June 14 Transcript

Texas Department of Transportation Commission Meeting

STAFF:

MR. WILLIAMSON: Good morning.

VOICES: Good morning.

MR. WILLIAMSON: It is 9:02 a.m., and I would like to call this special meeting of the Texas Transportation Commission to order.

It's a pleasure to have each of you here this morning with us. Please note for the record that public notice of this special meeting, containing all items on the agenda, was filed with the Office of the Secretary of State at 3:50 p.m. on June 6, 2007.

Before we begin today's special meeting, I would appreciate it if you would take a moment to put your pager or cell phone, Dewberry, or what other　-- only the Lord knows has been invented　-- electronic device you might have on a silent or off function so we won't be interrupted.

And if you give testimony　-- I haven't been saying this, but I've been asked to say it. If you give testimony, please leave your Blackberry in your seat, because the signal from that particular device interrupts the audio recording portion of the proceeding. And I thank you for doing that.

We've called this special meeting of the commission today to have a discussion on recent legislative changes and to take actions on a few matters that need our immediate attention.

We have also received notification from the department's executive director, Mr. Mike Behrens, of his intention to try to retire　-- try to retire　-- on August 31, after 37 years with TxDOT. We've scheduled an executive session for later during the meeting to discuss whether or not we're going to let him retire, and he will anxiously await the outcome.

Let me remind you that if you wish to address the commission today, we ask that you complete a yellow card. You'll find them to your right, in the lobby. On the table, there's a yellow card.

If you want to talk about something that's posted on our agenda, please fill that out. If you want to talk generally later on in the meeting, then we'll need you to fill out a blue card for general comments section. In any event, we ask that you try to limit your comments to three minutes unless you're a member of the legislature, in which case, please take as much time as you need.

Before we begin with today's posted agenda　-- our custom is to invite each commissioner to make opening comments. And we'll stay with that custom by beginning with Mr. Underwood and then Mr. Holmes, Mr. Houghton and, last, Ms. Andrade. Thank you to each of you for being here.

And, members?

MR. UNDERWOOD: I'd just like to welcome everyone here, and I look forward to hearing staff's report today.

MR. HOLMES: I add my welcome.

Thank you, Mr. Chairman.

MR. HOUGHTON: Good morning, and welcome to everybody. I think we got most of the MPOs and RMAs in the room, or at least a significant group of them.

And I welcome you all here.

I think we're going to have a fun time today moving transportation forward. Good morning.

MS. ANDRADE: Good morning to all. This is a great turnout for a special commission meeting. I'm looking forward to hearing the staff's report, and I'm looking forward to keeping Texas moving forward.

But as you all know, I'm from San Antonio. And I can't help myself, but go Spurs, go.

MR. WILLIAMSON: You wouldn't be offended if we all commented that we don't much think they need our help.

(General laughter.)

MR. WILLIAMSON: Man, what a team.

Thank you, members. And I do say good morning again, and thank you for attending our meeting.

Mr. Behrens?

MR. BEHRENS: Thank you.

For the first agenda item, we have a report from Coby Chase. As most of you that attend these meetings regularly remember, Coby reported to us on our agenda for almost a year before the session. And now he'll give us a recap on how we came out.

Coby?

MR. CHASE: Thank you, Mr. Behrens.

Good morning. And for the record, my name is Coby Chase, and I'm the director of TxDOT's Government and Business Enterprises Division. Today I will discuss legislation passed by the 80th State Legislature as it affects transportation and our operations.

The result of this session should be viewed in context with the transportation challenges we face and the goals we have for the future. There are many ways to measure progress, and almost everyone has a different opinion of the accomplishments of this session.

The legislature started out trying to respond to things they heard from their constituents. If they were rural members, they were concerned about land-takings and the misplaced perception of foreign ownership of roadways; if they were urban members, they were concerned about local tolling entities maintaining their status as the tolling providers of their regions. Legislation this session was primarily targeted to address those two types of issues broadly.

However, from our perspective, we did not make much progress in terms of enhancing our ability to provide transportation in this state. As far as the appropriations bill goes, if you compare apples to apples, our total funding increased by about 2 percent as compared with last biennium. This 2-percent increase does not get us any closer to building more roads; in fact, we've gone backwards.

As we all know, we've been experiencing highway cost inflation in the double digits; meanwhile, the estimated revenue brought in by the state gas tax does not even cover our maintenance budget for next biennium. And, oh, yes, congress has approved another rescission, meaning we'll be sending back about $66 million in the coming months.

The legislature voted down a gas tax increase and gas tax indexing and almost approved a summer gas tax holiday that would have cost the state upwards of $700 million this year. They all but completely cut off access to private capital except for a handful of projects and transferred approximately $1.5 billion from the state highway fund to non-transportation purposes. These transfers are up 15 percent from the last biennium.

Instead, the legislature approved an additional $3 billion in Proposition 14 bonds that will require us to mortgage future gas tax revenues in order to pay for projects now.

MR. WILLIAMSON: What does that mean　-- what you just said?

MR. CHASE: They allowed us to take existing gas tax funds and issue debt against it, which is not new money. It is simply a pay-day loan. We can take　-- we can just borrow against the future gas tax money that's coming that we were planning against for roadway projects and build some of those projects now. But it does not bring in new revenue.

There were a few small successes, some issues that were left unaddressed, many pieces of legislation that will affect our day-to-day operations and one rather major piece of transportation reform legislation that will change the way we develop toll projects. First, I'd like to discuss the areas in which we made progress toward our goals. During the interim, the commission adopted a legislative set of priorities, and, as a result, the following bills were passed that will include transportation in the state.

House Bill 1857 provides more authority to counties that wish to regulate development around future transportation corridors. Allowing counties to prevent development in future transportation corridors through the platting process will minimize right of way costs and maximize public awareness about the expansion and construction of highways.

House Bill 2093 will provide approximately $50 million a year in oversize/overweight permits to the state highway fund by increasing the fees charged for permits issued and reallocating some of the funds that were going to general revenue. The bill also addresses enforcement of violations of the motor vehicle size and weight laws of the state.

Senate Bill 1209 extends until 2013 current laws' 50/50 split of utility relocation expenses between the state and utility companies to accommodate toll road construction. Meanwhile, the department must establish a pilot program under which utilities may volunteer to make an annual prepayment to the department based on 75 percent of the previous years' non-reimbursable utility relocation expenses. All utility relocations would then be reimbursable for utilities participating in the program.

The pilot program expires in six years, after which we will have to ask the legislature to extend the program or revert to 100-percent utilities' responsibility for toll roads　-- well, at least the utilities along toll roads. The utilities will benefit from a lower average cost to relocate, and the state will benefit from more expeditious relocations. This was a long-negotiated piece of legislation that actually came out extremely well.

