thank you.

MR. WILLIAMSON: Thank you, members. And let me remind everyone that if you wish to address the commission today, we ask that you complete a speaker's card which you can find at the registration table to your immediate right in the lobby. If you're going to talk about something that is on the agenda as posted, I ask that you fill out a yellow card; if you're going to comment at the end of the meeting in the general comment section, I ask that you fill out a blue card.

But regardless of the color of the card, we would hope you would restrict your remarks to the matter at hand and limit your time to three minutes because we have a lot of people who wish to speak today and we do have a long agenda. That restriction, of course, does not apply to our friends from the legislature, and I know we have at least two and perhaps more in the audience, and you may take about as much time as you want.

MR. DILLON: Ric, I don't think it's very fair that the legislative personnel should get more time than the people.

MR. WILLIAMSON: Thank you. I appreciate your comment.

Okay, Mike, I'll turn the meeting over to you.

MR. BEHRENS: Thank you, Chairman.

The first order of business, it's my pleasure to present a service award, and the service award today goes to Chairman Ric Williamson, who has five years now as a TxDOT employee and part of our commission and leader of our commission, and speaking on behalf of all TxDOT employees, we appreciate your service, all that you have done, together with your fellow commissioners in the past five years, and all the things that we will continue to accomplish as we go forward. And your ideas, your innovations, your persistence, we appreciate that, and we hope to add to this as years to come.

MR. WILLIAMSON: Some of my friends in the legislature would say my hardheadedness.

(Applause.)

MR. WILLIAMSON: Well, thank you, Mike, and thank you, fellow commissioners. I didn't know I was in for certification today, and I appreciate that. I've had 20 years of public service and I love my state, this is a great state. My grandparents came here from Louisiana at a time when they couldn't get a job. My parents were blue collar families who worked hard. The state gave me a great public education, the University of Texas gave me a great university education at a price that a blue collar family could afford, and 20 years is a small price to pay in return for that.

Thanks for this; I appreciate it very much.

MR. BEHRENS: Thank you.

Our next item of business will be a couple of resolutions, and the first one will be we're going to recognize one of our invaluable employees that chose to leave TxDOT. His last day will be tomorrow, and so I'd like to ask our general counsel, Richard Monroe, to come forward and we will make a presentation.

Richard, let me read this resolution from the commission. It says:

"Whereas, Richard Monroe has been the director of the Office of General Counsel for the Texas Department of Transportation since 1998;

"And whereas, having first joined the department in 1989 as deputy general counsel, he has demonstrated integrity and wit while providing much needed and respected legal advice to the department and to the Texas Transportation Commission;

"And whereas, he has proven himself a strong and able advocate for various clients and employees in the private and public sectors over three decades, most recently and faithfully with the Texas Department of Transportation;

"And whereas, he has received his bachelor's degree in business administration from Southern Methodist University in 1968 and his doctor of jurisprudence in 1971 from Southern Methodist University School of Law;

"And whereas, his intellect, experience and leadership proved invaluable during the past two sessions of the Texas Legislature as his office drafted monumental laws on toll roads, regional mobility authorities, and comprehensive development agreements, thereby building the legal foundation for infrastructure development in the state for decades to come;

"Now, therefore, be it resolved that the Texas Transportation Commission hereby honors and thanks Richard Monroe for his service to TxDOT and to the people of Texas.

"With gratitude and best wishes, presented by the Texas Transportation Commission this day, June 29, 2006." And signed by all the members of the commission.

MR. WILLIAMSON: Mr. Houghton?

MR. HOUGHTON: I echo the chairman's remarks that we haven't approved this yet, but I guess over our objection, your going to do it anyway.

You've steered us a very steady course, very patiently, calmly have said, No, back this way, and I appreciate that, Richard, and congratulations to you.

MR. MONROE: Thank you.

MS. ANDRADE: Richard, I'm going to miss you. As I told you in the elevator earlier, I look at you, when we're talking about this agency, for guidance, and thank you for the great job that you've done in protecting our agency. So good luck, and if there's ever anything we can do for you, please let us know.

MR. MONROE: Thank you, Commissioner.

MR. JOHNSON: Well, Counselor, most of the times when you come forward, the commission has probably veered off the path and headed toward some legal trouble, and you're attention to that has been greatly appreciated.

I marvel in our conversations that you left sort of the safety net of being a corporate attorney in Midland, Texas to dedicate your life to serving the state and this agency in such a remarkable way and making sure that we dot the I's and cross the T's. It's been a great pleasure and I'm genuinely going to miss you.

MR. MONROE: Thank you, sir.

MR. WILLIAMSON: Mr. Monroe, I hate to see you go, I hate to see you go for a couple of reasons, one of which may be the most important to me. We've dealt with some highly emotional and contentious issues the last five years, and through it all you have conducted yourself as a civilized man. I frequently like to remind myself and remind whoever happens to be having to listen to me at the time that there can be no higher compliment paid than to disagree civilly and to end the day as a civilized man, and you have been the epitome of that and it's been my great pleasure to have worked with you.

MR. MONROE: Thank you, sir. I truly appreciate all the kind words.

MR. WILLIAMSON: We'll miss you, Richard.

MR. MONROE: Thank you.

MR. WILLIAMSON: Let's take a picture.

(Pause for photographs.)

MR. BEHRENS: We have one additional resolution, and that resolution commemorates today which is a very important day in the history of transportation. Fifty years ago today, President Eisenhower signed a bill authorizing the construction of the Interstate Highway System, and I'd like to ask Randall Dillard to come forward and to give us a brief presentation. Randall?

MR. DILLARD: Good morning, commissioners, Mr. Behrens. For the record, my name is Randall Dillard, director of the Public Information Office of TxDOT.

Today, June 29, 2006, marks the golden anniversary of what many people say is the greatest public works project ever. It was a project that changed America and touched virtually every aspect of American life; it improved mobility, it improved safety, it improved our economy; it brought Americans together.

Fifty years ago today, President Dwight Eisenhower signed the Federal Aid Highway Act of 1956, establishing the Interstate Highway System. I'm told that President Eisenhower signed the bill in a hospital room without any ceremony.

Thirty-seven years earlier, as a lieutenant colonel, went on the Army's first transcontinental motor convoy. On the 1919 trip between San Francisco and Washington, D.C., he saw firsthand the poor conditions of our nation's roadways. This slide shows some of the pictures from that cross-country trip. If you notice below the picture of the dirt road at the bottom right, Eisenhower wrote "Lucky to get on a road like this."

Later, during his World War II stint as commander of the Allied Forces, Eisenhower's admiration for Germany's Autobahn highway network reinforced his belief that the United States needed first class highways. He came to the conclusion that the U.S. highway system was, in his words, inadequate locally and obsolete as a national system.

As Eisenhower saw it, there were five consequences -- penalties is the word he used -- of this obsolete system: the deaths and injuries annually from crashes; the waste of money in traffic jams and detours; inefficient transport of goods; the inadequacies to meet defense demands; and the clogging of the nation's courts with highway-related lawsuits. So Eisenhower, a Republican, worked with a Democratic Congress to get legislation that resulted in the National System of Interstate and Defense Highways, what we now call the Interstate Highway System.

The country set out to build 41,000 miles of interstate at an estimated cost of about $35 billion. A final cost estimate of nearly $129 billion was issued in 1991. To build the nation's interstates, Eisenhower brought together a system approach, a design concept, a federal commitment, and a financing mechanism.

States were asked to submit designs for a standard route sign for the interstate system. In 1957, a design by Texas Highway Department traffic engineer Richard Oliver was selected as the winning entry for the now familiar red, white and blue interstate shield.

Here's a quick look at some of the state's early interstates. This first picture, taken in 1961, is of I-35 in Austin, this is at Riverside Drive. Judging from the shadows, this picture was taken in the late afternoon; it is not clear if it was rush hour traffic or not.

(General laughter.)

MR. DILLARD: In 1963, this was the Stemmons Freeway in Dallas. I count ten lanes, five in each direction; here is a rest area and it looks like everyone's high school Oldsmobile Cutlass is parked there on the left; and finally, here's a picture of I-35 in Waco taken back in 1969.

Missouri and Kansas argue over who had the first state to build the interstate. Missouri apparently had the first project to go to construction, Kansas had the first paving project. We're Texas so we don't really care. Texas has the most interstates today with 3,233 miles; that's almost 800 miles more than California, the state with the second most interstates.

The interstate system was not planned and built without controversy. Many property owners did not want to give up their land for a new highway; some cities fought the interstates, others saw the system as government folly, a colossal waste of tax money. Lyndon B. Johnson heard from people who opposed the plan. In the early 1960s, then Senator Johnson received a letter from Mrs. Maude Wilcox of San Antonio. She was upset about the use of eminent domain to purchase right of way, calling it unconstitutional, un-American, and communistic. She went on to liken the right of way process to everything from the Inquisition to the Salem Witch Trials, to the Holocaust.

MR. WILLIAMSON: Sounds familiar.

(General laughter.)

MR. DILLARD: I don't know if we ever bought property from Mrs. Wilcox, I'm sure if we did, we paid fair market value for it. But the interstate system was built and the country has prospered.

I'm not sure who Nick Taylor is, but in 1990 he wrote: "The interstates have knit us together in subtle and unanticipated ways. Just as the railroad first introduced us to the country a century ago, so the interstates have opened it to everyone. We are still pioneers seeking horizons from the driver's seat."

Dwight Eisenhower summed up the importance of a quality transportation system in America when he said, "Our unity as a nation is sustained by free communication of thought and by easy transportation of people and goods."

Today's anniversary provides us an opportunity to honor those that built the Interstate Highway System, it gives us a time to reflect on how the system can remain effective, and it gives us an opportunity to plan for tomorrow's transportation needs. Today Texas has a transportation problem, TxDOT has a plan. We're focused on five goals: to reduce congestion, enhance safety, expand economic opportunity, improve air quality, and increase the value of the transportation assets. As we look to the future, we can learn from the past.

To mark the significance of today's date in history, I am proud to present you with a resolution for your consideration. The resolution, I'll read it for you.

"Whereas, the Dwight D. Eisenhower National System of Interstate and Defense Highways was established 50 years ago today on June 29, 1956;

"And whereas, there now exists more than 48,000 miles of interstate highway in the nation's entirety;

"And whereas, Texas leads all states with interstate highways covering 3,233 miles on 17 routes;

"And whereas, interstate highways have made travel safer, it being estimated that since the inception of interstates in Texas, more than 1.1 million injuries have been prevented and more than 18,000 lives have been saved;

"And whereas, the interstate highways through five decades have propelled the sustained and bountiful growth of the Texas economy;

"And whereas, these highways have provided annual mobility benefits to motorists valued at $6 billion;

"Now, therefore, be it resolved that the Texas Transportation Commission hereby observes and celebrates the 50th anniversary of the United States Interstate Highway System and recognizes the efforts and sacrifices of those men and women who earn our ceaseless respect for their hard work and vision, including TxDOT employees, private sector contractors and partners, elected officials, citizens, and former commissioners, as today we praise those who brought forth and maintain these vital highways that bind our nation in union, that improve the lives of Texans, and that provide a worthy model of the effectiveness and beauty sought in the transportation systems by every person who hopes and works to make real their dream of a prosperous future. With gratitude for the achievements of the past and with the sure knowledge that the future challenges us ever more today than in 1956, the Transportation Commission, as a body, approves this resolution so made by the signatures affixed below on this day, June 29, 2006."

