December 13 Transcript

Texas Department of Transportation Commission Meeting

Commission Room
Dewitt Greer Building
125 East 11th Street
Austin, Texas 78701-2483

Thursday, December 13, 2007

COMMISSION MEMBERS:

Ric Williamson, Chairman
Hope Andrade
Ted Houghton, Jr.
Ned S. Holmes
Fred A. Underwood

STAFF:

AMADEO SAENZ, Executive Director
STEVE SIMMONS, Deputy Executive Director
BOB JACKSON, General Counsel
ROGER POLSON, Executive Assistant to the Deputy Executive Director
DEE HERNANDEZ, Chief Minute Clerk

PROCEEDINGS

MR. WILLIAMSON: Good morning. It is 9:03 a.m., and I would like to call the December 2007 meeting of the Texas Transportation Commission to order. It's a pleasure to have each of you here this morning.

Please note for the record that public notice of this meeting, containing all items on the agenda, was filed with the Office of Secretary of State at 2:32 p.m. on December 5.

Before we begin today's meeting, I would appreciate it if you would take a moment to place your pager, cell phone, DewBerry and other electronic device that you might have on the silent or vibrate mode so as to not interrupt our proceedings this morning with weird sounds.

And in addition, if you do address the commission this morning from the podium below me, if you would kindly think to leave your electronic device in your chair. It turns out that a lot of these new electronic devices, even when they're on the silent mode, interrupt the audio portion of our tapes and we're very concerned about getting an accurate recording of all of our proceedings. So if you would remember that, I would appreciate it, and thank you.

It's our custom to open with comments from each of the members. We always start to my far right: Commissioner Underwood will be followed by Commissioner Holmes, Commissioner Houghton and Commissioner Andrade.

MR. UNDERWOOD: Good morning. I want to wish everybody happy holidays. Also, I want to send out to our staff members that are watching this, Happy Holidays to you, drive safe, naturally, and whatnot, and thank you for all the hard work you have done this year.

MR. HOLMES: I'd like to add my holiday wishes to all present and watching and our staff around the state. You've labored long and hard and we appreciate all that you do for TxDOT and the people of Texas. And for those of you who do not recognize what this shirt is, it means you probably have a TxTag because this is the shirt that the toll-takers wear, and so it's becoming an historical item.

MR. WILLIAMSON: Artifact.

(General laughter.)

MR. HOUGHTON: Good morning, and Merry Christmas, Happy New Year and Happy Holidays to all of you. We're going to wind up a year at this meeting that's been one interesting year, and look forward to greater things in '08 to my colleagues here on the dais and to those out in the audience and in the internet audience. But again, Happy Holidays to everyone.

MS. ANDRADE: Well, I echo my fellow commissioners. Welcome to all of you that are here, and I also wish you safe and happy holidays. It's been an interesting 2007, and I'm looking forward to a greater 2008. Thank you so much.

MR. WILLIAMSON: Thank you, members. I associate myself, of course, with the remarks of my fellow commissioners and add Merry Christmas, Happy Holidays. I thank the staff and the employees of the Texas Department of Transportation for a great year during difficult times.

I also want to take a moment to thank the members of the commission. Each member, in his or her own way, has spent the year traveling the state, attempting to educate, as best we can, the public at large and leaders, locally, regionally, at the state level and national level on the challenges that face our particular responsibility in government, but even more broadly, the challenges that face our population as we deal with unprecedented and almost unplanned for population and economic growth in our state.

At the end of the year, it's a good time to reflect upon the mistakes you made and the right decisions you made and learn from both, and speaking for myself, I believe if I was going to point to one thing, it would be my discomfort with my own performance in separating the realities we deal with from the sort of rational, emotional reaction to the solutions that we've put forth. The reality we deal with is the cash flow to address long-term investment in infrastructure is just nonexistent in the current tax regime that this state and this nation uses for infrastructure. It's not unlike the crisis I think the federal government faces in pensions and healthcare, the crisis we face in our state is in infrastructure and transportation, generally.

I resolve in the next year to do a better job of separating the solutions that we're pursuing from focusing on the magnitude of the problem, and perhaps try to do a better job next year in helping people understand that this is a real problem that is not going to go away until men and women belly up to the bar and make some hard choices. I appreciate that each of you through the year have done the most you're able to do in advancing that message.

Let me remind everyone that if you wish to address the commission during today's meeting, we ask that you complete a speaker's card which you can find on the registration table in the lobby to your right. If you intend to comment on an item on our posted agenda, we ask that you complete a yellow card, such as the card that's in my right hand, and please identify the agenda item upon which you wish to speak. If you wish to speak in the open comment period on something not on our agenda, we ask that you fill out a blue card, such as the one in my right hand, indicating what topic upon which you wish to speak. Regardless of the color of the card, we would ask that you limit your remarks to about three minutes in order to permit everybody to speak, unless you're a member of the legislature, in which case we ask you to speak as long as you wish.

Our first item of business today is item 1 on the agenda, a public hearing regarding our project selection process, and I would like to call on Jim Randall, our director of Transportation Planning and Programming, to conduct this public hearing. Jim.

MR. RANDALL: Thank you, sir. Good morning, everyone. Again, my name is Jim Randall, director of the Transportation Planning and Programming Division.

The notice for this public hearing was filed with the Secretary of State on November 8, 2007, and published in the Texas Register on November 23, 2007. This presentation and hearing are held annually to fulfill the requirements of the Texas Transportation Code, Section 201.602. The highway project selection process being discussed will be used for selections in the 2009 Statewide Preservation Program and Statewide Mobility Program.

At this point, we have a 13-1/2 minute video presentation. After the video, I'll return to answer any questions.

(Whereupon, the video was shown.)

MR. RANDALL: In order to complete our presentation, I'd like to point out that copies of the project selection process brochure can be found out in the foyer. The brochure will recap the information provided in the video. A copy of the presentation in DVD format can be found in the foyer as well for those who want to take the public hearing home to share with others who could not attend.

We're requesting written comments regarding the highway project selection process be mailed to the address shown at the end of the video. The deadline for comments is January 18, 2008, at 5:00 p.m.

Chairman, this concludes our presentation and I'll turn it back over to you.

MR. WILLIAMSON: Well, first of all, job well done. The video was concise and to the point and very professionally done.

MR. RANDALL: Thank you.

MR. WILLIAMSON: Members?

(No response.)

MR. WILLIAMSON: Amadeo, just for the record, because we're going through some difficult moments with our policy makers across the street, we want to be sure and establish for the record that the layout of the program in the next 30 days is not meant to ignore the ongoing corrections we're having to make to our operational budget for the next three years. Is that correct?

MR. SAENZ: Yes, sir, that's correct.

MR. WILLIAMSON: Okay. Any other questions?

(No response.)

MR. WILLIAMSON: I want to thank you, Jim, and we look forward to talking a little bit more about this plan over the next 30 and 60 days as we figure out how to deal with our cash flow.

MR. RANDALL: Okay, sir. I'd like to acknowledge Doris Howdeshell's bunch. They're the ones that put the video together for us. They did a fine job, as they always do.

MR. WILLIAMSON: Doris always does a great job for the State of Texas.

MR. RANDALL: Thank you, sir.

MR. WILLIAMSON: Item 2 on today's agenda is the approval of the minutes for the November 15 meeting of the commission. Members, the minutes have been provided in your briefing materials, you've had the opportunity to review the minutes. Do I have a motion?

MR. UNDERWOOD: So moved.

MR. HOUGHTON: Second.

MR. WILLIAMSON: I have a motion and a second to approve the minutes. 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, members.

Amadeo.

MR. SAENZ: Mr. Chairman, before we start with the regular agenda, I'd like to make a special presentation today. I'd like to call up Shawna Russell to come forward, please. I'd like to present Shawna a ten-year service award. Shawna is, of course, Commissioner Andrade's administrative assistant and does a great job. I've known Shawna for quite a few years since I moved to Austin, and even before, and Shawna is one of our employees that has worked at the administrative level for the time that I've been here. She went off and got her master's degree, and then came back and now has been helping Commissioner Andrade. So Shawna, congratulations. We have a ten-year service award for you. I don't know what happened to the gift or the pin, but I do have the certificate.

This is a little bit late. Shawna reached her ten-year service award time last June, so we kind of maybe lost the certificate somewhere.

MR. HOUGHTON: Last June?

MR. SAENZ: Yes. A little bit late.

MR. WILLIAMSON: We're going to give you a chance to say something, but before we do, Shawna, members, anything you want to poke on Shawna about?

All the commission members might not know that you're a proud North Texas girl who relocated to Central Texas in order to help government govern. Shawna is from my part of the world.

MS. RUSSELL: I'm not used to delivering speeches, I prefer to write them, but I would just like to say thank you very much for the investment that this department has made in me and my education through the master's program, and thank you, more importantly, for the opportunity I get every day to take those skills and knowledge and apply them as part of the commission staff. It's been a wonderful, wonderful ride, so thank you.

MR. WILLIAMSON: Well, we appreciate your service, Shawna. Congratulations.

(Applause, and pause for photographs.)

MS. ANDRADE: Mr. Chairman, I just wanted to make sure I publicly acknowledged all my appreciation for everything that Shawna Russell has done. And you're right, you write great speeches, so thank you so much. But truly, I was blessed the day that I was introduced to you and thank you so much for being willing to take that risk of working with me. And sometimes it's those long evenings, but I appreciate very much everything that you've done for me and most especially what you've done for this department and for the State of Texas. Thank you, Shawna. I'm proud to work with you.

MR. SAENZ: Now moving on to our next item that deals with the award of airport improvement projects, our director of Aviation, Dave Fulton, will make this presentation and present the minute order. Dave.

MR. FULTON: Thank you, Amadeo. Welcome back. Hope that everything went well.

For the record, my name is Dave Fulton, director of the TxDOT Aviation Division.

This minute order contains a request for grant funding approval for nine airport improvement projects. The total estimated cost of all requests, as shown in Exhibit A, is approximately $7.7 million: approximately $5.6 million in federal, $1.2 million in state funds, and approximately $1 million in local funding.

A public hearing was held on November 8 of this year. No comments were received. We would recommend approval of this minute order.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation. Do you have questions or comments for staff?

MR. HOUGHTON: Dalhart gets $3 million. Growing community up there Dalhart.

MR. FULTON: Exactly, yes, sir.

MR. WILLIAMSON: Is that close to the cheese factory that fixing to go in?

MR. HOUGHTON: Yes.

MR. WILLIAMSON: So we're supporting economic opportunity with this grant.

MR. FULTON: Well, we try to do that with as many grants as we can. Yes, sir, we are.

MR. HOUGHTON: Because I believe that cheese factory got enhancements from the state.

MR. SAENZ: Yes, sir.

MR. HOUGHTON: From the Economic Development Fund by the governor.