There were a few major issues not addressed by the legislature this session: The Rail Relocation Fund is not funded; environmental streamlining; advanced acquisition of right of way, and; the idea of a transportation corporation that would develop infrastructure in Texas. We hope that these issues can be studied further during the interim and action taken next session.

I'm not going to present much of any further details, so, in the interest of time, I'll summarize some of the actions the legislature took that have some sort of effect on our ability to perform our jobs. Probably the most burdensome is House Bill 2006, which would cost taxpayers a fortune when a governmental agency has to acquire land for projects. Under this bill, we expect the cost to acquire right of way to balloon significantly if this legislation happens to be signed into law.

Other pieces of legislation require us to conduct a study regarding the distribution of funds to highway projects that enhance federally designated evacuation routes, provide an additional vehicle registration fee not to exceed $10 to be directed towards RMAs in Cameron and Hidalgo counties. We are actually looking forward to reviewing the successes of this program to see if it might be expanded into other counties in the future.

One piece of legislation allows the city of Laredo to determine border safety inspection facilities locations within their jurisdiction. Another piece of legislation that was filed kind of late requires the attorney general to conduct a study on whether Texas laws or the powers of the legislature are restricted or directly affected in any way by a proposed or existing agreement between any United States governmental entity and a foreign governmental entity.

And since they're talking about a conspiracy, let me decode that previous sentence for you. This is another way of saying someone is suspicious that there might be efforts underway to unite Canada, Mexico and the United States into a single country, so, Let's study it to make sure that's not happening.

MR. WILLIAMSON: Wait. Somebody passed a bill to do what?

MR. CHASE: To make sure that, oh, agreements like NAFTA and CAFTA and other governmental　-- foreign governments, nobody, is getting into or　-- to see if anybody is getting into agreements that restrict the ability for Texas to pass laws or the United States to pass laws, and any organizations that appear to be involved in this.

And this centers on　-- it's something that kind of pops up again and again in the world of blogging, and that it is all part and parcel　-- part of a larger conspiracy to unite Canada, Mexico and the United States into one country and we'll soon be having to pay at our toll booths not dollars any more, but Ameros would be the currency of the new realm. And so this is a study to see what's going on, apparently.

MR. WILLIAMSON: You are surely pulling the collective leg of this commission.

MR. CHASE: Man, I wish I could make this stuff up. I really do.

(General laughter.)

MR. CHASE: I don't, and I can't. As I've often stated at the　--

MR. WILLIAMSON: Somebody passed a law requiring this study? Are you serious?

MR. CHASE: Yes, sir.

VOICE: Has it been signed?

MR. CHASE: Not that I'm aware of. But, of course, not signing it leads to make the conspiracy grow. So I mean who knows.

MR. WILLIAMSON: Do you have a bill number on that one, Coby?

MR. CHASE: I do.

MR. HOUGHTON: Coby, at the risk of embarrassing myself and others, who championed this bill?

MR. CHASE: Representative Kolkhorst. It is House Bill　-- and like I said, it was filed late in the session, you'll see by the number. Well, it's in the 3000s, 3647. And it requires the attorney general to conduct the study by contracting out to a law school or law schools in the state to do.

MR. WILLIAMSON: Amazing.

MR. CHASE: It is.

MR. HOLMES: Se habla Español? No? Si?

MR. CHASE: Well, as you've heard me say before　--

MR. WILLIAMSON: Parlez-vous Francais?

MR. CHASE: No. The real plan was　-- I mean let's come clean, guys and gals. The real plan is Texas is taking over all three.

MR. WILLIAMSON: I understand.

MR. CHASE: And we're going to rename it Redneckistan.

(General laughter.)

MR. CHASE: Okay. That's the last time I'm going to make that joke. I've said that 100 times now.

To continue, statutory mandates for TxDOT to contract with the Health and Human Services Commission, or HHSC, to deliver public transportation services have now been repealed, and the medical transportation program will be administered by the Health and Human Services Commission. And that means the program that we took over four years ago has now been taken back over by the Health and Human Services Commission.

To do this, however, the bill transfers TxDOT property and personnel to the Health and Human Services Commission and, of course, does not cap the amount of Fund 6 that can be transferred annually. This is particularly troubling given the uncertainty of the Frew settlement's impact on the program and its ability to cause it to grow.

Fund 6 will now subsidize the Texas Emissions Reduction Plan through 2015. Prior to passage of this legislation, we were in the program for only two years. The legislation added seven more years at $100 million per year that Fund 6 will subsidize the Emissions Reduction Plan.

We'll have to use the Trunk System to the extent possible as a route for the Trans-Texas Corridor. And if we can't, we have to report to the legislature as to why.

Cities and counties now have to conduct a traffic engineering study prior to placing a red light or camera on a roadway and to place signs along the approach to the intersection; they also have to report the data to us.

One bill takes a twist on pass-through tolling by creating a transportation reinvestment fund as a result of pass-through tolling agreements. The idea is to create a perpetual pass-through tolling source, and it should be an interesting piece of legislation once it fully blossoms.

This November, there will be a constitutional amendment that, if passed by voters, will allow the state to issue debt backed by the general revenue of the state　-- and that's up to $5 billion　-- that can be spent on highway improvement projects. If voters do what at least I hope they'll do, the legislature may decide to grant us the ability to spend that money in 2009.

It's kind of like the Railway Relocation Fund. The voters approved it by a healthy margin last or two Novembers ago, and　-- but the legislature didn't fund the program.

Let me move into Senate Bill 792. Amadeo　--

MR. HOLMES: Coby, before you go further　--

MR. CHASE: Yes, sir?

MR. HOLMES: 　-- just to clarify, that debt, if approved and issued, is backed by general revenue, not by gas tax. Right?

MR. CHASE: Right, yes, sir.

Amadeo　--

MR. WILLIAMSON: I think that's why Coby went out of his way to say we don't really have access to that money until the legislature decides that they're willing to spend that general revenue on the debt.

MR. CHASE: Amadeo will cover the practical effects of Senate Bill 792 at length in a moment, and it is a presentation well worth paying attention to. It covers a lot of ground and a lot of important ground.

To give you a broad overview, however, Senate Bill 792 prohibits most comprehensive development agreements except for a few projects that can move forward in the major metropolitan areas. The authority to enter into concession CDAs expires in 2009, and the authority to enter into design/build CDAs and CDAs exempted from the two-year moratorium expires in 2011.

The study committee will review CDAs during the interim and submit their findings in December 2008. Unless the legislature takes a positive action to renew the CD program in 2009, there will be no more private investment in transportation infrastructure other than the few exceptions noted above.

In the future, for any toll project that is located within the jurisdiction of a local tolling entity　-- that would be an RMA, an RTA or a county toll road authority　-- whether it will be developed using private funds or not, the project must go through a market valuation process. Previously, our strategy was to allow the market to determine value of a project through a competitive process.