MR. WILLIAMSON: And Randall, we have all affixed, we've all signed the resolution.

MR. DILLARD: Thank you very much.

MR. WILLIAMSON: Thank you, Randall.

MR. DILLARD: Thank you.

MR. WILLIAMSON: Members, we are all having fun celebrating the 50th year of the Interstate System.

MR. DILLON: I signed up to speak on that, about every point in that speech, limit it to three minutes.

MR. WILLIAMSON: Well, we need to approve the minutes and formally open the meeting, Jim. You'll have the opportunity to speak on everything you wish to speak on.

MR. DILLON: Okay.

MR. WILLIAMSON: We need to approve the minutes, gentlemen and lady.

MR. JOHNSON: So moved.

MR. HOUGHTON: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries, minutes are approved. And Mike, I would like to move item 12 to the beginning point to accommodate some who have to leave unexpectedly.

MR. BEHRENS: Yes, sir, we can do that.

Item 12 is a rail project in Ellis County that we have been looking at, and I'll ask Jim Randall to make that presentation, and then we'll hear from the folks that wish to speak toward that item.

MR. RANDALL: Good morning, commissioners. My name is Jim Randall, director of Transportation Planning and Programming Division.

Item 12, this minute order directs the department to take no further action at this time to acquire a 4.57-mile rail facility in Waxahachie and Nena in Ellis County, known as the "Waxahachie Industrial Lead."

Transportation Code Chapter 91 authorizes the department to acquire abandoned rail facilities. Approving this type of acquisition requires the commission to consider the local and regional economic benefit realized from the disbursement of funds to acquire the rail facility in comparison to the amount of the disbursement.

Pursuant to the legislation, the commission has adopted rules prescribing policies and procedures for the department's acquisition of abandoned rail facilities, and it's codified in 43 TAC, Section 7.20 to 7.22. Those rules require the department to request documentation concerning the local and regional economic impact of abandonment from a municipality, county, or rural rail transportation district in which all or a segment of the rail facility is located. The rules also require the department to conduct one or more public hearings to receive public comment to determine the need to acquire a rail facility.

The Union Pacific Railroad, UP, filed a notice of exemption on November 17, 2005 with the Surface Transportation Board to abandon and discontinue service along this rail line, as shown in Exhibit A in your minute order packet. On January 11, 2006, the city filed a late request for the issuance of a Notice of Interim Trail Use, or NITU, for the subject line pursuant to the National Trail System Act.

TxDOT conducted a public hearing in the city on June 6, 2006 regarding the acquisition of the line. Three people provided comments at the hearing, one in support of the acquisition and two against. A separate written comment was received supporting the acquisition within the required time frame. A summary of public comments is contained in Exhibit B to your minute order packet. No comments received supported continued rail service but instead focused on the acquisition of the facility as it relates to preservation of the depot, tourism, trail development, and commercial development.

The department has obtained information concerning the local and regional economic impact of abandonment from UP and has determined, based on this information and the information contained in the UP notice, that there's only a limited need to preserve the rail facility for future transportation purposes.

The City of Waxahachie has proposed an interim trail use and has filed the necessary documents with the Surface Transportation Board. If approved, the city would assume full financial and legal responsibility for the corridor which would be subject to reversion back to UP to operate as a railroad at such time as the UP deems it's necessary to reactivate the line.

After evaluating the criteria prescribed in Section 7.22 of the rules, and considering comments received at the public hearing, staff has determined that acquisition of the rail facility should not be authorized at this time. We recommend approval of this minute order.

MR. WILLIAMSON: Members, we have three witnesses, and with your indulgence, we'll hear from them first. Representative/Chairman Jim Pitts. Welcome to our house, Mr. Pitts, a great supporter of transportation.

MR. PITTS: Thank you, Mr. Chairman; thank you, commissioners.

First of all, I want to echo what Mike said, Mr. Chairman. Thank you for your service to the State of Texas. You have been a wonderful asset for Texas and Texans, and we may not always agree on everything but I know your heart is in the right direction and you're keeping Texas moving, and I appreciate that.

MR. WILLIAMSON: Thanks.

MR. PITTS: I'm going to be very short. I did bring my bodyguards with me that I knew I had to have coming to TxDOT. Dennis Horak is a landowner and Mark Singleton is president of Citizens National Bank of Texas, who is very interested in the railroad remodeling and reconstruction.

We would ask for you to accept the recommendation of your staff. Thank you very much.

MR. WILLIAMSON: Members?

(No response.)

MR. WILLIAMSON: Thanks for being here.

MR. PITTS: Thank you.

MR. WILLIAMSON: Dennis?

MR. HORAK: He's made all the comments I need to make.

MR. WILLIAMSON: Okay. Mark?

MR. SINGLETON: As well.

MR. WILLIAMSON: Jim?

MR. DILLON: Banks have always been interested in railroads. The robber barons of the 1800s were interested in railroads, that's how they got filthy rich, monopolizing oil, meat packing, transportation of goods, grain and services all across this country at a profit. Similar to the interest the banks now have in bypassing all the small towns in our country with these toll roads and freeways that you're trying to build, the railroads could kill a town 150 years ago by going around it, but if they were paid enough racket money and extortion and ransom, then there might be a stop in your town. So banks have historically been very interested in railroads.

This foreign-owned railroad that you are trying to push down the people's throat --

MR. WILLIAMSON: Okay, Jim, the agenda item is not about that.

MR. DILLON: Oh, I thought he had referred to the banking interest in the railroad.

MR. WILLIAMSON: This agenda item is about whether or not we will acquire right of way from the Union Pacific that they're fixing to abandon, this isn't about building a new one.

MR. DILLON: Well, what do we need the banker here for if it's a giveaway, if it's free, as General Eisenhower originally intended our roads to be free, that's why he called them freeways.

MR. WILLIAMSON: I think he was speaking as a property owner, not as a banker.

MR. DILLON: Oh, he's a bodyguard, he's a banker, he's a property owner.

MR. WILLIAMSON: I think the bodyguard reference was for fun.

MR. DILLON: Okay, all right. This reference to history being made here today, I have a sneaky suspicion that it's going to be bad history.

MR. WILLIAMSON: Okay, but that's not what this agenda item is.

MR. DILLON: Okay. State the agenda item one more time, please. Railroad acquisition for free, that's going to be the only free thing in this whole deal.

MR. WILLIAMSON: It's a rail project, Ellis County. The minute order was whether or not we wanted to acquire it from the Union Pacific, and what our staff has recommended is that we not acquire it.

MR. DILLON: Well, if it's free, why not take it?

MR. WILLIAMSON: Because we would have to spend money maintaining it, we'd have to take your gasoline tax money and maintain it.

MR. DILLON: You're already stealing my gasoline tax money which is earmarked and dedicated to the people's roads, the free roads and being diverted.

MR. WILLIAMSON: Steal is a strong word.

MR. DILLON: Steal is a strong word.

MR. WILLIAMSON: I'm sure you don't intend it to be strong.

MR. DILLON: No, I don't intend it to be that strong, but if it fits, then let's use it. The politicians are known for stealing, they've earned that reputation.

MR. WILLIAMSON: Some people take that position.

MR. DILLON: I've seen it happen over and over. They steal the people's money, they're stealing our roads, our means of transportation, charging us to drive on the roads that we paid for, throwing their exit and entrance ramps down on top of our freeways, alleged freeways that have already been built so that they can have easy access to more revenue with a ramp to get on and off the toll roads.

MR. WILLIAMSON: That's not appropriate to the agenda item, Jim, and your time is up.

MR. DILLON: Okay, we'll stay on topic.

MR. WILLIAMSON: But you're going to be here the day, I'm sure.

Okay, members, you've heard the staff's explanation and recommendation, you've heard the testimony of the witnesses. What's your pleasure?

MR. HOUGHTON: So moved.

MR. JOHNSON: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you, each of you, for your testimony; we appreciate it.

Now, so the audience knows, we're going to move items as is appropriate for our furthest away out-of-town guests to be able to catch their planes to get home, however, at ten o'clock, whatever we're doing we're going to stop and take up the matter of State Highway 130, and a lot of you in this room will not have any interest in that and that will be a good time to take a restroom break or coffee break because we'll be tied up for about 15 minutes taking care of that matter.

Having said that, Mike, I would just as soon proceed to item 2(a) and get as much of our general business out of the way as we can.

MR. BEHRENS: Yes, sir, we'll do that.

Item 2 is discussion items, 2(a) is regarding our legislative agenda and looking at recommendations that we are looking forward to take to the next session, and item 2(b) then we'll be looking at our Legislative Appropriations Request. Coby Chase will present 2(a).

MR. CHASE: Good morning. For the record, my name is Coby Chase and I'm the director of TxDOT's Government and Business Enterprises Division.

Today I will further discuss the formulation of the legislative recommendations for the 80th session of the Texas Legislature. As I state every single time after I introduce myself, it's been said before, the Transportation Commission is authorized by law to make recommendations to the Texas Legislature on statutory changes that would improve the operation of the department. The purpose of this ongoing dialogue is to make these issues public, and as I also say every time, this is an open invitation to anybody within the sound of my voice, either here or over the internet or whatever the case may be, they may always contact my division and discuss any of these issues in any detail or whatever the case may be. We'll be happy to walk through whatever we're doing right at that minute with these issues.

Last month I went through an exhaustive listing of statutory changes that would improve department operations. I'll review those issues now but feel free to stop me with any questions you might have.

As far as some of our business processes, we'd like to make it clear in statute that we are not in the social service business when it comes to providing medical transportation, but we are in the medical transportation business. We'd also like the opportunity to share the cost of purchasing billboards with cities when they do not allow us to relocate billboards.

Now I will discuss issues we have previously mentioned related to the agency's funding. The first is currently when the department sells any surplus property, whether it is real property or surplus equipment, the proceeds from that sale are deposited into the states General Revenue Fund. These proceeds should be returned to the Highway Fund. Then there is the continuing evolution in the 2003 change in the point of collection of motor fuels taxes. Distributors of motor fuels are allowed to retain 2 percent of gross gas tax receipts but the burden has been reduced and so should the percentage they keep -- at least that's what our research is indicating.