MR. WILLIAMSON: Well, the reason I bring that up, Fred and I had a conversation yesterday　-- and I assume he's talked to each of you as well　-- about his Ports to Plains work in Canada. I was very impressed with the lines of communication he opened up with industrial interests in Canada, and we had a discussion about the difficulty of, in times of limited cash flow when you're reducing your out-year construction to address congestion and air quality on the one hand, how do you continue your mid-term and long-term goals that you know are necessary to continue the state's economic progress. Ports to Plains, the Port of Houston getting out the east side of Houston, El Paso getting the rail yards out of the downtown area, San Antonio getting the rail yards out, how do you do those things.

And it's interesting to note that the way those things eventually are done is by attracting businesses like this cheese processing operation that is proof positive you can take your agriculture economy at the grower level and begin to convert it to the manufacture and the distribution level inside the state, capturing those jobs for our state as opposed to transferring those jobs to other states.

MR. HOUGHTON: It's called the Enterprise Fund.

MR. WILLIAMSON: It's a big deal.

MR. HOUGHTON: Yes, it's a big deal. There's a famous rodeo up there every summer about the 4th of July. Do you know what that rodeo is?

MR. WILLIAMSON: Are you talking about Dalhart?

MR. HOUGHTON: Dalhart, Texas. Do you know? It's the XIT Rodeo.

MR. WILLIAMSON: Members, do I have a motion?

MR. HOLMES: 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.

MR. HOLMES: Mr. Chairman　--

[Mr. Holmes asks a question about a specific aviation project in Schleicher County; break in audio.]

MR. FULTON: If you'll give me a moment here, I'll get it out. It's basically just a pavement refurbishing. We're going to overlay the runway and an apron area. But you've been into that airport?

MR. HOLMES: And it could use every bit of this.

MR. FULTON: We did that original airport project in conjunction with the district. The highway guys kind of worked that out for us, but it does need some maintenance and preservation and service improvement, and that's what we're going to be doing.

MR. HOLMES: It could stand a little extension too, at some point.

MR. FULTON: We'll certainly take a look at that.

MR. WILLIAMSON: to clarify the record, Mr. Holmes moved and Mr. Houghton seconded the minute order. All those in favor will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you, members. Thank you, Dave.

MR. SAENZ: On agenda item number 4, dealing with the reallocation of some federal funding for the Laredo and Pharr districts will be presented by Eric Gleason.

MR. GLEASON: Good morning. For the record, my name is Eric Gleason, TxDOT director of the Public Transportation Division.

Agenda item 4 authorizes the reallocation of fiscal year 2007 Federal Section 5310 Elderly Individuals and Individuals with Disabilities Program funds for the Laredo and Pharr districts.

On March 29, 2007, Minute Order 110879 was approved by the commission for the fiscal year 2007 program of projects for the 5310 program. That minute order provided funds to the Community Action Council of South Texas for the provision of these services in Duval, Jim Hogg, Starr, and Zapata counties. Recently, each of these four counties elected to directly receive program funds for provision of these services and to no longer use the Community Action Council of South Texas. Therefore, the fiscal year 2007 program of projects needs to be revised to reflect these changes.

The entire Laredo and Pharr district program of projects, including the revised projects, are listed in the minute order. We recommend approval of this minute order.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation. Do you have questions or comments?

MS. ANDRADE: 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. Thank you, members. Thank you, Eric.

Eric, once a year I get to say this, and I can't say it enough. I am personally deeply appreciative for the direction you have taken this division of the department since your arrival from someplace outside the state. You have done an outstanding job. I think the public really understands that it is the governor's intention to pay as much attention to public transportation as he pays to construction of assets, whether they be paid for by the public or the private trust, and I really appreciate the direction you've taken your part of the operation.

MR. GLEASON: Well, thank you, sir. I certainly appreciate those comments and I'll accept them on behalf of all of my staff, and we have a lot of district staff who spend the vast majority of their time at work working on these issues with our public transportation providers. And you know, looking to the future and the growth of this state, there is a lot to be done and there are many, many challenges out there, and I look forward to working with you on them. Thank you.

MR. WILLIAMSON: That's great. Thank you, sir.

Amadeo.

MR. SAENZ: Moving on, Mr. Chairman, item 5 is a report by Phil Russell, director of our Turnpike Authority Division, who is going to give us a status report on the Trans-Texas Corridor TTC-35 and also TTC-69. Phil.

MR. RUSSELL: Thank you, and good morning, commissioners, Mr. Saenz and Roger. For the record, I'm Phillip Russell and I'm director of the Turnpike Division.

What I thought I might do this morning is actually take these a little bit out of order and talk about 69 first. We've had a lot of activity on both of these elements of the Trans-Texas Corridor, but I think the time limits of 69 is such that I'll go ahead and talk about it first.

The corridor itself, as you all know, we're working on two different fronts simultaneously. We're working on advancing the environmental process, while at the same time we're working on the procurement for a long-term developer. I'll talk about the environmental process first.

I'd have to say in my 25 years with the department, we've had more public involvement on the Trans-Texas Corridor than any other project, any other endeavor that I've been involved with. Starting back in 2004, we started our series of formal public meetings, 2005 as well, and we've had almost 50 of those public meetings, and of course, that doesn't count all the informal discussions and informal venues where we've had discussions with members of the public.

We take those comments through all those public meetings and we blend those with engineering and environmental analysis and we utilize all that data to put together our draft environmental impact statement. That environmental impact statement was approved by the Federal Highway Administration and it was released on November 13, just last month. And that's particularly important for a couple of reasons: primarily, it is the next stage of development, but more importantly, it now releases us to go out and have our final public hearings. So it's instrumental in how we progress the project.

Now, those formal public hearings are scheduled for February of next year. We're going to have, again, almost 50 public hearings, about 46 of those, and the format of those public hearings is something that, quite honestly, we've received a lot of criticism over the years. It doesn't really lend itself to a give-and-take, question-and-answer, it's more of receiving comments. So working with Coby and GPA, we've kind of engaged a different format in addition to those normal public hearings in February, we've instituted a series of kind of one-on-one formats. Many of you commissioners have been involved over the past several months with those. We have ten town hall meetings that we're going to be opening up in January.

So the intent is to give probably a little greater access to the public to engage us in questions and concerns that they have that are important to them, and then on top of that, we'll have our normal public hearings in February. But the reality is that project is moving forward very timely.

We have other efforts that are going on. Of course, we continue to work on projects in the 77 and the 281 area down south. We are continuing to look at some rail options throughout the area, particularly in the area of Victoria and El Campo where we're working on some options there. We anticipate that by the end of this year we'll go out with our final environmental impact statement and probably within two or three months we'll have our record of decision for that first phase, that tier one phase.

Now, again, when I talk about a record of decision, all that is is that's clearing us to that narrowed study area. I think sometimes when people hear that, they assume that that clears us to begin construction and that sort of thing　-- it doesn't. Again, it's a two-phase process, a tier one and a tier two, so the first tier we're simply narrowing the study area, and then once we get that record of decision, we'll launch into the second phase where we will begin alignment decisions on exactly where that project will be.

On the public-private partnership front, again on 69, as you all may remember, we initiated our request for qualifications for developers for this corridor back last year. We received two proposals and short-listed both of those folks: Bluebonnet Infrastructure Investors, and Zachry American. The request for final proposals went out again last month, November 30, and those proposals will be due March 5 of next year. It will take probably a month or so, month or two months to evaluate those proposals, and I anticipate bringing that back, the staff recommendation, to you all probably in June of next year, at which time, hopefully, we will be able to award the CDA for the 69 project.

The map in front of you here is our draft environmental impact statement map itself. You'll note a couple of things. We have narrowed the study area. Again, we started out with the yellow　-- and I don't know if the folks in the back of the room can really see that　-- but it started out a pretty broad study area. We now have compressed that down to some pretty fine lines on the map. We are absolutely looking at some existing corridors, we have from the very beginning and we certainly are now, particularly US 77, 281, 59 and 44 are some of the roads that come to mind. We also are looking at a new location portion that's slightly generally east-northeast of the 59 route, going out through east of Houston and on up north of Houston.

MR. WILLIAMSON: You mean west of Houston?

MR. RUSSELL: Excuse me. Yes, sir, west of Houston.

You'll note kind of two prongs on the 69 project itself. Number one, the first prong, the more southern prong, will be linking up with the piece that Louisiana is developing on 69　-- I think it's in the area of Logansport　-- and that will be, obviously, a critical connection. Sometimes people think the 69 effort is just something in Texas; obviously, it's not. The intent from 1991 on is to link up the South Texas area all the way up through Michigan, so it goes through a number of states, seven or eight states, so that would be the official connection going up through Louisiana.

I, for one, think it's incredibly important that we also have a link up to I-10 and I-30.

MR. WILLIAMSON: Time out, Phillip.

MR. RUSSELL: Yes, sir.

MR. WILLIAMSON: In anticipation of making the North American Union Quarterly, I want to clarify something you just said. Interstate 69 has been a national effort from 1991; TTC-69 is our state's attempt to address our state's infrastructure, whether the other states and the federal government decide to extend that into New York or not. We wouldn't want good Texans who are legitimately concerned about this three-country continent nonsense to be confused by our presentation.

MR. RUSSELL: Right.

MR. WILLIAMSON: We're focused on addressing congestion, air quality, and economic development in our state. If the other states want to carry it on, that's their business, not our business. Correct?

MR. RUSSELL: Absolutely. And that's why I think those links on up to I-20 and I-30 are so critical. Those are existing assets, I-30, I-20, and so we will have that link within our state so that we can move those people and goods east and west.

MR. HOUGHTON: Phil, there's another transportation asset in Louisiana being built currently north-south.

MR. SAENZ: I-49.

MR. RUSSELL: I-49, Texarkana.

MR. HOUGHTON: Right. And apparently it's going to come in in Texarkana, that region?

MR. RUSSELL: Right.

MR. HOUGHTON: And the Louisiana interest, does that terminate in Texarkana, or does that continue to go north?

MR. RUSSELL: I don't know.

MR. SIMMONS: Shreveport.

MR. HOUGHTON: Is that right, Shreveport and north? Okay.

MR. RUSSELL: There's 49, Commissioner.

MR. WILLIAMSON: They call it the casino corridor. I'm sorry, Phillip.

MR. RUSSELL: Those were all my comments on 69. Do you have any other questions or comments on that before I move on to 35?

MR. WILLIAMSON: I'm sure we're going to have comments generally. You can go ahead and move to 35, please.

MR. RUSSELL: Let me transition on over to Trans-Texas Corridor 35. Again, I'll talk about the environmental process first and then segue into the CDA.

Once again, we started out in about 2004 with our public meetings　-- and I call those formal public meetings to distinguish those from the everyday meetings we have with Rotary Clubs, Kiwanis Clubs and all that sort of thing　-- but we started out with those public meetings in 2004, they flowed through 2005, 2006. We've had over 170 of those public meetings all up and down this corridor. We received well over 10,000 comments from members of the public throughout that span.