The process laid out in the bill is an artificial competition when you get right down to it, but it is a way for the state and the local tolling entity to at least agree on the market value of a toll project or what they believe to be the market value of a toll project.

Once that value is determined, the local tolling entity will always have the first option to develop the project. If the tolling entity chooses not to develop the project, then the state may move forward.

The market valuation process laid out in the bill expires in 2011. The bill authorizes toll authorities to issue bonds to pay for any costs associated with the toll project or to terminate a CDA contract.

As I mentioned, also in that bill, an additional 3 billion in Proposition 14 bonds are authorized; up to $1.5 billion can be issued a year, 20 percent of which must be spent on safety projects. And again, Prop 14 bonds are not new dollars; they are in essence nothing more than a pay-day loan.

We expect to be very busy from now until the legislature meets again in 2009. We have our work cut out for us, between interim committees, the sunset review process, federal reauthorization and the study committee on CDAs set out in Senate Bill 792.

This is an opportunity for us to stand out. It will be a time when we focus on outreach and education; as a result of our efforts, we hope to spread awareness of our strategic plan and provide insight and guidance on the state of transportation and how it should be funded in the future.

We will conduct outreach events that are designed to educate members and their staff. And with the new Public Affairs Division, which my division is turning into on July 1, we have the opportunity to unite both legislative and public outreach and in turn strengthen the department's communications efforts.

And I would like to go off topic for just one second and say that　-- remind everybody in the audience that we have our second annual Transportation Forum. That will be July 18 through the 20th here in Austin. We're approaching 1,000 registrants at this point. So get on and register. We have an exciting array of speakers, and it's going to be fun again this year.

And with that, I'll take any questions.

MR. WILLIAMSON: You're going to be here while Amadeo delivers his speech and available to us to answer questions?

MR. CHASE: Yes, sir, absolutely.

MR. WILLIAMSON: Members, we can dialogue with Coby now or we can do it after we hear Mr. Saenz.

(Pause.)

MR. WILLIAMSON: And I think I might have made a mistake, Mike, because I was going to ask you to do utility relocation first and not disrupt the flow. I don't think he'll take long. Let's go ahead and put this out of the way and let it stay on the agenda.

Thank you, Coby. We'll have you back up in a moment.

MR. BEHRENS: Okay. We'll go to Agenda Item Number Two, which is under right of way. In the May meeting, you created the Utility Prepayment Funding Program Rules Advisory Committee, and we have another member we would like to recommend to add to that committee.

So, Amadeo, if you would, lay that out.

MR. SAENZ: Thank you, Mr. Behrens.

Good morning, Commissioners, Mr. Behrens and Roger. The minute order before you authorizes the expansion of the Utility Prepayment Funding Program Rules Advisory Committee that was formed last month; we want to increase the number from six to seven. We had sent the request because we wanted additional public sector people that were involved in utilities, and the submitted appointee from the City of Austin did not come in in time for us to handle it during the prior meeting.

We think that this would benefit　-- this person with the City of Austin with their experience would benefit that committee, and we'd like to be able to add that person. The inclusion of Kathi Flowers will provide valuable municipal input into the process as we develop the rules for this prepayment. So staff would recommend that you approve expansion of the committee to seven and adding also Ms. Flowers to the committee.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation of this minute order. Do you have questions of staff?

MR. HOUGHTON: So moved.

MR. UNDERWOOD: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: Aye.

All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you.

MR. SAENZ: Just as an aside just to let you know, the committee is beginning to start working, and sometime next week, we'll have our next meeting to get that process to be able to incorporate this new program into our program.

MR. WILLIAMSON: I started to say this when Coby was up, and then when I realized we were going to have this minute order, I held off. We try awful hard not to show too much favoritism from up here. And in adding the following comments to the record, I don't mean to necessarily indicate favoritism, but, members, I just would like to state for the record that AT&T were our principal initial adversaries and, during the process, partners in advancing this different kind of concept of dealing with utility costs.

And I think the public should know that AT&T and all of its brother and sister organizations　-- Southwestern Bell, Cingular, the pack　-- did a remarkable job of good corporate partnership in looking at the problem and trying to figure out how to help us solve the problem in a way that didn't damage the public's interest, doesn't damage their stockholders' interests and gives us all an opportunity to see if there's a cheaper, faster way to provide for utility relocation, and without taking away anything from their competitors or the other regulating utilities in the state.

And I think that we should recognize the fact that AT&T actually was very remarkable in how they worked with us on this. I personally appreciate it, and I'm sure the staff does, too.

All right.

MR. BEHRENS: We'll go to Agenda Item Number Three. This will be concerning toll roads. This will be a further discussion of Senate Bill 792 and then how we will be going into initiating a toll partnering process to begin to move more projects forward and those that will be developed as toll projects.

Amadeo?

MR. SAENZ: Thank you, Mr. Behrens.

Again, Commissioners, for the record, I'm Amadeo Saenz, Assistant Executive Director for Engineering Operations.

Our ultimate goals are to reduce congestion, enhance safety, expand economic opportunity, improve air quality and increase the value of our transportation assets. Since this last legislative session is now over, we can start to look at how we will meet the goals using this new legislation that has been passed.

First I want to go over Senate Bill 792, as Coby mentioned, and how it will change the way we do business. Then we'll look at the bill in more detail and go over the market valuation process and how we can initiate it and how it will work. And finally, as part of that, we have before you a minute order that in essence starts the process going by identifying a list of candidate projects that will be subject to market valuation and requesting you all to approve the Executive Director to move forward with the process outlined in 792.

As we discussed at our last meeting, our current transportation system is aging. Recent pavement scores show that we will need to make some hard decisions in the coming months about increasing our investment into preservation and maintenance. Unfortunately, if we raise funding levels for preservation and maintenance, that means that funding levels in the mobility categories will have to be decreased.

MR. WILLIAMSON: Now, Amadeo, this whole morning is going to be about, in the end, cash flow.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And after six years at this business, one of the things that I'm still surprised about is the terms that we use to describe a problem; they're not the terms that normal people use to describe a problem. And I don't want to insult you, but I want you to go back and say what you just said in the way a normal person would understand it.

MR. SAENZ: Okay.

When you look at cash flow, we have so much coming into the department through the gas tax and other funds. We set up a program. That program is broken up into taking care of the roads that we have, preserving the system and rehabilitating the system, and some of the other money goes to adding more lanes to the system.

MR. WILLIAMSON: Building new roads?

MR. SAENZ: Building new roads. When　-- but it's a capped amount. So if we have to move more money into preserving the system, we can only take it from the money that we have for building new roads. So somewhere, we're going to have to come up with a balance.

And we're going to come to you in the month of　-- at the end of this month at the next commission meeting and in July with some recommendations as to what the appropriate funding levels will be for preserving the system and building new roads and in how we move forward with those.

MR. WILLIAMSON: Okay. Thank you.