Now I'm going to discuss a measure designed to enhance the Texas Mobility Fund. The department collects fees from the trucking industry for General Revenue for oversized permits and motor carrier registrations. Since these fees are directly related to transportation, they should be re-evaluated, possibly increased, and redirected to the Texas Mobility Fund.

We have one human resource related issue that we're looking at at the moment. Numerous agencies have express authority pay unused compensatory time to FLSA-exempt employees but TxDOT does not. We should remedy that especially when we have to call them in to work in emergencies, long hours, hurricane evacuations, whatever the case may be, wildfire fighting.

Research on a safer temporary dealer tag continues. In addition, we are studying the possibility of extending the renewal of dealers' licenses to two years.

There are also several issues benefitting our project development process. The first is to grant counties transportation planning authority. This has been discussed, I hear this discussed more and more, not in a scientific kind of polling way but the more I meet with people and the more my staff meet with people, the more this idea comes up. Counties should be able to require developers to set aside lands for future transportation corridors. The second issue would grant us authority to acquire rights of way from a willing seller earlier in the process. And then third, we believe there is a better method of procuring engineering services and recommend a quality based, best value approach to obtaining this vital service.

In addition, we are studying the department's authority to enter property for the purpose of conducting surveys and appraisals. We are also researching what is required of state law in order for us to fully implement the delegation of environmental review given to us in the SAFETEA-LU pilot project.

Two issues on utilities need to be addressed: the costs we pay to relocate them and the right they have to use the state's right of way for free. As we optimize our assets, the policy on the utilities should be revisited.

Although this is certainly a matter up for debate, there is perhaps no more important issue before us this next session than seeking to capitalize the Rail Relocation and Improvement Fund. We know rail relocation is important but also know it is expensive. The state, local communities and rail operators must come together to make this happen. Revenue options are being studied in depth and will be presented to you soon.

I'd like to report that I recently met with some folks from Morgan Stanley. They're taking a lot of time to help us better frame the issue and add some good perspective to our research. We greatly appreciate their assistance on that.

MR. WILLIAMSON: Stop for a second, please.

Ted, in all of your ramblings through the mega-transportation systems that you've been studying for the commission, have you come across any states that levy any kind of flat fee -- I hate to use the word toll but maybe that's the right word -- on either the containers that come in on a railroad car or the railroad cars themselves as they move through a state?

MR. HOUGHTON: Well, the one with the highest profile is the Alameda Corridor where every container that hits the corridor has a fee associated with it.

MR. WILLIAMSON: So if China, for example, loads a container full of stereo components and puts it on a boat and brings it into the port and a crane lifts it up and puts it on a railroad car and it gets moved 15 miles, or however long the corridor is --

MR. HOUGHTON: Twenty-two miles.

MR. WILLIAMSON:  -- the owner of the container or China or whoever pays a fee for the use of that road.

MR. HOUGHTON: Correct. A toll railroad is what it is.

MR. WILLIAMSON: Is it like based on a percentage of value, weight, flat fee?

MR. HOUGHTON: It's based upon the size of the container. A 20-foot unit is $16. Coming back, every unit is $8.

MR. WILLIAMSON: So the rationale for the fee is to pay for that corridor.

MR. HOUGHTON: That's correct, pay for the capital cost of building that corridor.

MR. WILLIAMSON: And we don't want to frighten our business community that's in the rail business, I'm just asking the question, Coby. Have we dialogued with Kansas City Southern, UP and BNSF whether or not they would be willing to support that approach for the Rail Relocation Fund?

MR. CHASE: I don't believe my division has. My division will.

MR. WILLIAMSON: Well, we've got a standing memorandum of understanding negotiated by the governor and former Commissioner Nichols, a great commissioner of TxDOT and soon to be a good senator, that assures the railroads that they will not be made to pay for that which they do not wish to pay for, and I don't want to, in spirit or in fact, violate that MOU, it's been very important to us starting the dialogue and planning process with the railroads.

At the same time, the spirit of this discussion is to give fair warning to our friends in the legislature, to the industry, to the advocates of transportation, both sides of an issue, where we, the commission, think the law ought to be. So I think in the spirit of fair warning, maybe we ought to line up the railroad guys and gals and see if they want to come in and start visiting a little bit about that.

MR. CHASE: Absolutely.

MR. WILLIAMSON: With your permission, members? Let's do that.

MR. CHASE: Okay.

MR. WILLIAMSON: Please continue.

MR. CHASE: Enhancing safety on our highways is, of course, tantamount to all other goals you have established for this agency. Authorizing a system of sobriety checkpoints has proven to lower the instances of drunken driving. These should be established in Texas as well.

Another safety issue pertains to the possibility of authorizing the department to implement a variable speed limit system to address fluctuations in roadway conditions.

And then finally, in the way or recommendations regarding toll roads, I've divided this discussion into two sub-categories: comprehensive development agreements, and other toll road issues.

There are numerous issues regarding comprehensive development agreements, or CDAs, that should be included in your recommendations to the legislature, at least as we see them at this stage. These include the repeal of the CDA sunset date and the statutory cap on CDA-related expenditures. The 50-year cap on concession terms needs to be lifted. TxDOT should be granted the authority to assume the debt of a CDA developer and issue the bonds necessary to terminate a comprehensive development agreement. We should be granted the ability to deposit concession fees into the Mobility Fund. And then, of course, the CDA process should be opened up to non-tolled highway projects as well.

Other toll road related issues include granting the commission the ability to acquire toll roads from other public entities and issue debt for that purpose.

MR. WILLIAMSON: Another stop, please. Recently, in our discussion on State Highway 121 with Denton, Collin, Tarrant and Dallas county officials and officials representing the NTTA, it has come to our attention that while we wish NTTA and HCTRA and CTRMA and perhaps El Paso RMA, Alamo RMA to be in a position to compete head to head with other public sector organizations and/or private sector organizations, there may be some problem with them competing head to head.

Is that a federal restriction that we cannot legally change, or is that a state restriction -- maybe Amadeo needs to speak to this -- that needs to appear on our list? Or maybe Mike knows about it. Who wants to speak to it?

MR. DILLON: (Speaking from audience.) I can tell you the federal government has sole prerogative to control the borders and [inaudible].

MR. WILLIAMSON: Okay, Jim, but it's not comment time. We don't conduct our meetings this way.

MR. BEHRENS: That would be a federal limitation.

MR. CHASE: Apparently it's a federal limitation.

MR. WILLIAMSON: Okay. Well, when that became apparent, I think some with the NTTA felt like they were being -- not intentionally -- cut out of the deal. So I guess on our federal agenda which you'll start talking to us about in the fall, we need to see if we can address that.

What's probably going to happen over the next ten years is there's going to be a growth of these regional authorities that will in turn want to partner with the private sector and basically take us out of the process. That being the case, we need to be sure those public authorities, whether it's NTTA or something to be established later, has standing to do those things where they can move forward with their regional plans. So please remember that when the time comes.

MR. CHASE: Okay. We'll start poking deeper into that on the federal level immediately.

In addition, we should be granted the ability to enforce the payment of tolls through the denial of motor vehicle registration and driver's license renewals. And one issue in particular I'm interested in seeing evolve, seeing where the research takes us is the notion that TxDOT create its own separate entity that can compete in the CDA process. Our research section is digging into that right now.

Since I last addressed you, the agency has been involved in two public hearings with the legislature. On May 26, the administration appeared before the House Appropriations General Governance Subcommittee in which we provided testimony on transportation challenges, the Enhancements Program, and the department's flight services. And then on June 13, Chairman Williamson and the administration testified before the Senate Transportation and Homeland Security Committee and discussed comprehensive development agreements and Trans-Texas Corridor 35.

In addition, I'd like to inform you that my staff has made several presentations to transportation leaders around the state on the subject of my presentation to you here today, in addition with some federal matters as well. We are working to get your message out and Texas is moving forward.

These are my prepared remarks for today and I'll be happy to take any questions you might have.

MR. WILLIAMSON: Members, you've heard Coby's delivery and this is the time in which you either ask him questions about what's on the agenda now or you make suggestions to him about what you wish to be researched to be added.

MS. ANDRADE: Mr. Chairman, I have a question.

Coby, for the benefit of the people here for public transportation, could you just elaborate on the medical transportation, what you said at the beginning, briefly?

MR. CHASE: Yes, I did kind of go through that quickly.

The issue at stake -- and if someone from my staff needs to correct me, please do -- is we are in the business of providing transportation services, not the full array of client services -- I might have this wrong and in principle it's right -- and in two out of three places it needs to be in law, it's in two places and I think it needs to be in marbled more clearly into the Transportation Code or another part of law so it clearly shows people what our duties are and what our duties are not.

MS. ANDRADE: We're just in the business to provide public transportation, not qualified.

MR. CHASE: Yes, ma'am, that is precisely it.

MS. ANDRADE: And the second thing is that I want to make sure that they understand that we will still have time with our recommendations as to what we want to incorporate in our agenda.

MR. CHASE: Absolutely.

MS. ANDRADE: Because they're doing a lot of work and we want to make sure we're included.

MR. CHASE: I will say the first person to show up at our office to take us up on this offer was Ben Herr, and he'll always have a place in GBE in our heart for that one, and we're having a great time talking matters over with him.

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Members?

(No response.)

MR. WILLIAMSON: Thank you, Coby. We're not going to take up James at this time.

Jim, have you got comments?

MR. DILLON: Yes, I sure do.

The creation of these so-called regional entities which will supersede our local control of our lives is unconstitutional. Also, unconstitutional is the abdication of all authority to impose fees, duties, tariffs on interstate commerce. That's the sole prerogative of the federal government, although now everything is federal since the state has surrendered its sovereignty and the freedom of the people to the federal goliath/leviathan in Washington, D.C. that now controls everything, including our roads.

But the fact that he said that fair market value is going to be paid for everybody's land and new authorities are going to be created to tax and control and monitor the people's movements, that's just not going to cut it. See, Texas is a free state and we intend to remain free, we intend to drive on free ways, our roads are going to be a free way to travel because the right to travel -- or as you call it, mobility -- has historically been not only a God-given right but a natural right that the people have always possessed. Our freedom of movement is sacrosanct.

We will not surrender to a regional, federal, state or Spanish-owned entity our ability to move about without being held hostage, held for ransom, required to pay exorbitant fees, fines, penalties, duties, taxes and tariffs at every little toll booth you can possibly erect on every road that exists in Texas today. We will not put up with that, and I'm here to tell you that this is a history-making day and it's not going to be a mystery as to what kind of history you make today. You are working, unknowingly and unwittingly, I'm sure, but you are working for the wrong side of history here today.