We've been working now in the same process: we glean all those comments, we look at engineering and environmental analysis, and we combine those to move forward with our environmental impact statements. This project is a bit ahead of 69. We've already got the draft environmental impact statement approved, and in fact, we had our public hearing back in 2006 subsequent to that approval, so now we're in the stage of securing the final environmental impact statement, again, for that tier one, that first phase where we're attempting to narrow the study area.

That environmental impact statement is being reviewed, as we speak, by various resource agencies and we're hoping to get the Federal Highway Administration to approve that document probably early next year. And then again, once that document is approved, there's about a 30-day, I think, comment period, an additional comment period for the members of the public, and we get this record of decision probably within two or three months after that. So if you do the math, we're probably talking about late spring, early summer is when we would have our record of decision for that narrowed study area for TTC-35.

We also are looking at other environmental issues up and down the area, and I think this screen will eat my pointer, but if you look up here in this area, the Dallas-Fort Worth area, of course, the red configuration you all are probably familiar with that, that's the regionally preferred connection, the North Central Texas Council of Governments and the Dallas-Fort Worth area, and we were able to integrate that into our analysis. And one of the important facets of the Trans-Texas Corridor 35 environmental analysis, of course, is what we used to, when I was in the Dallas District, call the old Loop 9. I began work up there in the early '80s and the notion of an outer loop around LBJ was old then; it probably started back in the '60s or '70s.

And primarily what we talked about in those days was the red, the southeast piece, and a little bit of the yellow, but the Dallas District and Dallas County have been working on the environmental document really starting back in the '90s. I think that's coming to fruition now, they're scheduling public hearings probably in the spring of next year, again, for that red piece, that 42 miles of the southeast piece, and they hope to get a record of decision which will set that alignment by the end of next year.

We're also initiating environmental analysis for the other three segments, the east there in the yellow, as well as the southwest and the northwest over in the Tarrant County and Parker County sides. We'll be initiating those environmental documents probably early next year.

And overall, I think there is a great deal of support. I look back on the red section of it, it's the section I'm most familiar with. A lot of those cities throughout that area began trying to preserve that right of way, again, back in the '70s and '80s. They've been pretty much successful, although, if you go out there and look at it, there are subdivisions and houses beginning to spring up, and best I remember, they were probably trying to preserve 400 or 500 feet of right of way.

So it's never easy as metropolitan areas begin to expand, but those guys have done a remarkable job of trying to stay focused and trying to preserve that corridor, and so we are trying to move forward on that front.

Now, on the public-private partnership portion of TTC-35, again, just to refresh your memory, we signed our overall umbrella CDA with Cintra-Zachry back on March 11 of 2005. And you all probably remember this map. This was the master development plan for Trans-Texas Corridor 35. These are a lot of the short-term projects that Cintra-Zachry had come up with, both the overall facility, the all-in cost which was about $8.8 billion, and whatever concession fee might be if we deemed it appropriate to have that money up front.

And so we have a process where we periodically will update this master development plan. That next update will be occurring this year, we're initiating it now, and we anticipate that it will probably be completed early summer of next year. We also are moving forward. You'll notice some of the connecting facilities that are part of Trans-Texas 35, again, are that Loop 9 area up in the Dallas-Fort Worth area, we'll be moving forward with what we call a facility implementation plan agreement. It's simply a plan that we can sit down with the Cintra-Zachry group and begin assessing what the financial viability is of that project.

And again, I remind everybody that project has been on the drafting boards probably from the '60s, and what's really slowed that down is our inability to fund it. So we think we now have a fighting chance of actually being able to fund that project. Once again, I think there will be elements of it that will probably be toll viable, but we'll need to be able to cross-collateralize those funds so that we can build that entire Loop 9 area. And so that's what we're sorting out with the Cintra-Zachry group now and trying to assess what a potential financial plan might be.

We continue to look at rail opportunities as well. As you all might recall, we are working with the Cintra-Zachry group as far as rail opportunities, really stretching from the San Antonio area up through Austin, all the way up to the Dallas-Fort Worth area in, really on both sides. The Tower 55 has received a lot of discussion, but we continue to work with Cintra-Zachry and all the local parties that are involved in that project.

Commissioners, that's about all I have as far as an update. I'd be happy to address any questions you might have.

MR. WILLIAMSON: I'm sure we're all going to have some; I know I have some. Members, let's just free form, whoever wants to go, go.

MR. HOLMES: Phil, could you talk a little bit more about Tower 55? I mean, it looks like an extraordinary bottleneck. What sort of solutions are possible out there?

MR. RUSSELL: I think, Commissioner, there are probably two different　-- and there are folks in the audience that probably know much more about this than I do　-- but I think there are two solutions that are being analyzed. One is almost what I would call a short-term solution but it's more of an opportunity right there at that intersection to provide a grade separation. I think North Central Texas Council of Governments and all those entities up there are looking at that, almost as a short-term solution, while at the same time we're also looking at kind of a rail bypass of that area.

I would analogize that to a community somewhere that has two at-grade intersections. You may need a traffic signal right there, or maybe you have a traffic signal and you need to build an overpass there, but at the same time, you probably still need a relief route so that some folks can go around that community and move on their way. And it's kind of the same way, I think, here in the rail area: we do need some sort of grade separation right there at Tower 55, but I think there is a growing and increasing need for a rail bypass to that area as well. And so we're trying to work on both of those fronts.

MR. WILLIAMSON: The TTC-69 map didn't really highlight a study area on the east side of Houston into the port or on the immediate west side of Houston out of either the port or the growing chemical complex in that area. I'm aware of the political controversy sort of going on between the Grand Parkway and TTC-69 and Harris County, and I don't want to delve into that, that will work itself out. I am concerned about our ability to advance the Grand Parkway in such a way as to get freight in and out of the port on the east side and whether or not the Grand Parkway, in parts, might be a feeder into 69 to the north and west if that's the route chosen. Comments about that?

MR. RUSSELL: Well, Chairman, obviously that is a sensitive area. As the Grand Parkway Association moves forward on their environmental process for the Grand Parkway, we're trying to stay pretty well plugged in, both my group, Gary Trietsch and the district. I think both of those have to work in concert with each other and there may be some opportunities that one will feed into the other, particularly the port facilities, but I think we're taking a careful analysis of that, understanding some of the sensitivities, even beyond what you've talked about as far as Harris County Toll Authority and TxDOT, but we're staying closely involved in that discussion.

MR. HOUGHTON: Well, my understanding is, Mr. Chairman, that we've received an unsolicited proposal on the Grand Parkway, that would incorporate the port facilities in Houston on the eastern side and the western side, from Zachry American. Is that correct?

MR. RUSSELL: Yes, sir, we received an unsolicited proposal yesterday.

MR. HOUGHTON: To build the entire Grand Parkway.

MR. RUSSELL: Right.

MR. HOUGHTON: And the emphasis on the port facilities that would tie into 69 on the eastern side and then 69 on the western side.

MR. RUSSELL: We're just now starting to review that and assess that, but from my reading of it, it would include the entire Grand Parkway, as well as those interfaces, yes, sir.

MR. HOUGHTON: When is the last time we got an unsolicited in this building?

MR. RUSSELL: Commissioner, it's been several years. It's probably back 2003-04, probably.

MR. HOLMES: I'm encouraged by the fact that there is an unsolicited from Zachry and apparently there's another one that I haven't seen that involves Harris County. But I think it's imperative that 69 and the Grand Parkway interface. I mean, it isn't going to work properly without that, certainly from an evacuation standpoint, from the industrial area of Harris County and Galveston County. They have to interface.

MR. RUSSELL: Commissioner, I agree. I guess the reason I'm a bit reticent in that area, when we started out talking about 69, we actually talked about 69 and Grand Parkway overlaying on the western area. There was a lot of sensitivity to that, and so we ultimately went out to the west a little bit, so for that area, you're going to have two parallel facilities. But absolutely they have to interface, and you're right, whether it's for hurricane evacuation or just feeding the city, you've got to have good connections, and that's what we're working with pretty closely to ascertain exactly what those interfaces and connections are going to look like.

MR. WILLIAMSON: Well, the growth of the area　-- and correct me if I'm wrong, Ned　-- suggests that Grand Parkway is necessary just for the population growth of Southeast Texas.

MR. HOUGHTON: Well, my brief read of the proposal is that, in fact, you do have the connection to 69, the ports, and then you overlay the 69 on the western side/northwestern side you have significant transportation assets that are being proposed in the region for not only the growth but economic opportunity and freight.

MR. RUSSELL: Yes, sir. You know, if you look at the map, you can see two of the connections primarily, one coming down from the north, and we've looked at it from different ways, maybe a trucking route, but it would interface coming down from the north down to Barber's Cut and into the harbor. And then also from the southwest area, there would be some sort of connection coming up and going across the south side of Houston.

MR. HOUGHTON: Get your pointer out.

MR. RUSSELL: That's a big pointer.

MR. WILLIAMSON: My question was, when I looked at this map, I am concerned that we're not concentrating here, and I know that happens to also be part of the concentration of the Grand Parkway itself. I don't want to spook the Houston area political community that's sensitive right now to this whole discussion, but the flip side is, as Mr. Holmes pointed out, there are places where in order for the Grand Parkway to serve the citizens of Southeast Texas, for 69 to serve the citizens of the state, they almost have to be planned and coordinated, it not together, real close to each other.

MR. RUSSELL: Chairman, it strikes me I obviously left an important little facet out of this map. If you'll notice that crosshatched area, both the Harris County area as well as down to Corpus Christi, I think we call those mobile transition zones, and in real people terms, what that means is we're going to have more detailed planning in phase two, tier two. And so our intent at this first phase was just generally to suggest that we need connections there. Those exact connections will be figured out in that tier two. So we will be getting into a lot more of that detailed analysis in the second stage.

MR. WILLIAMSON: One of the things I'm invariably asked about, either on the road or in my time across the street by members, is how can you on the one hand instruct your staff to adjust contracts for anticipated reductions in cash flow, yet continue to talk about multi-billion dollar corridors like TTC-69 and TTC-35. And Steve, you may be going to address this later on this morning as far as the difference between our tax program and our private equity program. But I traditionally reply that we continue to believe TTC-35 will be paid for completely by private equity, even that the state will be reimbursed for whatever environmental and right-of-way costs it sustained.

Do we take that same position on TTC-69? Because that's my answer when people ask me that question.

MR. RUSSELL: I think so, Chairman. 35 is a very unique project. I mean, with the congestion levels on 35, I would anticipate we're going to have a great deal more concession dollars flowing that we can use for other transportation projects.

I don't know that it's going to be quite as rosy for 69, but my goal still is that we'll be able to use private sector dollars to build it. I guess what I'm trying to say, it may not throw off as much concession.

MR. WILLIAMSON: Cash flow.

MR. RUSSELL: Yes, sir.

MR. HOUGHTON: Well, with that in mind, we just talked about the Grand Parkway and its cost　-- and without coming up here, I think Zachry is in the back room　-- the question is is this financeable totally by the private sector, Sonny?