MR. SAENZ: We expect to see our population double in the next 25 years. As a result, the use of our roads will increase to an even higher rate, the tax base will continue to erode due to inflation, and we will have more transportation needs, but less money to spend on those needs.

The reason we have to use tolling in the private sector and the financial tools to provide transportation is because traditional gas taxes have proven to be inadequate. We've seen a reluctance to raise gas taxes in the legislature, we've seen transfers from the state highway fund to continue, and we've seen federal funding unnecessarily increasingly unreliable, and, as Coby mentioned, we're fixing to get hit with another rescission, for another $60-some-odd million.

So traditional funding is not sufficient. In other words, traditional funding is really inadequate. We need to try to rely on our strategies now more than ever to increase the competitive pressure, demand consumer-driven decisions, empower local and regional leaders and to use financial tools to build the infrastructure that we need.

I want to go over 792 and give you an overview. There are five major components to Senate Bill 792, which was signed by the governor on this past Monday. Number One, as Coby mentioned in his quick overview, it places a two-year moratorium, with certain exceptions.

It changes the expiration date of the CDA program, it addresses concerns from the public that the CDA program is not transparent enough, it gives tolling entities primacy on toll projects within their jurisdiction, and it establishes procedures for the development of future toll projects across the state.

I'll kind of go over each one of those　-- in detail each one of those five different areas.

The moratorium will last until September 1, 2009; in the meantime, only the projects that we show up here can move forward. There were some exceptions. These exceptions include Trinity Parkway, the North Tarrant Express, the D/FW Connector and I-635. Those three projects are managed lane projects that are currently under development as potential CDAs. Those were exempt.

The 1604 project is exempt, but it was developed as part of a project. So where we're going to move forward on 1604 is to look at it to see if we could salvage it if possible. If not, we would run it through the valuation process to try to develop 1604 by other methods.

The 121 and the 161 projects are procurements that are moving forward. In fact, after today's meeting, we're going to the Dallas/Fort Worth area to the RTC meeting and make a presentation on the 121 valuation that they are looking at. And the 161 project is a project that was going to have to go through a special valuation before we can proceed with a CDA that is currently under procurement.

Loop 9 was also exempt from the moratorium, as well as the Grand Parkway. Now, the Grand Parkway is going to be looked at under a special-value market valuation, and I'll discuss that when we get to market valuation.

The other projects that are exempt from the moratorium include the I-69 from Refugio County south into south Texas, and any CDA in El Paso, Cameron or Hidalgo County, except that in El Paso County, the CDA must be in the MPO plan prior to May 1, 2007. And of course, also exempt is any CDA in Grayson County.

MR. WILLIAMSON: What's the dollar value　-- do we have an estimated dollar value of those exemptions?

MR. SAENZ: I don't have it handy. I will get it to you all. Or if　-- staff could probably get it to me before staff　-- get into my Blackberry, I will be able to give you that number.

For all other projects during this time, CDAs may not contain a provision permitting the private participant to operate the project or collect revenue from the toll project regardless of whether the private participant operates or collects revenue from the toll project or engages a subcontractor to do so.

MR. WILLIAMSON: Say that again.

MR. SAENZ: The private sector cannot finance and then they cannot collect or operate the toll project or collect the toll roads　-- the tolls.

MR. HOUGHTON: So they may finance it, and they may provide the concession, but we have to collect the toll?

MR. SAENZ: Yes, sir.

MR. HOUGHTON: So we take the toll risk?

MR. SAENZ: Yes, sir. You're getting ahead of my presentation a little bit.

MR. HOUGHTON: Sorry about that.

MR. SAENZ: If we cannot have a project during the moratorium where the private entity operates or collects the revenue from the toll project, how can we address congestion problems in the meantime? We can still use tolling, toll roads. In other words, this is not the end of toll roads. We can still develop toll roads. We just have to develop those toll roads using some of our traditional funding sources to meet our transportation needs.

MR. WILLIAMSON: Amadeo, again, I don't wish to insult you, but the way you laid that last piece out and Ted's question and your answer create confusion, I think, for non-Austin people. Now, Ted asked the question about the collection of tolls.

Were you asking that question about these exceptions?

MR. HOUGHTON: I meant, yes, on the exceptions.

MR. SAENZ: Oh. These projects are exempt. And for these projects, the private sector can finance and collect the tolls. For all other projects　-- and that's how I had started the sentence. For all other projects during this time, CDAs may not contain a provision permitting the private participant to operate the toll project or to collect the revenue from the toll project　--

MR. WILLIAMSON: Okay.

MR. SAENZ: 　-- or have someone do it.

MR. WILLIAMSON: Now, time. That answer would imply that we or the Harris County toll authority could move forward with a privately financed concession as long as the winner did not directly receive or collect the tolls. Is that what you're saying?

MR. SAENZ: That's correct. The winner cannot collect or receive the tolls. It means that the public entity needs to keep the traffic risk that the　-- it keeps the traffic risk and the toll-collection risk.

MR. WILLIAMSON: So the legislature said that it's okay for the private sector to finance these assets, it's okay for them to take the construction risk, but it's not okay for them to take the traffic risk or to collect the money from the citizens?

MR. SAENZ: That's correct.

MR. WILLIAMSON: So in theory, we can move forward with $75 billion in private sector financing as long as the taxpayer was taking traffic risk and the taxpayer was directly collecting the tolls?

MR. SAENZ: The taxpayer is directly collecting the tolls, and, of course, the taxpayer is taking the traffic risk. And then the taxpayer needs to be able to have a mechanism to reimburse the private sector for their cost.

MR. HOUGHTON: There's one more issue, though, Mr. Chairman. The asset is not leased. It is still owned and operated by the state of Texas.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Does that adequately answer your question, Ted, or does that adequately make the point you were trying to make?

MR. HOUGHTON: Yes, it makes the point.

MR. WILLIAMSON: Okay.

MR. HOUGHTON: But to add that other piece to it, it's just not the traffic risk. There is no lease of the asset.

MR. SAENZ: No. The asset is　--

MR. HOUGHTON: The developer does not have title to that or a lease on that asset　--

MR. SAENZ: Right.

MR. HOUGHTON: 　-- as they do now with Segments 5 and 6 on SH 130.

MR. SAENZ: No. All we would have is a contract.

MR. HOUGHTON: That's right.

MR. SAENZ: A contract for that developer to build the asset, to finance the project, and then he would propose or he would submit how much he would want to get paid per year to compensate his costs for maintaining, building and financing the project. We call that availability payments.

Just kind of to step back, in essence, we can build toll roads the traditional way, where we will go to the bond market and finance it, or we'll use Fund 6 to finance it and then contract it out, either through design/bid/build　--

MR. HOUGHTON: Or a combination of both.

MR. SAENZ: 　-- or design/build or a combination of both, yes, sir.