There is a movement around the world called freedom and the people in this country and this state are joining in that movement. It's a grassroots, fundamental, basic instinct in the human heart to be free, and that includes, but is not limited to, our right and our freedoms to move about and travel from place to place as free men on a daily basis without being penalized and taxed.

MR. WILLIAMSON: Thank you. We appreciate your comments.

MR. DILLON: Thank you.

MR. WILLIAMSON: There's no reason to take action on the item, members. We are going to let James come back because at this time we're going to take up, Mike, agenda item 4, closely followed by agenda item 5(a), please.

MR. BEHRENS: That's correct. Item number 4 is going to concern toll projects in Caldwell, Guadalupe and Travis counties, and would recommend to the commission to exclude Segments 5 and 6 of State Highway 130 from the Central Texas Turnpike System.

MR. BASS: Good morning. For the record, I'm James Bass, chief financial officer at TxDOT.

As Mr. Behrens said, this item would define that Segments 5 and 6 of State Highway 130 as being financially independent of the Central Texas Turnpike System. The indenture for the Central Texas Turnpike System assumes that any toll road owned by the commission will be a part of that system unless designated otherwise by the commission. This minute order provides such a designation and we would then forward this to the trustee and on to the marketplace if you approve. Staff recommends your approval.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation.

Jim, this is a process matter. I think you want to speak on the whole idea, and you'll get a chance to do that on the next one, so if you don't mind, we'll pass this one and then we'll go to the next one and you can offer your comments about the whole package.

MR. DILLON: Okay.

MR. WILLIAMSON: Thank you very much.

Members, what's your pleasure?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. BASS: Thank you.

MR. WILLIAMSON: And now we'll hear 5(a) and then we'll take testimony.

MR. BEHRENS: Agenda item number 5(a) concerns comprehensive development agreements; 5(a) concerns Caldwell, Guadalupe and Travis counties where we recommend the consideration to the commission to authorize the department to execute a Facility Concession Agreement for financing, development, design, construction, operation and maintenance of Segments 5 and 6 of State Highway 130. Phil?

MR. RUSSELL: Thanks, Mike. Good morning, commissioners; good morning, Roger.

Commissioners, we have been very, very busy over the last several months working on this opportunity, and as Commissioner Houghton announced a couple of weeks ago, we have reached an agreement with Cintra Zachry to deliver this project.

The minute order before you authorizes the executive director to enter into this agreement and would agree to these business terms. I'll say that the agreement is complex, like any contract of this nature would be, so what staff has done is put together a 12 or 15 slide power point and I will try to take you through that presentation.

Chairman, of course, if you or any of the other commissioners have a question during this, feel free to interrupt. If I can't answer the question, I have Amadeo and James and Jack Ingram, who were all instrumental in developing this project, and I think between the four of us we'll be able to answer your questions.

Just as a bit of background, the project, as everybody knows, we had a long, arduous competition between three fine proposals back in the '04-05 time frame. At your March '05 commission meeting, it was determined that Cintra Zachry would be the best value to the state. In fact, in that March commission meeting, March 11, we did execute a strategic partnership with the Cintra Zachry group.

And I will say that certainly people had their own notions of what that did or did not do. The reality is that agreement essentially set the business terms, the relationship between TxDOT and Cintra Zachry group throughout the length of this agreement. It talked a little bit about the process that we'll follow as we develop individual projects all up and down the corridor, both road and rail.

There was some discussion about that Cintra Zachry would have all the work on this project and one of the provisions that they looked at in that March 11 contract was this notion of this $400 million right of first negotiation. Again, that was not guaranteeing Cintra Zachry any work at all, it just provided an affirmative duty for us to first discuss the project with the Cintra Zachry group.

MR. WILLIAMSON: So in other words, if Cintra Zachry said this piece, this asset, this facility inside the corridor is ready for development, the affirmative duty for us to permit to make their case as to why they should build it.

MR. RUSSELL: Yes, sir.

MR. WILLIAMSON: And then once we reach the $400 million threshold, at that point we had no affirmative duty at all.

MR. RUSSELL: That's correct.

MR. WILLIAMSON: And that would have been available to either one of the other two groups that were competing for the proposal.

MR. RUSSELL: Exactly, absolutely. It was in the original contract documents.

MR. WILLIAMSON: And if we get past the $400 million threshold, and if, for example, the county commission from Dallas County would come to us and say we want you to consider a portion of Loop 9 in southern Dallas County as a feeding facility or contributing facility to TTC-35 and we want you to consider it for readiness to build, we could do that.

MR. RUSSELL: Yes, sir, absolutely.

MR. WILLIAMSON: And it might even be Doug Pitcock and Carter Burgess who ends up with the work.

MR. RUSSELL: Our choice, we would make that decision. And again, even on your example, that first project we had no affirmative duty to give any of that construction to anyone, merely an obligation to visit with them, allow them to bring the idea to us.

MR. WILLIAMSON: And certainly if it wasn't self-performing, it's highly unlikely that we would do it without going out and getting some kind of competitive proposal -- self-performing meaning they put up all the money and we don't have any of the risk.

MR. RUSSELL: Exactly.

And Chairman, you've really led into that next bullet point. As part of that process, the Cintra Zachry group did bring to us an idea that a project was ready for development. We agreed to that in April, and that would be the extension of 130 south from essentially Bergstrom down to Seguin.

And if I could, Chairman, I know there's some confusion about this, that 130 is part of the Trans-Texas Corridor. That's not the case. 130 has been conceived for 20 years as an independent project to relieve congestion in this area. On all of our comprehensive development agreements, we always allow a certain amount of latitude to these proposers, so whatever the project is, we always allow them other projects that they may need for connectivity purposes or for financing. All proposers always come in with other ideas.

In this case, the Cintra Zachry group said, Hey, the State Highway 130 project, don't know if it will be part of Trans-Texas Corridor, you've achieved environmental clearance, we think it will be important to develop that project, we think it's ripe to be developed, and we agreed in April of last year.

MR. WILLIAMSON: And their rationale is the successful construction of that asset will feed willing customers to TTC-35, if they so choose.

MR. RUSSELL: Right.

MR. WILLIAMSON: So the state's interest here is not only in getting a road built that it doesn't have the money to pay for to build itself, but the state's interest is also in increasing the value of what might be available on the parallel as it gets started.

MR. RUSSELL: Exactly. And again, as to the same issue -- not to belabor the point -- we don't know whether State Highway 130 is going to be part of the Trans-Texas Corridor, it could, but the environmental process will determine whether it is or is not part of the Trans-Texas Corridor. And to some extent, that's in response to public comment we've heard on all of our public meetings. The general public said, Please first look at existing assets first before you look at a parallel or another facility. And clearly in this case, State Highway 130 would be an existing asset, so it is in response to those comments.

Just a little bit on the description. State Highway 130, again what we call Segments 5 and 6, is about a 40-mile stretch from 183 there in the Creedmoor area all the way down to I-10 east of Seguin. It would marry up with the section of 130 that Bob Daigh is constructing currently from Georgetown down to this section there on 183. We estimate it to be about a billion three, a billion three five total construction cost. That would be construction, right of way costs, design costs. We'd be looking at a 50-year lease after it's open for traffic, and depending on any environmental issues, that estimate would be about 2012 when it's open for traffic.

The overall goals, again, for the department: reduce congestion, enhance safety, expand economic opportunity, improve air quality, and increase the value of transportation assets. And I think, in our opinion, commissioners, this project handles all five of those goals and more.

Benefits to the state, some that we've looked at and quantified. We would own a new asset, a $1.3 billion asset, a state highway, public infrastructure that the State of Texas would own. Private investment, as you pointed out earlier, it would be no cost to the state, state or federal dollars, gas tax dollars. Preserve local resources. Originally when State Highway 130 was envisioned, there was a discussion with two of the counties, Guadalupe and Caldwell counties, and to an extent Travis County, that they would be providing a certain amount of the right of way cost, and of course, all that now would be removed and it would allow them to use those resources on other needed projects.

We constantly talk about going to bed at night and waking up in the morning thinking of an $86 billion shortfall for the state, and clearly this project would reduce that shortfall, and obviously would attract more economic development to the region as well.

MR. WILLIAMSON: Let's explore that for just a moment.

MR. RUSSELL: Yes, sir.

MR. WILLIAMSON: It reduces the shortfall in two ways, I think, but I need for you to decide whether we agree on this or not. It relieves from us the contingent liability of having to build a road at some point in the future, part of our $86 billion.

MR. RUSSELL: Yes, sir.

MR. WILLIAMSON: So that's a billion three that we reduce the $86 billion down to $85.7, in theory. But we also -- I think you're going to tell us in a few minutes -- share in the revenue from day one and we've conservatively projected that our share over 50 years would be in the billion six range.

MR. RUSSELL: Yes, sir.

MR. WILLIAMSON: So in a sense, we could feel, the commission, where it could move forward with this, take the position that we've reduced our $86 billion gap by $3 billion and we've now got an $83 billion gap.

MR. RUSSELL: That billion six is out over 50 years if you PV it.

MR. WILLIAMSON: But the $86 billion is also. When we developed the gap, one of the things we focused on was what is it really over the next 25 years.

Now, I'm kind of curious. Michael Morris, you're here? I thought he was here. Is there anyone from Collin or Dallas or the NTTA or RTC out there? We've been having a spirited discussion, Mr. Pickett, about the 121 matter in North Texas, and I've had it said to me that this is the most lucrative toll road in the state of Texas -- 121 I speak of. If it's the case that 121, the subject of so much fun discussions we're having, is the most lucrative toll road available on the state system right now, and if it's the case that Segments 5 and 6 has a $3 billion value, then I'm kind of curious what is the real value of the 121 toll road.

MR. MORRIS: Since we're approaching a competitive process on 121, I'd like to speak in general terms.

MR. WILLIAMSON: Yes, sir.

MR. MORRIS: From the traffic and revenue studies done on 121 in Denton and Collin counties, we think each of those is in excess of a billion dollars, so the 121 project in Denton, since it will have higher volumes as it approaches the airport, is anticipated to be about $1.5 billion, the 121 Collin County piece is anticipated to be a billion, and the 161 piece is anticipated to be a billion.

Now, with regard to 161, we still need $500 million to finish that project. 121 Denton was pretty well funded with gasoline tax, small amounts of money for technology with regard to reading toll tags, and then $350 million or so is needed to complete 121 Collin, so if you add that up, you're looking at a surplus of $2.2 billion of toll revenue available to build other transportation projects, and we're working through those MOUs at this particular time with this office.

I think it's quite possible, when CDAs or NTTA look closer at those details and actually go through the competition beyond the traffic and revenue and look at those further bandings that occur in what are two high-growth counties, I think the revenue could be in excess of that.

MR. WILLIAMSON: Thank you very much for your remarks.