MR. WILLIAMSON: Sonny really appreciates you asking him that, and Bob Jackson is having a coronary right now.

MR. HOUGHTON: It's important. The answer is yes?

SPEAKER FROM AUDIENCE: Yes.

MR. HOUGHTON: Thank you.

MR. WILLIAMSON: We'll let the record reflect that that was a sidebar conversation.

(General laughter.)

MR. WILLIAMSON: I'm concerned about a few things, Phil, because when I go across the street, I'm asked questions in three areas. I've personally learned a lot from the TTC-35 experience. When we first started walking down that path, I was convinced then and I'm convinced now, that a parallel is the correct way to go. I was caught off guard and I'm still a little bit surprised by the level of emotional concern.

Is it the case that the commission has established firmly that no contract with any private provider will surrender title to any of our assets to the private sector?

MR. RUSSELL: Absolutely.

MR. WILLIAMSON: So when I hear people say you're giving ownership of an asset to the state to a foreign country, it's just not true.

MR. RUSSELL: Absolutely state will retain ownership over the land, the asset, everything.

MR. WILLIAMSON: And even if one wanted to take the argument really far and say, well, the only difference between owning title to the land and being a concessionaire is in words only, it's still the same thing, do we not still always retain the right to buy whoever a developer is out of their contract on terms we defined in the contract?

MR. RUSSELL: Absolutely.

MR. WILLIAMSON: The second thing I hear a lot about is no matter how wide the corridor ends up being, 600 feet or 1,200 feet, it doesn't matter, you are going to divide people's property without regard to moving the route to try to preserve property, or giving people, particularly large landowners, access back and forth. Is it not the case that we have made it clear to staff and to our developers that the routes are to be thought about　-- and in particularly I can see in terms of 69　-- to be thought about in terms of existing footprint or with an effort to preserve the homogeneity of landowners' property boundary lines?

MR. RUSSELL: Yes, sir. We will do it on the Trans-Texas Corridor and we have been doing that for 50 or 60 years.

MR. WILLIAMSON: What was it, Ted, you said somebody asked you about the other day? You also heard foreign ownership, preservation　-- oh, existing lanes, that's what it was, existing footprint.

So 69, the approach we're taking, having learned from 35, is generally try to find existing footprint to look at first, even if it means expanding that existing footprint.

MR. RUSSELL: I would say, Commissioner, we've done that on both facilities. We've always looked at the existing footprint first to ascertain whether we can take care of our needs, and then if not, then we go out to some parallel route. So I think that's absolutely the case in 69.

MR. WILLIAMSON: I've been contacted recently　-- and maybe, again, Steve or Amadeo are more on top of this than you, maybe not　-- I've been contacted recently by business owners and landowners in the Temple-Killeen-Georgetown corridor expressing concerns for apparently we're talking to adjacent landowners about expanding 35, perhaps even doing some condemnation through downtown Salado, downtown Temple, and downtown Troy　-- is that the name of the community　-- but we're telling our policy makers across the street that we really don't have the construction money to proceed with those projects. Kind of square those two things up for me. Are we really right now in the condemnation process of downtown Salado?

MR. SAENZ: On 35, and one of the commitments that the commission had made was that we would expand the existing 35 corridor to three lanes in each direction, as we've done throughout from San Antonio to Austin. We would carry it forward through the Waco District in Bell and McLennan county. And so the district had been working on laying out the footprint to reconstruct the existing 35 and add that extra lane capacity. Just like because of our cash flow, those projects are going to have to be delayed because we can't get to it, but they've been completed environmental and they've been working on acquiring right of way. But it does require right of way of more than what the footprint has today, and it has required some condemnation.

MR. WILLIAMSON: Well, if we're representing to, for example, Representative Delisi or Senator Fraser that we do not have the cash flow to let the construction contracts in '09, '10 and '11　-- which I understand to be the case　-- does it make sense for us to continue talking to those landowners about right of way and even moving to the condemnation process?

MR. SAENZ: We're currently looking into that, and that's one of the areas that we're looking at. If we cannot get to these projects within a decent time, then we need to, in essence, put that project on hold with respect to buying the right of way. That's why we've been looking at our right-of-way budget, we've been looking at our consultant budget. Do we need to continue to do the design, do we need to continue to buy the right of way when we know that our cash flow is not going to allow us to do that. So that's one of the things.

Some of these parcels were under negotiation already, so we were halfway and we've asked our district people that depending on where they're at　-- not only on 35 but across the state　-- with respect to acquisition, we're going to have to take a look at that and probably have to stop some of those acquisition processes.

MR. WILLIAMSON: Phillip, have we got enough experience yet with local and regional leaders　-- and Ted may know about this than you　-- with this concept of corridor planning committees that we've set up? Are people aware that we're basically on 69 including the public at a different level on the planning process, or are we still getting that word out?

MR. RUSSELL: And you're right, Commissioner Houghton may be more involved in that than I am. I think the word is just now starting to seep out, people are starting to get their arms around it. I don't know if they've fully engaged yet, Chairman, but from the folks that I have talked to, they like that concept, they like that idea. So I think it's been positive, but I think we just need to get the word out and maybe we will more this morning.

MR. HOUGHTON: I've had the advantage of being on the proposed 69 Corridor from Texarkana to the Valley, end to end, and have talked to many county judges, commissioners, leaders, and they've embraced this opportunity. The truth is being told about Trans-Texas Corridor. We're not allowing the opposition to dictate the agenda, but we're telling the truth and they are enjoying the opportunity to sit down and talk about what they'd like to see in those assets for obviously congestion, port issues　-- there's a lot of port issues on 69. Commissioner Holmes and I have worked on this.

Just as an aside, Mr. Chairman, Ned spoke to the I-69 Alliance, their largest attended meeting since it's been formed in Houston, what, a week ago, Ned? So people are starting to embrace and understand it. I think they're looking forward to their planning committees. I'll be in Austin County next week talking to the county commissioners about the alignment and their involvement. So I think it's changed. We've changed the paradigm, we've changed the agenda, and it's more positive　-- not if, but where and when these assets will be built.

The folks up in Texarkana would like to have shovels out today building, they understand the economic opportunity　-- as well as in the Valley. I mean, along the corridor we have rail bypasses, get the rail outside. There's a rail asset there that KCS owns. So there's a lot of positive energy going on on the corridor.

MR. HOLMES: Ted has been in many more of those meetings than I have, but I have attended a few, and my sentiment is exactly the same: there is very strong support in South Texas and very strong support around Corpus, there's very strong support northeast of Houston, and I think as we resolve some of the alignment issues on the southwest side of Houston and west side of Houston that that will come into alignment as well. I think we'll end up with a much more positive reception.

The leadership that I've spoken with are very encouraged by being able to participate in that. They like the idea of the advisory committees. I think that was a very, very good move.

MR. WILLIAMSON: Well, Phillip, I hear about the foreign ownership business and the dividing private property business, and the existing footprint business a lot, and I know that it's policy that we've discussed, I know that it's policy we follow, but I would like　-- at least for consideration of the commission, I would like staff to work on some minute orders that reflect that the commission has no intention to surrender ownership of any of its assets, not just to foreign operations because I really think we don't serve ourselves well by wandering into that, but to any private operation.

This commission has never been in the business of selling its assets, it has been in the business of contracting to acquire cash to invest in its tax system in exchange for operation of toll roads over time, but I think it wouldn't hurt for the commission to speak loudly to staff and public for the future on the matter of foreign ownership or private ownership of assets. And I think we would be well served by speaking to the existing footprint issue from this dais and to the subdivision of land issue.

Now, I know the subdivision of private property, Mr. Jackson will want to be very careful about that. He will not want to limit the department's ability to do what's in the public's interest, and I understand that, but that doesn't prevent us from at least working on some language to look at in January　-- unless commission members object.

MR. HOUGHTON: No. And we've said that on 69. 69 is different than 35, it really is. Thirty-five, as you describe it, Mr. Chairman, is Main Street Texas.

MR. WILLIAMSON: Well, I wouldn't want to name a particular member, but I tell you, I've been contacted in the last 60 days　-- since we have started educating the members about our cash flow situation, I've been contacted by a lot of members who may perhaps have been characterized as on the other side of the 35 and 69 deal that don't really want to be on the other side because they're beginning to understand the dilemma we face, but they have to deal with the reality that their constituents believe, for whatever reason, that we're going to sell our assets. I just think it might not hurt the entire process to speak loudly, for the last time, that's not going to happen.

MR. HOUGHTON: I agree. I have a question regarding 35.

MR. RUSSELL: Yes, sir.

MR. HOUGHTON: You, Mr. Chairman, are the only member of this commission that was here when the Trans-Texas Corridor was conceived and rolled out. We have a beautiful asset that's opened up on SH 130, and in the words of the chairman, logic would tell you that there's not going to be a parallel to 130　as the Trans-Texas Corridor　-- logic, if you apply logic. What is the time line -- or can I ask our legal counsel, the time line of a designation of the 35 corridor? Is there a time line that we could look to? Because I think it's big.

MR. JACKSON: First, I have to say we've never done this before, Federal Highway Administration has never done this before, and we're all learning what the process will be, we're talking about it. Like Phil said, we expect tier one to be done in about six months, so late spring, early summer we'll be moving into tier two. Now, if you're only talking about the highway segment of the corridor and that being the sections of 130 that are constructed and maybe even under construction, we will probably be required by the Federal Highway Administration to do some sort of environmental document. My best guess is it would be a categorical exclusion, and if that is the case, maybe another six months. So maybe in twelve months you would have the opportunity to consider the results of that study, and if you wish, designate that portion as the Trans-Texas Corridor.

MR. WILLIAMSON: Thank you, Bob.

MR. HOUGHTON: Thanks, Bob.

MR. WILLIAMSON: Well, I appreciate the question, Ted. It's very interesting. We started out, Mr. Nichols and Mr. Johnson and myself, trying to talk about the rail issue and no one wanted to talk about that rail issue five years ago, and now it's really all we hear about is how can we get these freight trains out of downtown Texas and how can we establish high speed rail between Dallas-Fort Worth, Austin-San Antonio, and Houston-Galveston. So hopefully, as Mr. Jackson suggests, we'll have the opportunity to revisit and make some decisions within six months.

MR. HOUGHTON: Great. Look forward to it.

MR. WILLIAMSON: Members, any other questions about the current status of the Trans-Texas Corridor program?

MS. ANDRADE: I just have a question, Phil. On the town hall meetings, they're all going to be conducted in January?

MR. RUSSELL: Yes, ma'am.

MS. ANDRADE: And they'll have plenty of notice?

MR. RUSSELL: Yes, ma'am.

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Okay, Phillip, thank you for the report, and Amadeo. I appreciate it very much.

MR. SAENZ: Mr. Chairman, just as an addition to later on in our agenda we'll be finalizing the proposed rules for the segment advisory committees and the TTC corridor advisory committees. So once the rules are in place, then we can start working on identifying the segments and working with the locals to put those committee structures in place, and we should be able to do that in the first quarter.