MR. HOUGHTON: Right.

MR. SAENZ: And/or we could deal with something that we're calling availability payments, which is very similar to our pass-through tolling legislation. Under the availability payments, the private sector would finance the project, they would all bid on certain terms and conditions, and they would submit a bid of　-- we would, say, determine how long we wanted to take to pay for that project, and the bidders, the developers, would in essence finance it, build it and then get paid over the term that we had specified.

So for example, if we had a project and they bid $300 million and they wanted to pay　-- they were going to pay it in ten years and they would bid $30 million a year, then the department would, once the project is built, collect the tolls on that toll road. And from those tolls, we would then pay the developer his $30 million a year.

MR. WILLIAMSON: What happens if the tolls are only 20 million a year?

MR. SAENZ: If the tolls are only $20 million a year, because we are keeping the traffic risk, then we would have to make up the difference from other sources of money, Fund 6, for example. But if the tolls bring in 40 million a year, that would result in $10 million a year of surplus, additional money, available to develop other projects.

MR. WILLIAMSON: So the legislature prefers that the risk of traffic and toll payments be borne by the state in order to also have the reward of traffic and collections if there be excess revenue?

MR. SAENZ: That's correct. The state　-- it's a two-edged sword. The state would have the rewards of additional traffic but also have to bear, I guess, the negative side, where there is not enough traffic and we have to cover the shortfall of what we'd need to pay that contractor under that contract.

MR. UNDERWOOD: Mr. Chairman, when you say, "State," you're really saying taxpayers, aren't you?

MR. WILLIAMSON: Taxpayers, correct, Mr. Underwood.

MR. UNDERWOOD: Okay.

MR. HOLMES: Amadeo, I'd like for us to look carefully again at 792 to see if there's some way to structure a payment that is tied to traffic. I'm not yet convinced that the traffic risk can't be transferred back to the private sector.

MR. SAENZ: Yes, sir. And we have a group that is looking at that. I did not have enough time to hash that complete scenario out, but there are some, I guess, different variations to this availability payment where you can include the traffic as a factor in the payment of those availability payments, as well as　-- the other thing that you can include are the factors that would include levels or standards of maintenance, standards of congestion relief and such that you could include into this project.

So we will hash that out to see how else we can incorporate and use the legislation that has been passed.

MR. HOUGHTON: Did we not, Amadeo, have a similar proposal to what Commissioner Holmes is talking about on the pass-through project in El Paso?

MR. SAENZ: Yes. We had a proposal　-- under a pass-through toll scenario, we had a proposal where the developer was going to　-- it did not include traffic risk　-- well, pass-through tolling does include traffic risk, because we do set up a rate per vehicle mile traveled, and it's totally dependent on the amount of traffic that uses it. But　-- so that would in essence vary the number of years that we would have to pay for or　-- to reimburse the contractor for their cost.

MR. WILLIAMSON: Well, I don't mean to　-- I'm not trying to beat up on the sick horse, but I just want to be sure because everything I read, see or hear indicates to me that private sector toll roads are dead. That's what everybody says. Are you telling me that's not the case?

MR. SAENZ: No. That's not the case. We can include　-- under the availability model under the pass-through toll model, pass-through payment model, pass-through financing model, can build toll roads that can incorporate private sector financing. It's just the requirement that they not collect the tolls that is going to have to be implemented. Where we built　--

MR. HOUGHTON: The employees are ours as far as the toll operations.

MR. WILLIAMSON: Is there a dollar limit on this?

MR. SAENZ: No, sir.

MR. WILLIAMSON: I mean 5 billion?

MR. SAENZ: No, sir.

MR. WILLIAMSON: 10 billion?

MR. SAENZ: No dollar limit.

MR. WILLIAMSON: 50 billion?

MR. SAENZ: No dollar limit.

MR. WILLIAMSON: So we can build $50 billion in toll roads?

MR. SAENZ: Yes, sir. We could use this, what I'll call this availability payment model or a variation of this availability payment model to develop as much　-- as many toll roads as　-- well, of course, there is a limit, because there only is so much resources that we have.

And the resources would be the amount of revenue that's generated through the tolls plus any additional revenue that we have. And since we are capped, that would lead to some kind of cap in the future.

MR. WILLIAMSON: Which is precisely why the market valuation occurs first?

MR. SAENZ: Yes, sir.

MS. ANDRADE: Amadeo, I want to add to the Chairman's remarks or question. So it's not prohibiting us from doing business with the private sector; the difference is that now, instead of a lease, we have a contract with them, and everything will be up for negotiation. Is that what I'm understanding?

MR. SAENZ: It　-- we can enter into a contract with the private sector. We have to keep the traffic risk　--

MS. ANDRADE: How we pay them?

MR. SAENZ: How we pay them　-- we have to determine how we pay them. And we have to keep the traffic risk unless we can come up with an additional scenario under availability that would allow us to take traffic by varying, for example, time to repay into the equation.

MS. ANDRADE: But we may be able to negotiate that with the private sector, also?

MR. SAENZ: Yes, ma'am.

MS. ANDRADE: So that's open?

MR. SAENZ: Right. And in a way, what we would do is something very similar to　-- what we do is open up the length of time for payment.

MS. ANDRADE: Right.

MR. SAENZ: And that's where they will then incorporate the risk of the traffic into their bid.

MR. HOLMES: Amadeo, I'm not sure whether this is largely theoretical or it's here and how practical for the next six months or so　-- this last discussion. When I look at the list of exempted projects　--

MR. SAENZ: Yes, sir.

MR. HOLMES: 　-- I'm assuming that those were exempt by the legislature because they felt like they were very high-priority projects.

MR. SAENZ: Yes, sir. The list of exempt projects were projects that　-- One, they were　-- they characterized them as ongoing procurements. They also received a lot of pressure from the different regions of the state to exempt those projects that were already moving through the process.

For example, as I mentioned, the North Tarrant Express, the D/FW Connector and the IH-635 projects are all projects in the Dallas/Fort Worth district that have been going through the CDA process. They're also managed lane projects. And there is such a demand for those projects that they did not want to slow down or limit the opportunity to use private sector investment.

MR. HOLMES: And do you agree with that assessment, that these are high-priority projects?

MR. SAENZ: Yes, sir.

MR. HOLMES: Do you think we can get all these done in the next 18 months or so?

MR. SAENZ: Well, these projects here allow us to continue and get those projects under contract until 2011. A lot of these projects are already well into procurement that　-- we will get these projects into procurement within the next year. And then the other projects　-- we'll be able to get these projects moving and being under contract before 2011.

MR. HOLMES: I was trying to do kind of quick math. The Chairman asked what sort of dollar value was associated with it. But we're talking tens of billions of dollars in these projects?

MR. SAENZ: Yes, sir. The Grand Parkway itself is about 3- to $4 billion.