And Phil, the reason I interrupted you and asked Michael --

MR. MORRIS: Michael Morris, MPO director, Dallas-Fort Worth.

MR. WILLIAMSON:  -- the reason I asked Michael to comment because I know Michael is deep into the analysis of this. It's been interesting -- and I'm admittedly laying the groundwork for the El Paso discussion in a moment that will occur -- it's human nature to see the future through the prism of your past, and I can remember it was just four short years ago when we could not persuade organizations in parts of the state to build any of these toll roads unless we agreed to front half the money with gasoline tax because they couldn't possibly pay for themselves. In fact, we're looking at one on the board right now.

Just two years ago, a contractor who had an opportunity, at our option, to build this road told us that we needed to put $200 million of state gas tax money into this toll road, and yet we know as business people who have been focused on this for a while -- not because we like toll roads but because we have an $86 billion problem and that problem has got to be addressed either with taxes or tolls, one of the two -- we've known for a while that the numbers are much different than we think they are looking at the future through the prism of our past.

And it's refreshing for you to lay this out, and it's refreshing for Michael to share with us some of his initial findings, and it's instructive for all of us as we go through the day to kind of remember that, because we've all got some difficult decisions to make today that are really about how we finance the transportation system in our future.

Please continue.

MR. RUSSELL: Chairman, just a couple of other points I'd like to make on this slide, and you kind of touched upon it, I don't think anybody ever doubted the need for this extension down to Seguin. Commissioner Andrade has been very clear to us about the needs of the Austin-San Antonio area, so it wasn't a matter of need or importance, what it came down to, as you point out, was a lack of gas tax dollars to finish the deal. And as I'm always talking about, it's not that the department wouldn't have some money, but somebody would have to give up needed projects in their area to complete this. We'd have to essentially shift gas tax from somewhere, Dallas-Fort Worth, Houston, El Paso, the Valley, Amarillo, and guess what, nobody is willing to give up their projects because they have so much need.

So it's difficult. I guess I always cringe when people say you would have built this project anyway someday, but it wouldn't have been in the near future, we simply didn't have the money for it.

The other thing I think is important to talk about that people miss sometimes, even if and when we could fund the up-front project costs, construction, design and right of way, the long term maintenance cost is significant, and on a project like this, it would have been millions and millions of dollars. I'll talk a bit more about it, but it would relieve us of that long term maintenance cost as well.

Just some of the benefits again -- and we've talked about many of these -- it would improve mobility and safety on the 35 corridor itself, transfer project risk to the private sector -- I'll talk a little bit more about this -- operation and maintenance costs would be paid by the partnership, accelerate this project by decades, and then the concession fee and any revenue-sharing -- and again, I'll talk a bit more about that -- could be utilized to advance other projects.

The project agreement itself, Texas would receive a $1.35 billion project, state highway, public infrastructure at no cost to us. What we envision in this agreement is an up-front $25 million concession fee, again that could be utilized for other transportation projects; an estimated, in present value terms, $245 million of revenue-sharing out over the 50 years, and that relates to the figure that you mentioned earlier, Chairman; and of course, a long term source of maintenance for this project. In return for that, Cintra would receive the right to collect tolls for 50 years, and in return, they'd have the obligation to design it, build it, finance it, operate it and maintain it.

Now, the design and the construction standards would be to state/federal standards. We will be overseeing that, we're not going to shirk from our duty, we will be overseeing that general process. It will be designed as a high speed facility and state of the art.

MR. HOUGHTON: Phil, before you move on, can you go back?

MR. RUSSELL: Yes, sir.

MR. HOUGHTON: Are you going to talk about -- and I know you have numbers, Amadeo, on the maintenance -- what are we shifting to the private sector in maintenance in real dollars?

MR. RUSSELL: Commissioner, I don't know if I have that. Amadeo, do you? Let us get back to it. It will be millions and millions of dollars, but we should have done that.

MR. HOUGHTON: And the other thing -- Mr. Chairman, you alluded to it -- we have from a contractor a firm negotiated design and build that was about $200 million.

MR. RUSSELL: Yes, sir.

MR. HOUGHTON: If we're getting $245- back, the swing there is close to half a billion when you talk about the swing that just occurs.

MR. WILLIAMSON: And I don't want to confuse anyone in the audience that's kind of new to this discussion -- I particularly don't want to confuse our fellow citizens in the free press -- but $245 million is cash value.

MR. HOUGHTON: It's cash value.

MR. WILLIAMSON: Our $86 billion problem is extended over time. If we netted the $86 billion back to cash and said what would it take if we could spend it right now and solve our problem, it would be something like $31 billion. So this is a huge chunk out of our problem whether you look at it at present value or whether you look at it over time, as our $86 billion problem is over time. And you touched on something, the reduction in maintenance costs is also a huge reduction of that problem.

MR. HOUGHTON: We don't focus on that enough. Because currently state gas tax revenues no longer cover maintenance on the system. Is that an accurate statement?

MR. RUSSELL: Correct.

MR. HOUGHTON: So all of our state gas tax is being sucked up by maintenance.

MR. RUSSELL: Every penny and more.

A little bit on the revenue-sharing -- we've had some discussion on that. Part of the effort, a lot of the effort is exactly what would be the best for the state of Texas. When we started this procurement process, we tried to create an apples-to-apples comparison, and so we told all three proposers for purposes of this procurement please tell us what an up-front concession fee might be in your game plan, and I think people kind of naturally gravitated to that and assumed that's ultimately what we would want, all that money up front. But I think as we've gotten through this, what we've ultimately determined to be appropriate is we want some fee up front, that $25 million concession fee, but we kind of like being partners out over the long haul and it provides a revenue source out over the 50 years.

And so ultimately what we've designed here is a mechanism -- and we call them bands, and I think Michael mentioned it as well -- where we have different bands, and essentially -- I'll try to do this in everyday terms -- we know that the private sector is in business to make money, they want a return on their equity, no surprise there. I think there's some public push-back of is there any protection or any limitations of their rate of return. So essentially we've come up with this banding mechanism, and what it says is we think that they should have a reasonable opportunity to have a return on their investment, their equity investment, so for the first band up to an 11 percent equity return, we want right off the top from the first car that comes through we want 4.65 percent of that revenue coming in.

So think of it this way: we get about a nickel on every toll revenue that comes in right off the top, first thing, up to the point where they achieve 11 percent equity return. Now, we could get a lot more traffic than anybody anticipates and we want to guard that situation --

MR. WILLIAMSON: We want the citizens of the state of Texas to share in that benefit.

MR. RUSSELL: Yes, absolutely, and it's revenue, again, that we can use for other transportation projects.

So contractually, if there's more traffic, if there's more congestion relief off 35, there's even more traffic that comes on this project, and say their equity return would jump up to 15 percent turnabout, then we want a little higher percentage as well, so our revenue percentage would jump up to 9.3 percent, almost a dime apiece. If their rate of return exceeds 15 percent, then we would be into it for a 50-50 sharing in that revenue throughout the life of the project. And again, we estimate the present value of this at about $245 million.

MR. JOHNSON: Phil, I missed one point.

MR. RUSSELL: Yes, sir?

MR. JOHNSON: Are we talking revenues here or are we talking about cash flow?

MR. RUSSELL: We're talking revenues.

MR. JOHNSON: Gross revenues.

MR. RUSSELL: But again, we'll be getting our nickel right up front, we'll be first in line.

MS. ANDRADE: From day one.

MR. RUSSELL: From day one.

Other agreement terms. Revenue-sharing is based on 70 miles per hour speed, and increased speed limits would result in additional revenue-sharing. The idea behind this -- and I talked about it earlier -- there is a possibility that State Highway 130 could become part of the Trans-Texas Corridor, don't know that yet, environmental process will determine that. If the environmental process deems that State Highway 130 should become part of the Trans-Texas Corridor, then we would have the ability to increase those speeds up to 80 and 85 miles per hour.

In case anybody is thinking about asking the question, we're ensuring that this facility will be designed as a state of the art facility where we can safely transport folks 85 miles per hour. So it will be designed to accommodate that higher speed if the decision is ever made to make it part of the Trans-Texas Corridor. Now, if that occurs, then there will be an incremental increase in traffic from 70 to 80 and 80 and 85. And so we've captured that in this contract that if that speed limit is increased, more traffic will occur, and that we want one of two things: either we want to increase that up-front $25 million to a higher level, or we want a higher percentage of that revenue-sharing in each one of those three bands. So we'll have the option either way to increase our up-front cost, our up-front payment, or to increase our percentage throughout the 50 years.

Yes, ma'am?

MS. ANDRADE: So those will be our standards, our construction standards?

MR. RUSSELL: Yes, ma'am.

Capacity improvements. C-Z will be required to maintain specific levels of service. You know, the chairman has spoken previously about if you ask anybody if they really wanted to pay a toll, probably everybody would say no, but the realities are this may be an option for folks to kind of get a bit of congestion relief. Well, if we're asking people to pay a toll to drive on this roadway, it's only fair that they get to maintain a good quality of service, and so the contract is specifically detailed so that if traffic speeds start dipping down, say below 60 or below 55 miles per hour, then that will invoke certain requirements on C-Z to improve that level of service, very likely could be additional lanes would be added.

So to say it again, if traffic speed starts deteriorating, if we start having congestion problems -- and we will, obviously, over the length in the future -- then C-Z will be required to add additional lanes to ensure that the motorists have a good high speed facility.

Non-compete clause, that's always something that generates a lot of excitement and interest. We think we've got extensive protections in this to maintain flexibility. Just as we did on the 130 project, Segments 1 through 4, we ensure that all projects that are in our current long range plan will be built as planned, period. What I think is of special note is there will be no limitations on our ability to do work on 35. All the work that our district engineers have been working on to add additional lanes, all of that continues abated. Frankly, we can add additional lanes in the future if we so desire. So no future roadways are delayed, no prohibited.

The contract does establish something called a competing facility zone, and I'll try to explain it. Essentially it's a ten-mile wide band and if the state chooses to develop projects in that area that have either a negative or a positive effect on the overall revenue, then we will analyze that and take that into consideration. Now let me stop and say this isn't talk about a city or county or somebody else that we have no control over adds a facility, this is if TxDOT chooses to add a project.

And I think when you look at it, if we add a project, it could be deemed to be a competing facility that would drain cars off the State Highway 130 project, or it could be bringing more traffic from 35 to 130, so it could actually be increasing traffic on 130, and again, that's a good thing. We want to make sure that we can relieve congestion on 35 and that everybody has an option. So it could be the pro or negative, pro or con, and the contract establishes an ability to analyze that and take that into account.

MR. JOHNSON: Who makes that determination?

MR. RUSSELL: We'll look at it. The burden of proof is on C-Z, and we'll look at the data and either agree or disagree.