MR. WILLIAMSON: And that should give us an additional opportunity to talk about the commission's focus on who owns the assets, subdivision of private property, and adherence to existing footprint where possible.

MR. SAENZ: Yes, sir.

Moving on, agenda item number 6 is two discussion items. The first discussion item will be led by Steve Simmons, who is going to discuss impacts of near- and mid-term cash flow projections on our system operations, and also resource reallocation. Steve.

MR. WILLIAMSON: Steve, before you start, I want to ask you a couple of questions because I know we're being watched by maybe some people that haven't watched us in the past. This is December. Do you happen to recollect which consecutive month this is that we have discussed the coming cash flow situation?

MR. SIMMONS: We started in May.

MR. WILLIAMSON: That's May of 2007?

MR. SIMMONS: Yes, sir.

MR. WILLIAMSON: So May, June, July, August, September, October, November, this will be the eighth month that we have taken a large chunk of our monthly hearing and discussed the cash flow problem.

MR. SIMMONS: Yes, sir. And for the record, my name is Steve Simmons. I'm the deputy executive director of the Texas Department of Transportation. Good morning, Chairman, commissioners, Mr. Saenz.

MR. WILLIAMSON: For the most part, have we been notifying members and staff of our meetings and our agenda ahead of time?

MR. SIMMONS: Yes, sir, we have.

MR. WILLIAMSON: Okay. Thank you very much. Please move ahead.

MR. SIMMONS: Before I get started, I'd like to do two things. One is, as you know, we're going through sunset and we do have members of the sunset staff that is going through our review with us today, and I'd ask if they'd stand up. They don't know I was going to ask that. So I know they want comments from people about the department, and so it's hard to get comments if you don't know who they are. So they're doing a great job, they're asking some good questions, and I hope that they'll tell you that our staff is working with them and providing whatever they need.

The other comment I'd like to say is in regards to the University of Texas and Texas A&M and how the University of Houston is going to help you next season in football. There will be an announcement today that U of H is hiring an Oklahoma coach as our new head coach.

MR. WILLIAMSON: So while weakening Oklahoma, it helps A&M and UT.

MR. SIMMONS: That's right.

MR. WILLIAMSON: That's a real offhanded compliment, Steve.

MR. SIMMONS: That's right.

(General laughter.)

MR. SIMMONS: Well, I'm here today to talk about the cash flow, and really, you know, as the chairman mentioned, this is our eighth month and I think it's about time we start putting this in a box and putting a bow around it of what all we've been talking about, and that's what I'm here today to talk about.

You know, last month I told you that our projection right now is that by 2012 we'll be short $1.8 billion, and by 2015 we'll be short $3.6 billion. So I want to summarize the discussion we've had today and also tell you what actions we're taking to help address that. But I think I'd be remiss if I didn't tell you that we're not the only state in this boat, and over the last　-- well, it's been a little bit over a week, I've been reading news articles across the state, and I thought I'd show you some of these other states and what they're saying.

This is out of the Middletown Journal. It says "Funding for new highways and bridge projects in Ohio has hit the wall. With gas tax revenues flat, federal funding uncertain, and the cost of new construction increasing by double digits, the Ohio Department of Transportation predicts it will begin running a shortfall in 2009, according to an ODOT report released this week. By 2015　-- remember the numbers I just told you in Texas　-- the agency could be $3.5 billion in the red." Our numbers by 2015 will be $3.6 billion in the red.

"ODOT's officials say repair and maintenance projects will have first priority but new construction projects are on hold. Projected revenues from the state gas tax which accounts for about half of ODOT's total funding won't be enough to cover all projects in Ohio currently slated for construction through 2015."

Another article, this one from the Albuquerque Tribune. "The state can't move ahead with 29 road construction projects, including a stretch of I-25 north of Albuquerque, because of a financial shortfall of nearly $500 million. The projects will be on hold until more money is found to pay for them. The shortfall is largely because of rapidly rising construction costs, such as higher prices for asphalt, concrete and other materials. In addition, New Mexico isn't receiving as much federal highway money as the state had anticipated."

Another article, this one from the Associated Press, from our neighbors to the north. This is a quote from Gary Ridley, who is Amadeo's counterpart. "Ridley says it's difficult to make long-range plans when the department doesn't know how much funding it will receive and while construction costs have increased at 50 percent in the last three years."

All those three articles have been in the paper just in the last little over a week. So while there are a lot of folks that want to focus on one or two issues that have gotten us to this issue, I can tell you that is not the case. Some may have a larger impact than others, but they all have had an impact.

Over the last few months, I've been trying to explain to myself what has happened in the hopes that I could easily explain to our transportation partners because I realize the impact our decisions will have on them. When I started putting pen to paper, I found that I could categorize the issues into four areas, and those areas are: things that are outside anyone's control, things that have happened in the state legislature, things that have happened in Congress, and things that TxDOT did to contribute to the issue too.

So when I look at the outside factors, the first one that we've been talking about here is inflation, and you've heard the numbers: 62 percent over the last five years, 100 percent over the last ten years. And we can attribute that to a lot of different things. You know, we talk about China and their infrastructure being a program that's going gang-busters and them buying steel and asphalt, things of that nature. We know how the price of oil impacts transportation because when you look at a construction project, whether we're using an asphalt material which is a byproduct of oil or we're having to fuel the trucks and equipment to build the project or get the materials to it, those costs impact us greatly.

And I was in a meeting the other day and they showed us this chart, and this is a chart that reflects the price of a barrel of oil since 1970, and it kind of puts into perspective some of the different things that have happened historically that have impacted the price of oil. You can see back in 1973 the Oil Embargo, the Iran-Iraq War, the first Gulf War, and you notice the first Gulf War there was just a spike and then it came back down to normal numbers. And then back in 1996 it started going down, and then OPEC cut production, it started going back up, and started coming back down again, and then we had September 11, we attacked Afghanistan, we attacked Iraq, we started having hurricanes, and you can see what the price of oil has done since 2002.

And if you can move the graph over just a little bit so you can see the other way. If you notice, the top of that line is $70 a barrel. I think today oil was at $94 a barrel, so it's still climbing. So you can see what a tremendous impact just the price of a barrel of oil has had on our construction.

Maintenance, we've talked a lot about maintenance, and when I look at how we've gotten in this, we started putting a lot more money into maintenance and we saw improvements in our pavement scores, and we kind of sat back and said, Well, we're putting the right amount of money into maintenance to maintain the system. And so we kind of kept it at a stable amount. But what you can see from inflation is when you can't buy as much with the same dollar amount, we're not doing as much maintenance work as we were previously, and you don't see the pavement scores dropping right away, it takes a little time. And so that's what we've seen is the money hasn't been being put into maintenance that we've needed and we've got to increase the amount of money we spend on it.

So that's kind of those factors that we didn't have any control over.

So now let's talk about the state issues, and I don't want to get in and first off sound like we're blaming or bringing up excuses, and so I'm going to start the state issues with the positive things.

We knew we were coming down this road to a shortage of transportation funding and the legislature did do some things to help us. They passed the Texas Mobility Fund which brought a good infusion of money into the department. They got the legislation going to get the constitutional amendment for Prop 14 that allowed us to bring money sooner rather than later to try to offset that inflation. During this last appropriations bill, and if the comptroller was able to certify it, they would bring an additional $300 million to the department for bonding purposes　-- and I can tell you that we have that money in the bank and we'll be meeting, as I discussed last time, on how to use that money. Prop 12 was just voted on in November which has a likelihood to bring in additional an $5 billion of money to the department if they appropriate it next session. So they've done some good things.

Short-term borrowing, I don't want to forget about that because we couldn't have functioned without having the short-term borrowing, but I do want to put a caveat on that. We're at $388 million of short-term borrowing right now and we have a cap of $500 million. So we're nearing close to the cap on short-term borrowing because of the pay-outs and unexpected pay-outs that we've got.

But the legislature also has been doing some things that has had an impact on the department in the funding for it, and I think the first thing you can kind of look at is what everybody thinks of is raising the gas tax. That would be a way to help solve this problem. But if you looked at the last legislative session, there were several votes, either bills that were up or amendments on bills, one to raise the gas tax straight away, and it failed considerably. There was a bill to index the gas tax, and it failed tremendously. And then there was another one to actually do a gas tax holiday, and it passed. It did not get out of the Senate so it did not pass both houses and get signed into law. But I don't think the inclination on our legislature to raise fuel taxes or registration fees has been there, so we haven't seen the funding coming forward.

They've had some transfers out of Fund 6 to other non-transportation things, things that are priorities for the legislature but it's being funded out of the motor fuel tax, and some of those that I mentioned is: $50 million to the Texas Education Agency for school buses; the medical transportation program came to the department and we were funding it out of Fund 6, it's now going back into health and human services and the appropriations bill basically says we have to spend no less than and so it's an open checkbook right now to Fund 6; and the TERP transfer for the Texas Emissions Reduction Program transfers which don't impact our current budget but are impacting our future projections of revenue because the money is being moved out of Fund 6; and you can talk about the other non-transportation items like the Commission for the Arts and the Historical Commission and things of that nature.

And then there's Senate Bill 792, and there's a lot of things that came about in 792 that have impacted the department in their projections on what future revenue is going to come out there, and I think the biggest obstacle is that bill passed in June and we're still having discussions with some of our transportation partners on exactly what that bill means and says.

MR. WILLIAMSON: Let me ask you a question about that because I think most people who are transportation interested process that the most severe impact of 792 is limiting our access to private equity. I think very few realize that the process that was set in place　-- which actually is not a bad process if we could just get everybody to agree on following it　-- basically says, okay, TxDOT, you notify the county toll authorities or the regional toll authorities or the RMAs that a project is ready to advance and then you meet and confer with them on business terms and market evaluation, and then you get a market evaluation and they have the opportunity to finance and construct it first, and if they don't, then you have the opportunity, and then if you don't, the project goes on the tax road list.

When you say that we're still talking with our transportation partners at the regional level and how that's impacting our cash flow, what you're actually telling us is even with the restrictions of 792 on the private equity side, we could have anticipated continuing construction money flowing into the system just by virtue of reaching agreement with some of the toll authorities on some of the projects. The problem is we're in December and we can't get any of our local and regional partners to agree on a smooth process that should be advancing projects right now. In other words, we noticed them on some 88 projects, many of which are ready to go, and because that process hasn't been agreed upon, that's a lot of the deferral of the construction projects in the out years because we can't rely on 792 as a path towards construction of a local toll project.

MR. SIMMONS: Yes, I think you've said it exactly right.

MR. WILLIAMSON: Okay, thank you.

MR. SIMMONS: Part of 792 also was the CDA sunset legislation which, of course, there is a committee that's made up to review the CDA legislation that we have out there, but because of that unknown, because it sunsets in 2009, we no longer can feel comfortable forecasting revenue that may come from a comprehensive development agreement. And then there's the issue of primacy. Before we kind of had an idea of the projects that we would be able to build in addition to the projects that our transportation partners would be able to build, but now the primacy has kind of taken that away. So again, the ability to forecast in the future has been limited.