MR. HOLMES: Or maybe more if you build it all?

MR. SAENZ: Yes.

MS. ANDRADE: Amadeo, since we're talking about the list of projects, can I ask? What happened to 281?

MR. SAENZ: 281 is a project that is not exempt from the moratorium.

MS. ANDRADE: But 1604 and 281 were together. It was our starter project.

MR. SAENZ: 281 and 1604 were being procured together. 281 was specifically not exempt from the moratorium. 1604　--

MS. ANDRADE: Is it not a priority project for us?

MR. SAENZ: It is a priority project. But　--

MS. ANDRADE: Has anybody driven on 281 that did not think it was a priority project?

(General laughter.)

MR. SAENZ: That 792 did not exempt the 281 project. They specifically singled out that it was not exempt from the moratorium.

MR. HOUGHTON: But there's a way that it can be procured?

MR. SAENZ: 281 can be built as　-- just following the models that I just explained　--

MR. HOUGHTON: Right. If the　--

MR. SAENZ: 　-- either through their traditional financing model or through the market valuation and then moving forward with potentially availability payments or an offset of the availability payment model.

MR. HOUGHTON: If the RMA is willing to negotiate?

MR. SAENZ: Yes. We'll work with the RMAs as we get into that, because 281 is in Alamo　-- is part of the Alamo RMA area, then 281 now is subject to the market valuation and the negotiations and Alamo RMA would have the right of first refusal to develop 281.

MS. ANDRADE: Was 281 the only project that was not exempt from the moratorium that was already out there that could have been exempt?

MR. SAENZ: Madam Commissioner, I would just　-- I think you're correct. From memory, I think that is the only project that was already an ongoing procurement that was not exempt.

MS. ANDRADE: How sad. Thank you.

MR. HOUGHTON: But there's a way to build it, Hope.

MR. WILLIAMSON: There's hope, Hope.

MS. ANDRADE: Okay. Thank you.

MR. HOUGHTON: There's a way to build it.

MS. ANDRADE: Oh. There's no doubt we're going to get it done. It's just that　--

MR. HOUGHTON: It just takes, again, that the local tolling authority has got to be amenable to these　-- to building these assets sooner than later.

MS. ANDRADE: Oh. And I'm very confident that they already have a plan for it, but I'm just disappointed that it could have been protected and it wasn't.

MR. SAENZ: Okay. Moving forward, as Coby said earlier, under Senate Bill 792, the legislature also moved up the expiration date for the CDAs by two years, from 2011 to 2009.

MR. HOUGHTON: Well, let's talk about that. That affects those projects. Correct?

MR. SAENZ: Well, however the　--

MR. HOUGHTON: Those exempt projects?

MR. SAENZ: They allowed projects exempt under the moratorium to be developed as long as the contract was signed before 2011. So the projects that were listed in the　--

MR. HOUGHTON: Is there a reasonable hope that those projects can be signed prior to 2009?

MR. SAENZ: Well, the projects that are on the list that were exempt from the moratorium have until 2011, and those projects will be under contract before 2011.

MR. WILLIAMSON: I think, Ted, the reasoning behind that: Senator Carona was insistent, because the department sunsets in 2009　--

MR. HOUGHTON: Right.

MR. WILLIAMSON: 　-- and it was his belief as expressed to me that this is going to be such an imbedded part of our future financial structure that it didn't make sense to him that we'd sunset the department and not sunset this at the same time. And frankly, I don't know that I could argue with his logic. I think his logic's correct.

That's his way, I think, of saying and of recognizing that unless the legislature offers alternative financing for new construction in the state, the CDA process in some shape or form is going to be how we finance new a footprint in the state for the next 20 years, so we might as well sunset it all at the same time and embed that process into our statutes during the sunset process. I believe that was their reasoning　-- his reasoning behind the 2009 date.

MR. HOLMES: Amadeo, just to go a little bit further with that, the exempt projects have until 2011.

MR. SAENZ: Yes, sir.

MR. HOLMES: Given the sunset process about the department and CDA legislation, it would seem to me that we were　-- would be well advised to have these under contract by 2009.

MR. SAENZ: We will　--

MR. HOUGHTON: That was my question.

MR. SAENZ: We will　--

MR. HOUGHTON: Can we realistically have these projects on that list under contract by 2009?

MR. SAENZ: I think that the projects that are identified there we will be if not　-- all of them will be under contract by 2009. The ones that are already in there in active procurement will surely be under contract, because we're within a year of having them under contract. The State Highway 99 project has to go through the special market valuation.

That's why it's important what we're doing today and we get that project initiated sooner, rather than later, to make sure that we do meet that deadline of 2011, but if we can get it earlier, we can get it by 2009.

As I mentioned, in addition, the projects that are　-- any project　-- they allow any project where a private entity is not granted the right to finance the toll project to also continue until 2011. This would allow us to continue using the design/build or design/bid/build model to develop projects all the way until 2011. That's where they have no financing by the private sector.

The bill also created a study commission that will review the CDAs during the interim and submit a report back to the legislature by the end of 2008. We hope that through this and the sunset process that Chairman Williamson mentioned a few minutes ago we will be going through, the legislature will come back next session and not only not sunset us, but, also, extend our CDA program as a viable option to developing projects.

Another item that was very important that came out very strongly in this piece of legislation. The legislature all responded to concerns that the CDA process was not very transparent. It wasn't transparent enough by enacting　-- you know, so they enacted some reforms that required newspaper notices and public hearings on all toll projects. It requires documents and contracts　-- that they must be put on the internet on a timely basis.

The reform also supplies to all other tolling entities, not just TxDOT. In addition, the state auditor, the LBB and the AG will play a very important role in the review and approval of the CDAs under this bill.

There's also a rider in our appropriations bill that bans the use of appropriated funds for toll road traffic and revenue studies unless the controller is the entity conducting or having those studies conducted. We were in the process of initiating those communications with the other state agencies to get them involved in our process and so that we don't lose any time.

The bill establishes local　-- deals with　-- establishes local toll project entities as the primary entities responsible for toll projects within their jurisdiction. They also get access to the state highway system and are required to pay the price of what was originally paid for the use of the state highway right of way.

The Houston area toll road authorities were given specific projects under this bill that they can develop without any question. They're projects that were in essence set aside to be developed by the Harris County Toll Road Authority during any time and under their direction and jurisdiction. This included the Beltway 8 Tollway East project, Hardy connector, State Highway 288. US-290/Hempstead Highway, the Fairmont Parkway, the South Post Oak Road Parkway, the Westpark Toll Road Phase Two and the Fort Bend Parkway.

Some of these projects are off system. The last four that I mentioned are off system. So they will be developed　-- I think our estimated cost of those projects is about $5 billion that Harris County has　-- that bills set aside for the Harris County Toll Road Authority to develop those projects　-- and not subject to moratoriums or　-- they're subject to the moratorium. They cannot be with private financing, but they can be developed by any means that the county toll road authority wants to move forward on.