Toll rates. Let me start off by saying I've read stuff, heard stuff that there will be no cap, there will be no constraint -- I think Commissioner Andrade heard some of that yesterday -- but the reality is that we will have a cap on what the increase in toll rate can be. Ultimately, though, market rates I think will pretty well be based on consumer demand.

You've heard me in the previous slide indicate that we have no limitations on the work we can do on 35, and even if we didn't have a cap on the toll rate, we would argue that Cintra Zachry wouldn't be increasing toll rate. All that's going to do is chase people off 130 and put more and more people on 35. So they're always going to look at it as a market-based situation and they're not going to increase toll rates to the extent that they're going to chase people away, they want to incentivize people to utilize the roadway.

MR. WILLIAMSON: In other words, the argument for controlling tolls as a public policy is entirely defensible when you're building a road that's a person's only choice between point A and point B, it's totally without defense when you're building a parallel road and your taxpayers always have the choice to drive the tax road they're paying a low gas tax rate for or to drive the toll road that they would pay a market-based or consumer-driven rate.

MR. RUSSELL: Absolutely.

MR. WILLIAMSON: And one of the arguments -- I noticed in the previous slide you touched on it before I got back -- I need to re-emphasize one of the arguments that is often advanced by those who are concerned about this transaction is that a Spanish company is controlling the road. It's clear from the slide that is not the case.

The other argument is that we will cease our commitment to Interstate 35 because -- not to be too repetitive, but we do tend to see our future through the prism of our past -- we compare the Trans-Texas Corridor and its impact on the interstate system to the devastation that occurred in some communities when the interstate system was built, but what people forget was there was no competing open free tax road for the interstate to compete with. That is the primary reason those communities no longer had any traffic. In this case we're paralleling an existing open, non-stop interstate system, so the same impacts could not be expected.

MR. RUSSELL: I would agree completely.

The reality is, Chairman, on 35 the struggle is not going to be to keep people on 35, the struggle is going to be to get them to move off to a parallel connection. 35 will continue to garner a huge amount of the traffic that's occurring north and south, but people will always have the option. If Commissioner Andrade drove up yesterday, she will always have the option to choose 35 or choose State Highway 130 as a toll road, her option.

Now, we talked a little bit about market-demand and consumer-based decisions, but the reality is state law under House Bill 2702 does require that the department, the commission approve the toll-setting methodology. It doesn't say that you have to individually on a yearly basis set the toll, but it does require you to set the methodology that Cintra Zachry would utilize to increase that toll.

MR. WILLIAMSON: Or any other toll road operator.

MR. RUSSELL: Or any other toll road operator, that is correct, exactly.

And so the process, what we thought was probably the best, the most fair escalation ability was something that's based on what the Texas economy is doing, good or bad, and so we selected something called Gross State Product, and we think that's probably a pretty good indicator of how the Texas economy is occurring on that particular year. So that would be the methodology. They could increase it no higher than that Gross State Product. It's not to say that they would, but that would be the cap, the limitation that they could utilize on any one year.

And again, my sense is they're going to be very much market-driven, so they know what the cap is but my sense is they're going to be very careful in increasing that toll and chasing customers away, they want them on the roadway.

MR. WILLIAMSON: They might even go out and market lower toll rates in order to incent certain types of people to go over.

MR. RUSSELL: Yes, sir.

MR. WILLIAMSON: For example, they might go to UT and offer a bonus to UT alumni.

MR. RUSSELL: Well, that's something that I would fully support, I think it's a very good idea.

MR. WILLIAMSON: No offense, Mike.

MR. RUSSELL: He's not too excited. We'll throw in a 50 percent discount for Aggies.

MR. WILLIAMSON: That's correct, and a surcharge for Aggies.

MR. RUSSELL: He said that, Mr. Behrens. I said a 50 percent discount for Aggies.

(General laughter.)

MR. RUSSELL: Risk transfer. And you know, commissioners, this is something -- again you're talking about looking at the prism of the past -- I think all of us that have worked for the department for a number of years kind of look at risk transfer at least early on and we kind of scratched our head. Those are things that we were just accustomed to in government of accepting that risk. We didn't think of it as a big deal, that's just something we do as our everyday job function, but the reality is that's a substantial, substantial transfer of that risk when we can get the private sector to take over some of those matters.

For instance, construction delay. Again, estimated opening at 2012. They will be held accountable and the idea will be that it will be open at 2012. We talk about inflation risk and other price uncertainties. You know, Chairman, when we really originally looked at extending this project in 2002, I don't remember offhand but the construction cost was a lot less, and over the past few years, particularly the past year or so, we've had some huge increases in construction cost, whether it's attributed to steel, concrete or petroleum, but the reality is the private sector in this case will be absorbing that risk.

MR. WILLIAMSON: Let's use that as an example, again laying the groundwork for our discussion with El Paso in a few minutes. When you talk of risk transfer, we speak of it generally at multiple levels, not just at one level. There's the risk of how much more we'll have to pay for a road if we wait to build it as a tax road 25 years from now versus letting someone else build it as a toll road today -- that's one kind of transfer of risk. But is it also not the case that we're transferring the risk that the traffic projections and the population projections upon which we're basing our plan turn out to be not correct, we've transferred the risk of taking gasoline tax money and building a road that's not heavily used to the private sector and we're permitting them to make a profit from having taken that risk, so that's another kind of risk transfer.

MR. RUSSELL: That's exactly right, and that's the fourth bullet point: Traffic demand and toll revenues. When I talked to, in earlier slides, about those revenue bands, up to 11 percent rate of return or 15 percent, there's absolutely no guarantee that they'll ever achieve those. That traffic risk is all theirs, they're absolutely absorbing that traffic risk.

The most obvious one that's not on the page that we wouldn't ask Phillip to market, but the one that we have to consider is the risk we run every day of the federal government continuing to rescind our apportionment of the gas tax, forcing us to reduce projects because our reimbursement from the federal government shrinks.

MR. HOUGHTON: What is that number today, Mr. Chairman, the rescissions?

MR. WILLIAMSON: I think the rescissions this year totaled $250 million, and we have been given preliminary notice that another $125 million is on the way.

MR. HOUGHTON: And that will be allocated, Amadeo, across the system?

MR. SAENZ: (Speaking from audience.) We'll be looking at that.

MR. WILLIAMSON: So that's another form of risk. We're transferring the risk that the money available to us projected ends up being less, meaning less tax projects we can buy which also means our $86 billion gap grows as opposed to shrinks. We're transferring that risk to the private sector.

MR. JOHNSON: Phil, can we highlight bullet point number 3 or at least focus on it for one moment?

MR. RUSSELL: Yes, sir.

MR. JOHNSON: One of the things that I'm particularly drawn to about this partnership is the entrepreneur's ability to make certain decisions, and the road surface is one of those decisions. We are not going to dictate the type surface that they build. It makes sense to me that if they go concrete, they're up-front costs are going to be more but their maintenance costs are going to be less, and if they go another surface, their up-front costs are going to be probably less than concrete but their maintenance bills are going to be higher.

How do we make sure that the standard of maintenance, standard of the surface of that facility is in keeping with the standard that this department has always sought and maintained in our system across the state?

MR. RUSSELL: That's a great question, Commissioner. As we entered into this agreement, what we deemed to be appropriate was to make sure that they had guidelines of which they could propose on and which we had some expectations of how the project would be developed, including maintenance standards. We provide those, we say this is what we expect. It could be ride score, it could be a number of different engineering elements, but we set those standards.

But just as important is we have to step back, they're trying to run it like a business. And I'll pick on Thomas because I think I saw him here earlier. When we first started talking about this a year or so ago, some of the folks in Construction, the way we have always designed or constructed a project, once a contractor left, if we started having problems on it, then that kind of came back to us, and so the discussion was if we let them have more control, what happens if we start having problems on the pavement.

My response is not our problem, that will be somebody else's on the private sector problem. It will be in the contract that they have to maintain certain ride score or whatever it is. They will be responsible for fixing that.

The only thing, Commissioner, that we made very, very straightforward to the private sector that we absolutely won't even move out on a day-to-day basis, anything related to safety. Anything that's related to safety, TxDOT absolutely will be there on a day-to-day basis to ensure that we have a good, safe, efficient roadway.

MR. JOHNSON: Well, you know, I asked about the determination of whether a facility, a new facility competes or doesn't compete. Who makes the determination on is the ride score or whatever satisfactory, keeping with the standards that this department sets for itself?

MR. RUSSELL: We'll have an independent engineer that will be looking at all of the data, from a ride score, just a whole bunch of things, maintenance, construction. That independent engineer will be providing information to both us and the Cintra Zachry group, and so they'll be making an independent analysis. We can either agree or disagree with it, and then there's a process in place of how we solve any sorts of concern or come to some sort of resolution.

MR. JOHNSON: Let's hypothetically assume that in the type of pavement selected we have a disagreement on the safety aspect of that pavement. How do we reconcile a difference like that?

MR. RUSSELL: Well, I mean, you're right, there could be a gray area. We could have a ride score that kind of looks like some sort of maintenance issue but in reality it's a safety issue. I think in the interest of safety we'll have a bit more leverage in that contract document to take care of business quickly. That's obviously something that can't languish for a week or two weeks or three weeks while we kind of sort it out internally, so if there's a safety issue, we'll have the ability to move in quickly and fix it and move on.

MR. JOHNSON: I just want to make sure that we're not neglecting our responsibility in passing that responsibility of the standard of safety and the standard of the maintenance of the ride score, et cetera and letting somebody else make those decisions when clearly we are giving somebody a right here but they have to live up to a certain very high standards.

MR. RUSSELL: Commissioner, I guess we started on all of this program with baby steps first, and again, I would still look at the project that Bob is constructing, 130, the northern section, and we had that dilemma early on. Any project that we'd ever designed on a design-bid-build basis, we absolutely designed, we said whether it was going to be concrete or asphalt, and we did the design, and then we asked a construction company to design it. With 130 we started changing that paradigm, and we said, Really, guys, we don't care whether you use asphalt or concrete because we know every proposer, every company will have different expertise, you all do what you do best, but we do have some expectations of the end product, the performance product.

And this one really is a natural progression to where we are in a concession base, and we think on a lot of those day-to-day activities we can step back a little bit, let the private sector run their business, but we will have standards, we'll monitor it. Federal Highway Administration is okay as well, they've approved this general process.

MR. JOHNSON: Thank you.

MS. ANDRADE: Phil?

MR. RUSSELL: Yes, ma'am.

MS. ANDRADE: As Commissioner Johnson brought up safety, it reminded me that we need to remind the public that it remains a state highway, Department of Public Safety will continue to patrol our state highway. Right?

MR. RUSSELL: Yes, ma'am.

MS. ANDRADE: Okay.