MR. HOUGHTON: Let me talk about primacy a little bit. Define primacy. How many projects are categorized in that?

MR. SIMMONS: I'm going to have to defer to Mr. Saenz on that question, or Bob Jackson.

MR. HOUGHTON: Offhand, do you remember how many projects?

MR. SAENZ: I would say of the 87 projects, probably around 50 of them are in areas where we have either an RMA, an NTTA or a county toll road authority.

MR. HOUGHTON: Of those 50 that are the primacy projects, since the gavel went down on the legislature in May, how many of those have been brought to us to let's start moving forward by our transportation partners, those primacy projects?

MR. SAENZ: None. We are working on several projects but we have not gotten to the point where they've gotten　-- we haven't reached terms and conditions agreement, so therefore, they've not been able to get market valuations done. The only project that is the most advanced is the US 281 in San Antonio. All the other projects are still under negotiation.

MR. HOUGHTON: So we've been doing this since June 1, and we're still without a resolution on any project.

MR. SAENZ: Right.

MR. HOUGHTON: Okay, thanks.

MR. SIMMONS: So that kind of summarizes the issues when it comes to things that have happened in our state legislature that has had impact on our　-- and I keep using the term　-- forecast for the future because you have to remember we're planning projects 20 years out and our legislature meets every two years, so that's ten legislatures that we're trying to work through, and here this is just one that has had this impact on us.

So what has the federal government done? Well, if you remember, we redid all our categories of funding back in 2003-2004, and we actually had a new transportation bill passed in 2005. It was originally supposed to have been passed in 2002, but they kept doing continuing resolutions because they couldn't meet agreement on what the bill should look like, so we've had a bill since 2005.

This department has a long history, and going back, we've had things that have been called rescissions in the past but never to the amount that we've seen since this bill was passed. We've talked about it. Currently, to date, we've had $666 million rescinded from Texas, there is a bill right now before Congress that will add another $259 million of rescissions, and as we've talked about, there's $700 million actually incorporated into the transportation bill that will come out in 2009. So there's a billion five of rescissions of projects that we were planning on that we can no longer plan for.

We talk about earmarks. This last bill had over 6,000 earmarks in it, and we've talked about the impacts that earmarks have on our planning and project selection, but I just have to point out that President Reagan vetoed a transportation bill that had about 100 earmarks in it because he said that there were too many earmarks.

And the Federal Highway Trust Fund, as we've talked about, the Office of Management and Budget has projected that it's going to go negative $4 billion in fiscal year 2009. And $4 billion equates to about $320 million for Texas, but that's writing checks in that one year, and as we know, our projects pay out over a four-year period, so if they can't pay $320 million in one year, that means we have to stop four times that amount in actual project letting, because if the money isn't there in the first year to pay for it, it's surely not going to be there in the following years. So we have to stop about $1.2 billion of projects because the Highway Trust Fund is going to negative.

Now, there are some fixes that they have out there but they're one-time fixes, and they have been discussing these for several months now and still have not gotten it into any bill to try to correct that. So Texas, again, with everything else that's going on, we have to be a little bit more conservative and adjust our forecast to take that into account.

I've mentioned the SAFETEA-LU bill which is our federal transportation bill that was passed in 2005. It expires in 2009. With a Highway Trust Fund that's going negative, I don't believe Congress, just like our state legislature, is looking to increase motor fuel taxes, and so I'm not real sure we're going to have as robust of a bill as we've had over the last few transportation cycles.

MR. WILLIAMSON: Hang on a second, Steve. I appreciate the comprehensive report and I think I understand it's staff's intention for this to be the wrap-up of an eight-month effort to educate the public on why we're going to do what we're fixing to do, but I don't want to leave anyone in the audience or anyone who might be watching us with a false impression　-- which is one of the things that state agencies have to deal with constantly when they make decisions and when they say things. When we say that it appears the legislature, and therefore, the people of the state, are not prepared to increase the motor fuel tax, and when we say that the United States Congress, and therefore, the people of the United States, are not supportive of an increase in the federal gas tax, we might leave the impression that any level of gas tax increase would solve the problem, and I think we would be not responsible men and women if we left people with that impression.

By any chance, is David Casteel and John Barton with us today, or did they go back home?

MR. SIMMONS: They went back home. I was getting to that.

MR. WILLIAMSON: I don't want to embarrass you, but I do want some numbers discussed and some tax rates discussed in order to understand the dimension of the problem. And the reason that I think that's important is for this commission and speaking for its previous commission, now State Senator Nichols and now 792 Commission member Johnson and myself, know to say plainly that we understood this problem was coming in 2001, and unlike any other state in the nation, we began to prepare for this problem by asking the legislature to change the laws to open up the doors to private investment to fill the gap that we knew was coming and that we talked about on a regular basis as coming.

Because there's going to be a tendency in the next few months, as these reductions in contracts become real to employees and contractors and employees of contractors, that we understood this was going to happen, we had a plan in place to address it and that plan has been redefined for, I'm sure, good reasons. Otherwise, we wouldn't be going through this.

So just for the record, do you happen to recollect what a 25 percent increase, 5 cents, in the state's motor fuel tax would yield to the Texas Department of Transportation to fill the cash flow shortfall?

MR. SIMMONS: James Bass would probably have it better, but for every penny, it's about $110 million.

MR. WILLIAMSON: So a nickel would yield $550 million per year.

MR. SIMMONS: That's correct.

MR. WILLIAMSON: And do you or Mr. Saenz happen to recall, based on our pavement scores, the amount of money per year we are soon to increase into our maintenance budget?

MR. SIMMONS: Amadeo may have the number but it's over a billion dollars.

MR. SAENZ: Our maintenance number needs to be around $2.1 billion. We were doing about $1.1-, so it's about a billion dollars more.

MR. WILLIAMSON: So a nickel in the state motor fuel tax, a 25 percent increase in the state tax, will effectively yield 50 percent of the maintenance we need to increase in order to catch back up on the quality of our highways.

MR. SIMMONS: Yes, sir.

MR. WILLIAMSON: Now, do you happen to recollect what a nickel in the federal gas tax would yield the State of Texas? That would be a 32 percent increase in the federal gas tax. I may be the only one on the dais that knows that.

MR. SIMMONS: Yes. I don't want to run through the calculations in my head.

MR. WILLIAMSON: Unless Mr. Chase knows.

MR. CHASE: It would be about $500 million.

MR. WILLIAMSON: A full nickel in the federal motor fuel tax, apportioned as it's been apportioned in the past, would result in about $480 million in federal reimbursement available to us, however, to be sure that we all understand, the $480 million is only available to us under what circumstance?

MR. SIMMONS: We have to spend it first, and it's usually in siloed accounts for what we can spend it on.

MR. WILLIAMSON: So if the federal government called and said, hey, guess what, you've got $480 million more in your apportionment, in your spending authority than we first thought, we would still have to generate state revenue and spend it before we could be reimbursed the $480 million. And then the $480 million, our expenditure of state money to get to that $480- would be siloed according to the categories of federal expenditure.

MR. SIMMONS: Correct.

MR. WILLIAMSON: So when we speak of the public's position on raising the tax rate in the negative, we don't mean to imply that a nickel at the state level and a nickel at the federal level would permit us to move forward with construction. We only mean to imply that we all have choices. The choices are to raise taxes to a significant level, or to borrow money at a significant level, or to incent private investment at a significant level, or to live with congestion, deteriorating air quality and deteriorating highways.

MR. SIMMONS: Yes, sir.

MR. WILLIAMSON: Thank you.

MR. SIMMONS: And if I left the impression that there's one silver bullet to solve it, there is not.

So if you want to categorize it that I've been blaming people　-- which I have not been　-- I want to put on the table what TxDOT has done that has complicated this issue ourselves. And you know, we've been an agency 90 years last April, and we've dealt with projections of what a federal transportation bill is going to do and what our state legislature has done, and when we were projecting back in 2004, 2002, for a 20-year program, we were forecasting what the next three federal transportation bills were going to be. And the way we've always looked at it in the past is we've never lost anything from bill to bill　-- in fact, usually we gain　-- but looking at what has been transpiring at the federal level, and what the Highway Trust Fund is doing now, we don't feel like we can be as optimistic about what those future transportation bills are going to be.

And so in our previous forecast for the next transportation bill after SAFETEA-LU, we said we were going to get at least the amount of money that we got in the last two years of SAFETEA-LU and then increase it 2-1/2 percent each year. Well, I don't think that that is any longer a good forecast to do, so we have to be a little bit more conservative.

I don't think that when we were looking at our revenue stream, kind of going back to that chart that I showed on the price of a barrel of oil, I don't think we had projected that the motor fuel tax would be at or around $3 a gallon of gas for as long as it has been, and I think that we needed to have adjusted our numbers sooner rather than later.

Some of the way we have selected projects　-- and we went through the public hearing this morning on how we go about selecting projects or programming projects, and one of the things I think you'll notice is that we went to a bank balance program on just about everything that we're doing now　-- or that's our proposal.

In the past when we said some of these were project-specific programs, we gave a false impression to folks when we said project A, B and C is funded because people believed that that project, once we said it was a go, was going to get funded regardless of our cash flow, and we cannot do that anymore. And that's why we're going to bank balance so our local planning partners will know how much money they've got and they will help us to keep the balance positive.

MR. WILLIAMSON: And again, forgive me for interrupting, but we've wandered out of normal person speak and into TxDOT speak. Bank balance means what to the normal person?

MR. SIMMONS: Bank balance is like your checking account: you have so much money in it and you can write checks based on what you have in the balance, but you can never go negative without consequences.

MR. WILLIAMSON: And does centralized government in Austin, Texas control that checkbook, or does decentralized local and regional government in Dallas and Houston and Austin control that checkbook?

MR. SIMMONS: We have moved to where the locals have that decision-making on selecting the projects, but in some cases we kept the balancing of the books here in Austin, and what we're moving to is while we'll still keep the larger books for everybody, the locals will have that checking account that they will have to make sure that their household account stays positive.

MR. WILLIAMSON: I know in the case of the Austin area, a prominent　-- and I would say knowledgeable　-- senator in the world of transportation contacted me recently about the impacts of our cash flow reductions on the Austin district, and he made the point that it's hard for him to plan and promote an aggressive program at the district level when the state leads him to believe he's got X amount of money today and he finds out the very next day that it's less than X. My response to him was: We have, we think, fully completed the process of empowering the Austin District with a budget as opposed to a series of projects that are not costed out every year so that he can plan better. Was that good information I gave that person?

MR. SIMMONS: Yes, sir.

MR. WILLIAMSON: That would be the case in San　Antonio and El Paso and Houston and Lubbock as well?

MR. SIMMONS: Yes, sir.

MR. WILLIAMSON: Well, I guess Weatherford is probably Fort Worth District. Please proceed.