The NTTA will also be able to develop several projects without having to go through the process outlined in 792. This includes the Lake Lewisville Bridge project, the eastern extension of the President George Bush Parkway or toll road, the Southwest Parkway in Tarrant County and, also, the next phases of the North Dallas Tollway extending into Grayson County　-- extending up to the Grayson County line. Again, these projects are exempt and will be developed by the NTTA.

MR. HOUGHTON: Let me ask. The ones I'm familiar with　-- and maybe you can talk about HCTRA's projects. On the NTTA side, how much equity have we been requested to invest into the NTTA exempt projects?

MR. SAENZ: Okay. I don't have all the numbers, but I do know, for example, because we have been working with the NTTA on a toll equity request for the extension of the President George Bush, what we call the eastern extension.

MR. HOUGHTON: Right.

MR. SAENZ: And their toll equity request involved a request that we currently have and are working on for, I believe, $160 million to $170 million for right of way acquisition.

And then, also as part of that project, in the financial plan, the RTC had elected to fund part of the construction for that project, which involved the connectors to Interstate 30, as well as a bridge immediately, I would say, to the north of Interstate 30. And that project was close to somewhere between 180- and 200 million. So if you do 200 and 160, the $360 million was for that project.

The other project that we're working on with them that they've been moving closely or　-- they've been moving ahead　-- and these are projects that they have been developing for quite sometime. And I think that's the reason for why they wanted　-- those were exempt, because they were already being built.

MR. HOUGHTON: But did they require equity or connectors that we would build to those projects?

MR. SAENZ: Yes, sir. The　--

MR. HOUGHTON: The other projects?

MR. SAENZ: The other projects do, too. The 121, what we call Southwest Parkway, requires that. Now, the Lake Lewisville Bridge　-- there was some connectivity roads. I just don't remember exactly what that number is.

And the extension to the North Dallas Tollway　-- I don't think we have any　-- we have not been working with them on that project.

MR. HOUGHTON: So we don't necessarily　-- I want to say, All bets are off. We don't necessarily have to invest any dollars in those projects. We'll let them fully load the costs of those projects where they're truly reflective of the toll and the investment; so they make the entire investment in those projects where we can then deploy our dollars into other roads into the region.

MR. SAENZ: Yes, sir.

MR. HOUGHTON: It seems to be what the NTTA wanted.

MR. SAENZ: Right. Part of the　-- let me go back and digress a little bit. We had a protocol that was executed between the department and the NTTA.

MR. HOUGHTON: Right.

MR. SAENZ: Of course that protocol was eliminated as part of Senate Bill 792. And under that protocol that is no longer in effect, we　-- they would develop those projects and we would　-- we contributed but then agreed to a revenue-sharing scheme.

We had been moving forward and are moving forward still with the eastern extension of President George Bush where the region was going to get a percentage of the future tolls collected for President George Bush. We still have not　-- the number was somewhere around 20 percent.

It was kind of geared that, from a 14-1/2-cent toll rate, 12 cents would go to NTTA and the 2-1/2 cents, or about 20 percent, would go to the RTC for identifying future projects. That was based on that the RTC was putting in the money for the connectors at Interstate 30 and then, of course, the toll equity request for the 160 million that we're still working on.

Very similarly, we would have　-- we never were able to sit down and talk to them about what kind of revenue-sharing process we were going to set up for the other project in the Fort Worth district, the Southwest Parkway, or what was once State Highway 121. We were never able to get　-- we never started those negotiations.

MR. HOUGHTON: It would seem to me that would allow NTTA to go out and gain the financing for the project in its entirety and let the state gas tax money build transportation assets that need to be built, instead of subsidizing those projects.

MR. SAENZ: That is certainly an option.

MR. HOUGHTON: Okay. Thanks.

MS. ANDRADE: Amadeo, I have a question.

MR. SAENZ: Yes, ma'am.

MS. ANDRADE: Explain to me on the state highway on the right of way. They're going to　-- they get to use it, but they're going to pay us what we originally paid for it?

MR. SAENZ: Yes.

MS. ANDRADE: And that money comes to our highway fund?

MR. SAENZ: Yes, ma'am.

MS. ANDRADE: Not to the region?

MR. SAENZ: No. The money comes to the highway, the Fund 6.

MS. ANDRADE: Okay. And they own that right of way?

MR. SAENZ: No. The right of way　-- I think there's a legal question, in that I think that the right of way would still remain the property of the state.

MS. ANDRADE: And they're just getting the use of it?

MR. SAENZ: They will get the use of that right of way. And we will have, for example, a county toll road built within state right of way. The bill also put in place some transfer of liabilities and who's responsible for whatever is built on that right of way. It also addresses some of the connections and the standards and also has some requirements that whatever is done needs to be in compliance with federal laws so that federal funds are not lost. Those　-- all that needs to be hashed out.

MS. ANDRADE: So the state recuperates the money that it paid for it, they get to use it, and we get what we get?

MR. SAENZ: Well, we get the money from the right of way, based on how much money we've paid for it.

MS. ANDRADE: Okay. Thank you.

MR. HOLMES: Amadeo, I'd like to follow up on a point that Commissioner Houghton was working on but move from the metroplex down to the Houston area. There is a project, 290/Hempstead, I believe　--

MR. SAENZ: Yes, sir.

MR. HOLMES: 　-- that the TPC has some money programmed in for an extremely expensive interchange at Loop 610. It seems to me that money for that intersection　-- that it would be appropriately included in that toll project so that the funds from the TPC could be reprogrammed.

MR. SAENZ: Yes, sir. We will pass　-- we will take that forward.

MR. HOLMES: It's about $700 million, I think.

MR. SAENZ: It's a big interchange.

MR. HOLMES: That builds a lot of road.

MR. SAENZ: The most complex part of the bill I kind of saved for last because what　-- it's called the market valuation process, which must be followed　--

MR. WILLIAMSON: Well, wait a second now. When　-- you said the, TPC. That's the southeast Texas equivalent of the RTC. Right?

MR. HOLMES: Right.

MR. WILLIAMSON: You said they had that programmed into their [inaudible]?

MR. HOLMES: I said I think they do.

MR. SAENZ: That project is in their long-range plan. The funding for　-- that interchange, I guess, has always been considered that it would be funded through the department through the TPC, equivalent of RTC, the MPO in the　-- Houston.

I don't think that they have enough resources. But they're here, and they could probably answer this a lot better than I can. They don't have the resources already earmarked for that project, but they would have committed very similar to what　-- as the project moved forward, they would have had to agree to commit that money in the form of either　-- a toll equity request so that project could be completed.

MR. WILLIAMSON: But you weren't suggesting, or were you, Ned, that we　-- you're not suggesting we tell the MPO what they should do. We should just point out to them that there's an opportunity for the toll authority to pick this up and then reprogram that estimated money to other projects?