MR. RUSSELL: I was going to bring that up as well. Through the chairman's earlier comments, I think there's some discussion. First of all, it's private, it's not state highway, and at the end of the day the Department of Public Safety is still the group that's policing this state highway just like any others.

MS. ANDRADE: Okay, thank you.

MR. RUSSELL: We talked a little, I think, on most of those. Financing, the interest rate risk, that's another area of substantial risk transfer that Cintra Zachry will be taking into account.

Chairman, you thought we weren't listening to you for the last five years. We were, we heard very clearly that you absolutely expect all of our TxDOT roadways to be all electronic. There will be no inconvenient toll booths to stop and dig in your pocket for quarters, it will be an all electronic. You all have been consistent for the last three, four, five years that you want to have an all electronic system. This will be it.

It will be interoperable, another critical issue for the commission, with all the toll roads in the state. We'll be looking at TxTag again. If you want a toll tag sticker, that's fine. We've also put together a process for video billing where we'll be able to handle that either way through a TxTag or just through video billing. We retain the customer service center, what we call kind of the back room, all the business operations, the day-to-day discussions with our TxTag customers. Cintra Zachry will assume all the toll equipment operation. To say it another way, they'll be the guys installing the equipment on the overhead gantry that will read the TxTags and all that, send the data to us, and then we'll be responsible for collecting those revenues, handling that, and then sending the money back to the private group.

Alternate funding scenario. And Chairman, we've talked a little bit about this, but Amadeo and Mike wanted us to kind of look at it from a public sector standpoint and say okay, there's always a lot of discussion, what happens, can TxDOT just do this project ourselves, why would we need the private sector involved. And so we asked our financial guys, James and KPMG and all the financial guys to kind of run some numbers, and we asked them to be very, very, very conservative on their estimate.

And essentially what they came up with is that if we built the project today without Cintra Zachry, if you all commanded us today to go out and build it, we'd conservatively have to come up with over $700 million in public funds, gas tax dollars.

MR. WILLIAMSON: Which is why we wouldn't have built it because we don't have an unplanned for $720 million.

MR. RUSSELL: Unless somebody else is willing to give it up.

I will also say, in my opinion, they did what we asked, it's $720-, it's conservative. If you actually gave us that commandment to go build it, you'd probably see me stuttering and hesitating because I think actually it would be closer to a billion dollars. But for our conservative basis so nobody could say we're exaggerating, we said it would come up with about $700 million of extra gas tax dollars to build this as a TxDOT toll road.

And again, we talked a little bit earlier about some of the right of way costs. That was a huge issue four or five or six years ago. Commissioner Johnson remembers those discussions very well. It would relieve a huge burden from those counties. Caldwell especially is a county that's rural in nature, they don't have a lot of financial means, yet they're getting caught up in a lot of the growth in Austin and San Antonio and it's reflected in those right of way values.

MR. WILLIAMSON: Now I want to explore that just a second.

MR. RUSSELL: Yes, sir.

MR. WILLIAMSON: Because I think if a Caldwell County judge were here or Guadalupe County judge were here, they would say well, you can't count that as a cost toward it because we haven't got that money, we weren't going to pitch it in the pot anyway, so those are funny numbers. They wouldn't say it negatively but they would just say those are funny numbers.

Is David Casteel here? Is Bob Daigh here?

MR. RUSSELL: Bob is here; Bob may be in the outer room.

MR. WILLIAMSON: He no doubt heard me because Bob listens to what we're doing.

Let's play a game.

MR. RUSSELL: Here he comes. I knew he was in that outer room.

MR. WILLIAMSON: Let's play a game a minute, members. Let's assume that we weren't willing to do this but the pressure on us through the legislature reached the point that we had to build this road. Is it the case, Bob, that the Austin District and the San Antonio District, because of the way we apportion our funds now -- we don't approve projects here, we apportion funds to districts -- is it the case that the Austin District and the San Antonio District would have to work the cash flow to build this road out of their apportionment?

MR. DAIGH: That's correct, sir.

MR. WILLIAMSON: So if you lived in Caldwell County and you had a state highway you needed improved, and the need to finish State Highway 130 became so intense it had to be done, in effect, a project that would have been built in Guadalupe County would not be built in order to transfer the cash to this project to pay for it.

MR. DAIGH: That's correct, and vice versa.

MR. WILLIAMSON: So really, if you were in Caldwell or Guadalupe and at one time Comal County and you didn't have the cash to pay for this right of way and contribute your share, one way or the other you were going to suffer the loss of this $80 million either through paying it in cash or through deferred transportation projects that would have occurred.

MR. DAIGH: Yes, sir.

MR. WILLIAMSON: Thank you very much.

MR. DAIGH: I would like to also point out that that alone is several years of our total allocation, so that would be a very long time in coming.

MR. HOUGHTON: How many years of your allocation is that number?

MR. DAIGH: In 2017 our allocation is approximately $24 million, so you're looking at four years of the total allocation in 2017.

MR. HOUGHTON: Would be sucked up into this.

MR. DAIGH: Would be sucked up into that one project.

MR. WILLIAMSON: I don't think we would have afforded the highway.

MR. JOHNSON: You know, another way to look at this right of way issue, the right of way has got to be acquired, somebody is going to pay for it.

MR. WILLIAMSON: One way or the other.

MR. JOHNSON: That's right.

MR. DILLON: We could just take it by eminent domain.

MR. JOHNSON: You still have to pay for it.

MR. WILLIAMSON: Wait, Jim, you'll have your chance in a minute. Everybody gets their chance.

MR. RUSSELL: Commissioners, again just a summary of the agreement itself. The concession would be for Cintra Zachry to design, build, finance and operate and maintain this project, and collect tolls for up to the next 50 years. Toll rates are market-based with an escalation methodology that would be approved by the commission. All those substantial project risks that I talked about in the previous slides will be transferred to Cintra Zachry.

The state, in return, would receive a $1.35 billion project many, many years earlier with no public funds. We would receive an up-front $25 million concession payment. Over the 50 years we would receive, it's estimated, a substantial amount of revenues, what we've present valued, what if we got the money today, it would be worth $245 million and a long term funding source for operation and maintenance.

And in conclusion, again, it's a new asset, no cost to the state; revenue-sharing will accelerate other needed projects; we'll enjoy less congestion whether we choose 35 or whether we choose State Highway 130; it furthers those state transportation goals; encourages private investment; preserves local resources; accelerates those projects, as has been pointed out, with safety and mobility that promotes that productivity and quality of life that I think all of us as Texans enjoy.

Commissioners, I'd be happy to address any questions you might have.

MR. WILLIAMSON: Have we touched upon everything we want to with Phil at this time?

MS. ANDRADE: I have a question.

MR. WILLIAMSON: Please.

MS. ANDRADE: Phil, on the concession fee that we're getting and the money that will be earned throughout the 50 years, is that money being applied or are we projecting to apply it for projects in that region?

MR. RUSSELL: I think obviously that would be the call of the commission. There's some statutory language I think applies and it's something like to TxDOT districts, I believe, is how that's related.

MS. ANDRADE: And those monies, can they be applied for projects other than just road-building?

MR. RUSSELL: Other than just roadway projects? Oh, you're saying other transportation projects?

MS. ANDRADE: Yes, other transportation projects.

MR. RUSSELL: Yes, absolutely.

MS. ANDRADE: Okay. Thank you. Oh, and I had one other. When I came to you on the commission, I think it was clear that this region wanted 5 and 6 to be completed, and it was always planned that it would be a toll road. Right? So there was never any question whether it was going to be a toll road, not a toll road, they just wanted it to be completed.

MR. RUSSELL: Right. Twenty years ago they just wanted the project and they were frustrated because it couldn't be delivered.

MS. ANDRADE: All we were looking for was relief from congestion.

MR. RUSSELL: Clearly.

MS. ANDRADE: Thank you.

MR. WILLIAMSON: I'm going to have a couple of other questions, but I think it would be appropriate to permit testimony at this time, unless, Ted, you or John want to talk with Phil? Okay, we're going to take testimony at this time on this discussion item, and you're up.

MR. DILLON: There was about a million points on that power point thing he just went through. I wish I could rebut each item.

The assertion that the goal of this panel and the rest of the gang that is trying to tax us out of existence is not to reduce congestion on our roads. If that were the case, four and probably six entrance and exit ramps on I-35 -- which is already a parking lot -- would not be scheduled to close this year in Round Rock to the detriment of traffic flow.

Now, I think I heard him say that the Spanish-owned company is going to generate all the profits. Is this thing on?

MR. WILLIAMSON: Oh, yes.

MR. DILLON: Good -- all the profits from the tax road, but that the state and the people are going to be responsible for collecting the money for these foreigners, and then you're also going to allow Department of Public Safety to toll and patrol this new road, generating even more revenue at the expense of the traveling public, and the assertion that speeds of 80 to 100 miles an hour could enhance safety when we don't know really who's responsible for maintenance on these roads. Well, actually we do, it's the people. The Spanish-owned company is responsible for collecting profits, the people are responsible for the maintenance. The people's employees --

MR. WILLIAMSON: Well, I hope they weren't confusing about that.

MR. DILLON: They were.

MR. WILLIAMSON: The Spanish company has to pay for the maintenance.

MR. DILLON: They won't do it. You're not maintaining our roads now.

MR. WILLIAMSON: I mean, I know some people say that, but I think we're maintaining them as best we can, given the limited cash flow we have.

MR. DILLON: Well, you're not including a provision for safety when you close four and probably six exits on I-35 in Round Rock so that the toll road can sweep in with their own exit that is a profit-maker. Speaking of profit --

MR. WILLIAMSON: Now, that toll road up there, that's not a Spanish toll road, it's a Texas toll road.

MR. DILLON: They're all the same, it's all Morgan Stanley, the guys at the top.

MR. WILLIAMSON: Not Morgan Stanley. I don't think we do business with Morgan Stanley up there. I mean, if we're going to involve personal names, we need to get them right; otherwise, they might sue you and me, and we don't want that to happen.

MR. DILLON: Now, the matter of whether or not this foreign-owned toll road company can be held to a standard of safety that would protect the people of Texas when they travel is pretty clear in my mind. General Franco was a close friend of Adolf Hitler, his buddy, King Juan Carlos is primary stockholder in Cintra, and they were the original -- with their buddy Hitler -- designers in on the war roads called the Autobahn that General Eisenhower used as a model to create our interstate system in America.

He imported thousands of Nazi engineers and architects after the war, as did Truman and the rest of them, to design our own Autobahn system 50 years ago -- their Freedom Road. He even called it the National Defense Highway Act as a euphemism for that other term. But as they were bringing in the architects, engineers and designers for our freeway system 50 years ago, they also brought in other war criminals from Nazi Germany under the Operation Paperclip Program whereby the medical experimenters, the big money guys, Prescott Bush from Connecticut, all of that --

MR. WILLIAMSON: Let's keep restricted to --

MR. DILLON: Okay, we won't mention President Bush's father.