MR. SIMMONS: Just as we probably didn't do a good job of assuming that the price of a gallon of gas was going to be staying around $3, with what has been happening, I don't think we reacted fast enough to some of the restrictions on the innovative financing and how that impacted us.

And then lastly, when we got Prop 14 bonds which allowed us to move forward projects that were in the future, build them sooner, we encouraged the districts to go ahead and let those projects, and those were the type of projects that were probably sitting on the shelves ready to go, and so we've spent future money before we had the money in the bank, but it was because we had some of the abilities out there.

So again, because I know when I get up here, some people like to point to one thing or the other, there is no silver bullet that has caused this problem, it's a whole bunch of things that have compounded the issue. And I want to go back to all the things that I've mentioned in here, or most of them, have happened since June when the legislature ended. And I kind of equate it to　-- and some of you remember　-- the old penny scales out on the sidewalk where you put your penny in and you jumped on it and that needle started going like this until it finally settled down. Well, that's where we are at right now. We've got so many things in flux that we're just trying to get to see the impact of all those, and I think we're close.

So what have we done since the last meeting where I mentioned some of the issues that we're going to do? Well, first off, Mr. Bass, our chief financial officer, has advised us that the maximum we can let to contract in fiscal year '08 is $3.1 billion.

MR. HOUGHTON: That's all construction?

MR. SIMMONS: That is construction and maintenance.

MR. HOUGHTON: Okay.

MR. SIMMONS: And because here we are in December, we had already approved the January letting, so it's already been advertised and ready to go, so if I had to cut projects, my ability to cut projects was from the February through August '08 letting, basically half the year. And when I looked at the amount of funding that we had in that time period, or basically all of fiscal year '08, we had about $4.2 billion planned to let, now we only have cash flow to allow me to do $3.1-, simple math is I've got to cut $1.1 billion from the letting and I only have six months to get it done.

We have met with our district engineers, by video teleconference, and provided them a list of projects that will be delayed. Those projects were selected on the basis of we had to maintain the existing system so all of our maintenance projects were moving forward and any added capacity　-- which is funding out of our Categories 2, 3 and 4　-- will be delayed, and that came up to about $1.03 billion.

So they have been advised of that and we've tasked them to go out and start　-- through this video teleconference and a communication plan　-- to start talking to the metropolitan planning organizations, their state and local elected officials, to advise them of this and of the situation we're in. And so they are out there right now and they have to report to me on what they're doing, so I will keep you apprized of those contacts that they have been having.

MR. HOUGHTON: In contrast, Steve, what was the highest letting year?

MR. SIMMONS: $5.3-.

MR. SAENZ: In 2005.

MR. HOUGHTON: $5.3-.

MR. SIMMONS: And I'd just tell you that right now Mr. Bass doesn't think that we'll have a $3.1 billion letting in '09, the way the projections are, but we're still finalizing that based on the cuts.

MR. WILLIAMSON: By that, you mean it will be less than $3.1 billion.

MR. SIMMONS: It will be less than $3.1-.

I mentioned last time we were going to reduce the outsourced engineering by $250 million. We've done that, we've given the new allocations to the districts for them to look at what they have to date, what they've spent to date, what projects they have in the letting, and what projects need to move forward and which ones can be stopped. We also have encouraged them to take a look at it and not just cut them off because we need to get it to where the plans, or whatever we're at, to a good stopping point. In other words, we don't want to have to, when we finally get this funding shortfall resolved, to start reinventing the wheel.

So they're in the process of looking at the contracts they have and evaluating their budget and how it's going to affect it, and we expect to hear back from them　-- I think next week is when I asked them to respond back to me on their cuts.

We also cut the right-of-way budget, and again, as Mr. Saenz mentioned in his discussion about the TTC-69, you're right, it doesn't make sense to go forward and purchase a lot of this right of way, but a lot of times we have offers already extended to property owners, and it would be difficult to withdraw those and say we're not going to negotiate anymore because of our cash flow. We need to just go ahead and proceed to get it to the right point.

MR. WILLIAMSON: Well, I understand that in some cases, but I focused on 35 because I think for the first time since we started talking about TTC-35, it's starting to sink into landowners and local governments along the existing 35 footprint what it means to expand 35. And I say, once again, I'm extremely uncomfortable tearing down downtown Troy and then telling everybody it's going to be 20 more years before we can add the lane.

MR. SIMMONS: I understand.

MR. WILLIAMSON: I think that is not good.

MR. SIMMONS: And we have processes, Mr. Chairman, that we don't really take possession of the property until we need it, and so if there's a business on it, we buy the property but we'll allow them to operate on it on a lease basis, so we have opportunities with that.

First off, we're not just focusing on external cost reductions, we're looking internal. Mr. Saenz has tasked all of our districts, divisions and offices to look at their operating budget and to come up with a minimum of up to a 10 percent reduction in cost savings. And nothing is off the table when it comes to that; whether it's purchases, utilities or even FTEs, they're going to take a hard look at that.

Those plans are due back in on Saturday. We gave them till Saturday, some probably wondered why, but we wanted to give them all day Friday to finish their plans up. We've already started getting them in. We will have a committee, that's being headed by Ed Serna, and a group of others to evaluate those plans, and so we're doing it uniformly across the state of Texas.

I mentioned the video teleconference we had with all of our district engineers and select division offices where we shared all this information with them and gave them guidance and direction on how to proceed with it. I also mentioned the communication plan so that we make sure we're not just sitting up here in Austin telling the story but that we're getting the message out to our MPOs and our state and local elected officials to let them know where we're at, what we're doing and how it impacts them.

We talked about the MPOs playing a greater role in 2009 and beyond in order to identify future cuts when it comes to the bank balances. I've had a personal meeting with the Consulting Engineers Council to advise them of what's going on, and I think that they understand the situation we're in. It's how we work with the consultants that we have on contract to make sure that it's a smooth transition, and not just a short notice to reduce.

I've been to D.C. several times, been talking with our Texas congressional delegation, first off, to advise them of the shortfall issue, and also to encourage them to start being engaged　-- not that they weren't engaged, but maybe being a little bit more engaged in starting to work on the new federal transportation bill. And I think Coby will talk a little bit more about the group that our Texas delegation is putting together to work not only at the federal level but also to try to work with our local legislative leaders on that.

I've also offered to go up there on a monthly basis to keep our congressional delegation informed, so I'll be going up there probably before each commission meeting because we will also be discussing the federal agenda over the next few months to keep them informed of what we're doing.

And as we're doing with our congressional delegation, I think we need to do also the same thing with our legislative leadership here in Texas. I know that the chairman and myself and Mr. Bass have already met with the lieutenant governor and Chairman Carona and Chairman Ogden, and we want to continue those discussions. I've personally met with the House appropriations staff and laid out to them the issues that are going on, and I've personally talked to Chairman Chisum to keep him informed of the issue.

Some of the other things, Amadeo is our new executive director and he is starting to put his organizational structure together, and some of the things that we've done, for example, we now have a CFO that is at our administration level and we're moving all of the programming, forecasting and letting management under his leadership so it's all focused in one area so we'll be much more efficient when it comes to our projections and our forecasts.

We're also adapting our financial forecast system to meet the needs in uncertain times. When we talk about fuel efficiency, the federal money, inflation, fees and taxes, and bonding, and comprehensive development agreements, it all comes into play in our forecast. We are working on a model　-- and I think that's the one you were asking if Mr. Casteel and Mr. Barton were here; Amadeo tasked them with looking at this and coming up with some recommendations　-- and we will have a model that we can use to project what different scenarios might come before us, whether it's an increase in bonding capacity or whether it's an increase in fuel tax or what the fuel efficiency of motor vehicles are, things of that nature.

And last but not least, we've been in contact with the comptroller. When she does her budget analysis for our revenue at the state level, it's for the state legislature which is a two-year period, so we feel very confident using her numbers projecting the revenue for a two-year period. But when we start having to project out for our programming out to 20 years, we need some additional help, and we've gone to her and asked her to help us forecast it, at least out 15 years, so we can point to another number that says these are not just our numbers, we've had assistance with an organization that does forecasting for the State of Texas. So we'll also ask her, once we get those numbers, to help us look at our forecasting system and see if there's any improvements or modifications we can do or should take into consideration.

So there are some folks out there that are asking the question of why you're just now doing something about this, or implying we've known about the need to do this and have been waiting until now to say that there's a problem, and as I've mentioned several times, with only a few exceptions, all these issues have occurred since June of this year. Every time it seems we're ready to move forward on adjusting our funding, another issue comes out that causes us to reevaluate our position, and we do not believe we have reached a stable position yet but we feel we have made the best decision, given the facts we know today.

And with that, Mr. Chairman, commissioners, I'll be happy to answer any questions.

MR. WILLIAMSON: Members.

MR. HOUGHTON: Steve and fellow commissioners, it looks like to me there was one shining piece of legislation that allowed us to go this long on funding these major transportation initiatives and that was the Texas Mobility Fund. It's provided significant cash infused into the system, and James, I can remember all the charts where it spiked and all of a sudden it dropped off, and we're in that drop-off phase, along with other things that have occurred, inflation, the tolling issues, not allowing the concessionaires, a couple of things.

And Amadeo, I asked you a question a minute ago, what kind of sticks in my throat is during the session we had the local and regional mobility authorities ask for projects, and under 792, primacy, whatever you want to call it, and to date we have yet to close one. It doesn't seem like there's an urgency, for whatever reason. It seems like the local and regional tolling authorities are running away from private equity, when these projects, in fact, could get built if they would open their minds to private equity mixed with debt financing.

SH 130 is a shining example of competition, what competition can do. Yes, there is no private equity in there, they went out and leveraged their entire system to do that.

MR. WILLIAMSON: There's a lot of state equity in it.

MR. HOUGHTON: Yes, there's state equity.

MR. WILLIAMSON: Fifty percent tax equity.

MR. HOUGHTON: Right. But the point is when we looked at dealing with the local authorities years ago, we were putting in state tax dollars as equity in the forms of right of way, in the forms of building connectors, in the form of participation, and not getting the adequate return back to this agency. We subsidized those toll projects. So the challenge is getting our senators and out state reps to understand that we could move ahead on a lot of these projects if there's a will on the other side to get these moved ahead and quit protecting the turf and open up and let private equity come in and mix some of that equity with debt financing. Now, I pontificated a little bit but there's a reason for it.

On the other side, when you talk about vehicle registration and increase in tax, there is a little shining star, two of them　-- one is in this room. There's two counties in the state of Texas that came up here and said, We'll tax ourselves if you put this rider on this bill　-- or I don't remember how it was done.

Pete, can you come up here, please?

MR. WILLIAMSON: You're hell on surprising people today, aren't you.

MR. HOUGHTON: Yes, I am.

(General laughter.)

MR. SEPULVEDA: For the record, my name is Pete Sepulveda. I'm the county administrator for Cameron County and I'm also the RMA coordinator for the Cameron County Regional Mobility Authority.