MR. WILLIAMSON: I'm giving you double time because our presentation took so long, but you've got about a minute to wrap up.

MR. DILLON: Okay. Yes, I won't mention the Bush crime family in this at all, even though there's a panic on the board apparently that some of our money that we send to Washington, D.C. may not be returned to us unless we're in full compliance with all their mandates, unfunded mandates that they impose on us such as mandatory seatbelt use, mandatory speed limits --

MR. WILLIAMSON: Motorcycle helmets.

MR. DILLON:  -- the helmet laws, unfunded mandates requiring compliance from the sovereign state and people of Texas in order to get our own money back.

MR. WILLIAMSON: Can I infer that you're against this?

MR. DILLON: Yes, sir.

MR. WILLIAMSON: Well, that was six minutes and that's twice as long, and I appreciate it.

MR. DILLON: Okay.

MR. WILLIAMSON: But don't leave, we've got more agenda items.

MR. DILLON: Okay. I'm not leaving.

MR. WILLIAMSON: Did Hope abandon ship?

MR. JOHNSON: I think she just had to take care of a personal matter.

MR. WILLIAMSON: We don't want to vote without all of our members present, so do we have any other witnesses, Mike?

MR. HOUGHTON: Are we going to vote right now?

MR. WILLIAMSON: I think we're going to vote.

MR. HOUGHTON: Are we finished with testimony.

MR. BEHRENS: We don't have any other witnesses.

MR. HOUGHTON: No more witnesses?

MR. WILLIAMSON: No more witnesses.

MR. HOUGHTON: I'd like to recognize the folks that put this together. This was a yeoman's job.

MR. WILLIAMSON: Is your mike on?

MR. HOUGHTON: Yes, it is, my mike is on. I would love to have all of the folks that represented TxDOT to come forward, to stand up in the audience and come forward.

MR. WILLIAMSON: That would be Amadeo, where's Mr. Ingram, James Bass, Jeremiah.

MR. HOUGHTON: Where are you guys? Get out of the back room.

MR. WILLIAMSON: Now, this takes the place of your bonus this year, just so you know.

(General talking and laughter.)

MR. HOUGHTON: Well, I'd just like to recognize, ladies and gentlemen, Mr. Chairman, we set a high standard, this group met the high standard. The first CDA program approved in the state of Texas, 5 and 6, one huge, huge success.

MR. WILLIAMSON: Before we do congratulate them, let me add something, because almost everyone in the audience is a transportation player at some level, either a House member, Mr. Pickett, an HNTB engineer, an Austin Road & Bridge Company constructor, a Morgan Company -- not Morgan Stanley -- a Morgan Company financier, an Association of Good Roads advocate, almost everyone in our audience is a transportation player at some level.

All of us get approached by all of you individually about different aspects. Dalton Smith, my good friend, calls and says I'm concerned about this, Kris Heckmann with the Governor's Office calls and says I'm concerned about that, people call John, people call Hope, Justin calls Hope and raises Cain about something, but the chairman almost always gets most of the calls that go as follows:

All of your employees are bureaucrats, they're moving too slow, you guys are in over your head, you don't know what you're doing, you're too cautious, and particularly for me because I'm probably the most -- well, I won't say probably, I think I might be the most libertine, entrepreneur there is because I do believe in a totally market-driven economy without any controls, and I get these calls all the time. And I want to tell you, as a taxpayer in this state, you can be very proud that all across this nation today people are talking about a group of state employees who get it, who understand the balance between entrepreneurial action and protecting the public's interest, and they have striven mightily to get that perfect balance.

There have been times when our legal staff had to say -- and thank God they did -- Whoa, boys, slow down a little bit, think about this. And then there's been times when our financial group has said that may look good right now but it won't look good 20 years from now when we're all gone and we shouldn't do that. And I'm not being negative to Cintra or to Mr. Zachry and family, but they have their interests and we have the public's interests, and this group of men and women have stricken, we think, the perfect balance between those two, and we have laid, in our view, the template for El Paso if and when they do this, for Dallas if and when they do this, for San Antonio if and when they do this, for Austin if and when they do this, for Brownsville if and when they do this, we've laid the template for how to find that perfect balance between transferring risk and receiving benefit, between getting the asset we can have but having to pay for it as we should as opposed to how we've been trying to pay for our highway system the last 50 years and doing a pretty poor job of it.

I'll turn it back over to you.

MR. HOUGHTON: I can't add on to that, Mr. Chairman.

MR. WILLIAMSON: Sure you can.

MR. HOUGHTON: No way.

MR. WILLIAMSON: Well, then let's recognize these people.

MR. HOUGHTON: Yes.

(Applause.)

MR. WILLIAMSON: Good job. Thank you very much.

MR. HOUGHTON: And with that, Mr. Chair, I move to approve.

MS. ANDRADE: I second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Let's move forward. And we're going to take about a ten-minute break for those of you that need to do so, and we'll be back on our agenda.

(Whereupon, a brief recess was taken.)

MR. WILLIAMSON: Let's return from recess. For the audience to fully appreciate your schedule for the day, we will be doing a little bit of jumping around. Mike, I'd like to go to item 6, and then we're probably, Hope, going to go ahead and advance to some of the public transportation issues right after that.

MS. ANDRADE: Thank you.

MR. BEHRENS: We'll go to item number 6, Regional Mobility Authorities, we'll go to item 6(a) which is a final approval for a request for financing from Cameron County Regional Mobility Authority. Phil?

MR. RUSSELL: Thanks, Mike. And for the record again, I'm Phillip Russell, director of the Turnpike Division.

The minute order before you, item 6(a), as Mike said, relates to Cameron County Regional Mobility Authority. If you remember, back in April you all approved the first step, a preliminary approval for this financial assistance to the Cameron County Regional Mobility Authority. This would be the final step for the approval of that financing.

The agreement itself would be in the form of a loan for $21.6 million that the Cameron County Regional Mobility Authority would utilize to pay certain costs for preliminary engineering, financial planning, and preliminary development of the West Loop project on the west side from US 77/83 all the way down to Palm Boulevard in Brownsville. The rest of the money would be utilized for environmental studies, some design and legal services, and some preliminary development costs for the South Padre Island second causeway bridge which we've talked about for a number of years.

Staff would recommend approval of this minute order.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation. We do have two witnesses, with your permission, our friends, Pete Sepulveda and David Garza. Pete, who goes first? And they are our friends.

MR. GARZA: Mr. Chairman, commissioners, David Garza, and I'm honored to be here. I can't believe our chairman passed up on this opportunity, but David Alex asked me that on behalf of the chairman and the entire board of the Cameron County RMA that we thank you for this opportunity for the consideration of the toll equity grant application or loan application.

And as you all will remember firsthand when you visited Brownsville in your April commission meeting, Cameron County and South Texas is a rapidly growing region with promising opportunities for years in the future, and our Cameron County RMA is pledged to contribute to its economic sustain ability by planning accordingly and accelerating transportation projects that will enhance the economic vitality of this international region.

Today is a first step in moving forward with this goal in mind and we thank you for your support and we look forward to continuing a great working environment. Thank you.

MR. WILLIAMSON: Members, anything for David?

MR. HOUGHTON: David, congratulations. My questions to you are the loan is for the West Loop project. Specifically what is the RMA doing on those projects? We'll ask Pete. Okay.

MR. WILLIAMSON: Any other questions for David?

MS. ANDRADE: Not other than thank you and give my best to your chairman.

MR. GARZA: I will. Thank you.

MR. WILLIAMSON: Thank you, David.

MR. SEPULVEDA: Good morning, Mr. Chairman, commissioners, Mr. Behrens. Thank you for the opportunity to be here.

I'll take just a few minutes and give you an update on what the RMA has done the last couple of months. We have completed a strategic plan that the board has outlined eight goals that they want to accomplish between the year 2007 and the year 2011. In developing the strategic plan, we worked very closely with our neighbors on the Mexican side with the state of Tamaulipas and with Secretaria de Camiones y Transportes in Mexico City, and ensuring that our transportation infrastructure network on the U.S. side lined up with future transportation infrastructure projects that either the state of Tamaulipas or Mexico has for the next five years.

We have also completed the first phase of the public involvement plan and we're in the process of moving forward to the next phase of that plan. Both of these will be available on our website and will be distributed throughout the community and in Mexico as well.

One of the things we did was a strategic plan and we have a draft, we don't have the final, but we've translated it to Spanish and we're going to use that to promote the regional mobility authority throughout Mexico.

After your approval of our agenda item today, we'll begin preliminary development on two projects. One of the projects that I'll talk about this morning, Cameron County is our sponsor -- not our sponsor but our partner on, and on the second causeway project, in addition to the county and TxDOT, we're going to partner with the town of South Padre Island and the city of Port Isabel, and this involves a second causeway linking South Padre Island to the mainland. The funding that we receive will be utilized for preliminary environmental analysis, public involvement, traffic and revenue studies.

The West Loop project is a project in the Brownsville area that we are going to develop as a toll road. It's about an eight-mile stretch of road that we are in the process of negotiating the scope with our GEC to begin the environmental assessment. Once we do that, then we can proceed with the preliminary engineering of this project.

The local district office in Pharr has done quite a bit of work on the environmental assessment, along with the county, so we're hoping that we can reduce the amount of time that it takes to complete the environmental assessment and receive a finding of no significant impact.

One of the interesting projects that we just became involved with, partnering with Cameron County and the cities of Harlingen and San Benito, the RMA is now spearheading a rail relocation project in the Harlingen-San Benito area that the project entails relocating the rail away from the urban areas to a more rural area. Our partner is also Union Pacific. We started working about 30 to 45 days ago, but we feel very strongly that in the next 90 days we're going to have a plan that includes Union Pacific's concurrence on different corridors that we can relocate that rail, and in addition to that, we believe we're going to come up with a plan that will relocate the switch yard from downtown Harlingen to the switch yard in Olmito north of Brownsville. In speaking to the local UP officials, they believe that about 70 percent of the congestion in downtown Harlingen is created because of the location of the switch yard.

So it's a major project that the RMA is heading and we just feel very honored to be able to work with the county and the local communities in making that project a reality.

In addition to that, we are working on a north loop, and this involves a loop between the cities of Harlingen and San Benito. What this is, there is an existing farm to market road that begins at the Free Trade International Bridge and goes north about 15 miles, and then ends at the intersection of another farm to market road. And the project is already underway, our consultants are working on the environmental assessment and the corridor analysis, but we're going to take this project about 18 miles northwest to connect to Expressway 77. In the meantime, Hidalgo County is coming in with a loop that's going to connect with our project.

What we've do