MR. HOUGHTON: Pete, can you talk about what you did in the legislature as far as vehicle registration, you and Hidalgo County?

MR. SEPULVEDA: What we did, we were able to get language passed in the House and Senate that allowed the commissioners court of our county the ability to implement an additional fee on the vehicle registration in our county of up to $10, and the idea there was to utilize that money to be able to leverage additional funding for projects in our area. In Cameron County, the commissioners court unanimously approved an order where we are, beginning January 1　-- and that's the way the legislation was written　-- beginning January 1, we will charge an additional $5 per vehicle in Cameron County and that will go to the regional mobility authority to utilize to move projects forward in our area.

Again, we have the flexibility of going up to $10, so that's there. In Hidalgo County, they elected to go up to $10, but we felt that $5 would be enough to allow us to move forward with several of the projects that we had been planning on for the last couple of years. And so we've been working with the district office and determining which projects are the projects that are going to be, time-wise, easiest to clear environmentally so that we can move forward with the design, engineering and ultimately construction. But that legislation will allow us to leverage money, utilize public-private partnerships and provide the necessary transportation infrastructure that Cameron County is going to need today and in the future.

MR. HOUGHTON: Pete, what does that $5 generate in revenue?

MR. SEPULVEDA: Annually, for Cameron County RMA, again, that $5 per vehicle is $1.3 million.

MR. HOUGHTON: $1.3 million. I congratulate you all for thinking outside the box, and this is the example of bringing your leverage and bringing private equity to the table. And I'm sorry to surprise you, but continually, Mr. Chairman, South Texas rises again.

MR. WILLIAMSON: You're right, South Texas is way ahead of the curve, they think a little bit further ahead than most people.

How are you doing, Pete?

MR. SEPULVEDA: Doing great. Judge Cascos sends his regards. We also, in Cameron County, have the good fortune of owning three international bridges, and so now that's something that we're very seriously going to consider, that's an additional source of funds that we can utilize to leverage additional funding. One project in particular that we've actually presented to the district office that would connect our commercial international bridge with the Port of Brownsville and then back to US　77. There's several different sources of funding, but that has a lot of potential in our mind, and I think if we can bring in the private sector, we can really make that happen quick.

MR. WILLIAMSON: Hope, if you're not careful, they're going to do such a good job of modernizing their transportation infrastructure that AT&T is going to move to Brownsville.

(General laughter.)

MR. HOUGHTON: Congratulations, Pete, and thank you, and I'm sorry to surprise you.

MR. SEPULVEDA: Thank you. No problem.

MR. WILLIAMSON: Good to see you. It's always good for you to be here.

MR. HOUGHTON: So those are some of the things, Mr. Chairman. They have been outside the box, as well as North Texas on the SH 130 and other projects up there, but we've got to challenge these regional mobility authorities and the local tolling authorities that private equity is not a bad issue, it's not a bad name, it's not a bad way of going to get these projects on the table, generate revenue for the region.

MR. WILLIAMSON: Well, I agree. I think I want to put the most positive spin on it. I've got to think that a lot of the communities that have been resistive to it in the early years, maybe when the option is no progress versus progress, might be a little more open.

On the other hand, Ted, we've got to always remind ourselves we built our plan based on the notion of regional planning and local execution and you can only do so much in central government if you believe in regional planning and local execution. Eventually you've got to say, for example, to Judge Emmett and Ed, you're the local guy, it's your call in the end, how you do it. So hopefully, by offering example after example of how success can be reached, it leads people to make those decisions on their own and not because we think it's the best. If you say you're going to trust local government, you've got to trust local government in the end.

Anything else for Steve?

MR. HOLMES: Chairman, I wanted to just go back to some of the numbers that you were talking about on the potential gas tax increase and how various type things might work, because seems to me that if you take the most optimistic view of, say, a 10 cent state gas tax increase which is about a billion one a year, and a nickel at the federal level which is $500 million, and if you eliminated 100 percent of the diversions which is another $750 million, and then maybe you add a little bit of vehicle registration, so you create about $2-1/2 billion a year, you're still around $3 billion or so short if you did all of those things.

And I recall your testimony from time to time in the last session that talked about needing all three legs of the stool: the tolls, gas tax money and fees, and private funding. And I think that if you look at the most optimistic level of gas tax increase and vehicle registration fee increase, you don't really quite get halfway there, and so it just amplifies that point that you had made a number of months ago.

MR. WILLIAMSON: I thank you for that. We work for a guy who has said repeatedly that he's not opposed to tax increases for specific things, he just believes that that should be the last option, not the first option. And I think the point he tries to make all the time is every road requires some level of equity, it's either tax equity or toll equity but it's some level of equity. If you choose toll equity, then every toll road can either be in the public trust or in the private trust, and there can be any range of combination of those. You need tax roads, you need toll roads, you need public trust, you need private trust, if you're going to address the problem and solve the problem within a 25-year time span.

I just really believe that infrastructure, again, is not unlike the national pension system and the national healthcare system. There is a tremendous level of unfunded liability that's just been pushed forward and pushed forward and pushed forward, and now the push is against a wall and you can't push it any further, you've got to deal with it, and it's just pretty damn hard for some people to deal with, they have a hard time.

I was a member of the legislature when this infrastructure problem was created, and I can tell you not a day goes by that I don't get up and regret that we didn't say to Governor Clements at the time: No, don't need to reach into Fund 6 for DPS salaries. I look back and regret that daily because once you get in a habit of borrowing from one hand to pay the other, it's a hard habit to break. It's easier to push that unfunded liability ball down the road and let somebody else deal with it. Well, we're the somebody else.

Any other questions for Steve? This is basically the wrap-up, members, and the next thing you see, probably in January, is going to be some specific reductions that we'll have to approve, so I think Steve and his staff have had about all of telling us how bad it is that they'd like for the next year or so.

MR. HOUGHTON: But there are good, positive things like Cameron County and things that have happened in North Texas, there are some good things.

MR. WILLIAMSON: Steve, I want to close this out by acknowledging that Chairman Carona has recently sent us a letter giving us his thoughts on how we should use the $300 million that has been reserved for debt payment, and I think that we ought publicly acknowledge that Chairman Carona is actively working through what he feels like is something he can support in the next legislative session by way of encouraging us to use that $300 million to issue additional debt and keep our construction projects moving as best we can through '08 and '09.

I know there is, based upon what you've reported to us on your conversations across the street, there is still a little bit of confusion on behalf of some of the members about why we have to act now on construction contracts that are occurring in '09 and '10. For example, an unnamed chairman recently asked me: Well, how can you say you're going to stop construction, you've got $3.2 billion to spend in North Texas? I had to remind that person that for whatever reason, the legislature chose not to appropriate that money to us in the current biennium, we couldn't spend it if we wanted to. And it's just small things like that that I'm not sure members fully grasp yet about why it's important for us to stop now.

Chairman Carona is not one of those members. He fully understands our cash flow situation, has written us and asked us to map a plan to use that $300 million as he thinks it should be used, and we are preparing a plan for the commission members to look at that involves issuing some debt and using the $300 million to pay the debt payments, but as Chairman Carona acknowledges, even that is not enough to fully stave off what we've got to do, it only makes it a little easier to transition.

MR. SIMMONS: Yes, sir. And you mentioned the $3.2 billion. I assume that you're talking about the NTTA payment?

MR. WILLIAMSON: State Highway 121.

MR. SIMMONS: I'd be remiss if I didn't point out the positives from that standpoint too. As you know, going back to the cuts in right of way and consultant contracting, the Dallas and Fort Worth districts got the same cut as all the other districts did when it came to our normal Fund 6 generated consultant usage and right of way, but they have　-- and I guess you'd call it a separate ledger　-- that $3.2 billion that they can now use that money to pay the consultants and right of way for those projects that were going to be advanced by that $3.2- out of that fund. So that is an opportunity for the Dallas-Fort Worth area to keep their program moving forward in these times.

MR. WILLIAMSON: Members, we have one person who wishes to comment on this agenda item, I'd like to call him at this time. John Shackett. John, as my recollection, this is the first time we've seen you giving testimony.

MR. SHACKETT: Yes, sir, it is.

MR. WILLIAMSON: Welcome, and thank you for wanting to offer your comments.

MR. SHACKETT: Thank you. Actually, my name is John Shackett. I'm with Rodriguez Transportation Group. We're a small engineering firm, been in business about 12 years, providing services for the state. And I do sit in the back room, actually, for the last couple of years and I listen, and I really do appreciate the time and energy that you guys commit to this great state. I've also been watching this commissioner right here and I always say to myself: Man, I'm glad I don't have to talk in front of that guy, he asks some tough questions. So I could anticipate that, but here I am.

So I want to tell you a quick story. I was out on about 3,000 acres outside of Mason the other weekend, there was a guy in town from Boston, and he was all excited and he was sitting out there and he said, Man, we're out here in the middle of nowhere, we can do whatever we want and nobody would ever know. And I thought about that for a second, and I said, Man, you're kind of scaring me. And I pulled out a picture of my wife and four kids and started talking about that, you know, trying to clear the air a little bit.

How does that relate to today? Sometimes I feel like we operate out on the 3,000 acres and I'd like to bring the issue a little bit closer to home. In our particular situation, granted, we're a small firm, but in a relatively short period of time we had a reduction in our workload of about $3 million, and you can be assured that during the holiday season we're also having to make some tough decisions, just like you guys are, as we look at moving forward. But I'm not as focused on that as much as coming up with potential solutions as we look forward.

And I really appreciate Commissioner Andrade's comment of putting on the raincoat and weathering the storm. And we did that, we've put on our raincoat and we were looking at the horizon and we saw the perfect storm, and then all of a sudden, this tsunami came in and kind of swept us away. And so we're a little bit concerned about that, but we're also here to recognize that the actions we're having to take today don't necessarily address the main goals that this agency is all about: reducing congestion, improving air quality and things of that nature.

So our only hope might be that there would be a special session called and kind of enable Proposition 12. I know that's a little bit out there but it sure would help bridge some of this gap that we're looking at. Another consideration might be to kind of phase in the reduction of the short-term borrowing, and what I mean by that is all we're trying to do is bridge a gap from what we have today to get to the point where the legislature gets back together and come up with hopefully some longer term solutions.

Looking at some possible long-term solutions　-- we talked a little bit about the NTTA payment and that's a great thing to see injected　-- one thing we might consider is that whenever a payment like that comes in, maybe we have 50 percent of that stay in that region and then another 50 percent kind of allocated based on whatever the state's needs are, due to the fact that we're talking about a state asset. It's just something to consider.

And too, when we look at the private equity, I agree that that's a great opportunity to bring in an influx of equity, and it's a good short-term solution, to a certain degree, because I can assure you that any private equity that comes to the table sees it as a viable long-term solution, so we might rethink that as we move forward a little bit on some of the assets that we're looking at as we move forward.

But at the end of the day, we're here to support you, and the reason why I'm here is that as I've been sitting in the back of the room for the last couple of years, it became ver