MR. HOLMES: That's much more artful, Chairman.

MR. WILLIAMSON: Well, I just don't want us to be on record as　-- I mean we've gone to great lengths to not tell MPOs how to run their business. And I　--

MR. HOLMES: Right.

MR. SAENZ: I think that in the long run, as the MPOs are going to be required to put together their long-range plans　-- that plan is financially constrained. And if the MPOs want to partner with a tolling entity, whether they partner with us or they partner with HCTRA in this case since HCTRA's developing that project, they would decide whether they wanted to contribute some of the allocation that was given to them or provided to them through the planning process to fund part of that project.

MR. HOUGHTON: Well, the word, "Give," gives me pause and a little heartburn from the standpoint that you went over the limited resources and the rescissions we're having. And I don't mean to pick on the Harris County issue on this $700 million, but give $700 million on our limited resource? It should be, Invest 700- with a return.

I think at some point in time, Mr. Chairman, we're going to have to visit this issue, that we　-- when we load these　-- and we went over this the　-- and I don't want to beat the horse, but we did this the last meeting, on the President George Bush.

We invested half of the cost of that project, and we're getting how much back?

MR. SAENZ: The equivalent of about 20 percent.

MR. HOUGHTON: And when will　--

MR. WILLIAMSON: Yes. But that's no longer the case.

MR. SAENZ: No. It's no longer the case, because that　--

MR. HOUGHTON: That's what the model　-- what we're talking about giving. And that　-- we need to make it real clear that we're not in the business of giving those dollars without a return.

MR. SAENZ: Right. Well, for President George Bush　--

MR. WILLIAMSON: Well　--

But hang on a second, Amadeo.

The point I was making, Ted, was　-- Ned asked the question about the MPOs, what I thought was their apportionment of available state revenue. And it turns out that's what he was asking about. And it seemed to me that we might be suggesting to our staff member that our staff tell the MPO what to do with that apportionment.

And I didn't think that we'd want　-- we don't want to be on record I don't think as telling the regional planning authority what they should or should not do with their apportionment. We want to be on the record as providing them good, solid information about what their choices are in order to put them in a position of making good decisions about their ever-decreasing share of the state's apportionment because of our ever-decreasing revenue.

And it's logical　-- it seems to me it's logical that the TPC would turn to HCTRA and say, Why don't you do all this yourselves and let us go do something else. That's a logical thing for them to do, but maybe it's the more logical thing for them to say to HCTRA, We'd like to put up a piece of this deal with you, and I want a piece of the tolls. I just don't think we want to be in the business of telling them what to do.

Or do we, Ned? I mean　--

MR. HOLMES: No. I think your point is well taken. I was looking at the practical availability. And it's the practical aspect of completing that project　--

MR. WILLIAMSON: Yes.

MR. HOLMES: 　-- and the availability of funds that the TPC would have. It was such a large project, and it is absolutely integral to completion of the 290/Hempstead toll roads.

MR. WILLIAMSON: Yes.

MR. HOLMES: I mean you can't do those toll roads　--

MR. HOUGHTON: Without it.

MR. HOLMES: 　-- without that interchange. And it seemed to me just that in order to be able to move those projects forward which are very high priority in Harris County, you have to provide a very significant funding source. And I would ask the TPC to study that carefully.

MR. HOLMES: Right.

MR. WILLIAMSON: I just think our policy from what we've tried to lay down in the last six years　-- we've tried to create a system, a regionalism, where we're partners if we're asked, but we're not forced, we are providers of information, we are [inaudible] the inspectors, the designers, but we're trying to create a system where the local governments and regional compacts are taking the resources that are limited in the state and making regional decisions and executing locally to solve the problems that regional and local government think are most pressing in that area.

And to the extent that we empower the Harris County Toll Authority to act on their own　-- or that the legislature does　-- and to the extent that we've sent all the actors in the play to act in their own self-interests is the extent to which we'll be successful in solving and reducing congestion in Harris County.

So the commissioner's correct. We hope that TPC looks carefully. But the philosophy of the department needs to be to empower those　-- we need to empower Stein to build all these toll roads. We don't need to tell Stein to go build these toll roads, because we don't want Stein coming in here and asking us to give him the state's assets instead of building his own toll roads.

Right, Stein?

MR. HEILIGENSTEIN: Right.

MR. WILLIAMSON: Right.

MR. SAENZ: And that's　-- you know, just to make sure we're clear on the President George Bush, that's why the department and the RTC were working on a revenue sharing process where they would get a return on the amount of money that they invested on that project.

MR. WILLIAMSON: But the emphasis would be, "They," not, We.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: The taxpayers of that region would be receiving a return on that investment, which return would be reinvested in transportation assets in that region　--

MR. SAENZ: That's correct.

MR. WILLIAMSON: 　-- of any kind: Commuter rail, high-speed buses, or whatever the region determined was the best transportation decision for their citizens.

MR. SAENZ: Yes, sir.

Moving on, the most complex part of the bill is the market valuation process, which must be followed for all future toll projects where a local tolling authority is present. There are five major steps to the market valuation process as it's set out in Senate Bill 792.

First, either the local tolling entity or TxDOT can identify projects that should be developed as toll projects. And this is the purpose of today's meeting. Today we will review a list of projects that we feel are ready for development.

The second item on the list is: The local tolling entity and the department must agree on the terms and conditions that will govern the development of that toll project. Third, the local tolling entity and the department must also agree on the entity who will perform the market valuation. Fourth, each entity must negotiate and adopt the market valuation after it has been done.

And finally, the project can move into project development with the local entity reserving its first option to build, operate and maintain the project. If the tolling entity and the department agree to the value of the project before the market valuation is performed, either the tolling entity or the department may agree to waive the requirement to go through this market valuation.

For example, if we have a project　-- for example, I mentioned the 161 that is currently under a procurement. We have worked and have done a lot of work to determine what we think the market valuation for that project would be based on that we were procuring it as a CDA.

When we sit down with NTTA, and if they agree and we agree, we could waive　-- do a whole new market valuation and present to them what we've done. And if we agree on that value, we can move forward. But if we can't agree on the market valuation and if we can't agree to waive it, then the market valuation must be done.

Now, the market valuation is based on terms and conditions mutually agreed to by both TxDOT and the tolling entity for the development of the toll project, including what you see here, and other information deemed appropriate on a project-by-project basis. We will look at the initial toll rates and the toll escalation methodology. We look at traffic and revenue studies and determine projected traffic.

We look at project scope. We look at estimated costs. We look at and do some market research with respect to, How valuable is this project or how important　-- of how much interest is this project out there in the private market. We can also include other items as we deem appropriate, based on the uniqueness of the project.

MR. HOUGHTON: Let me interrupt you, Amadeo.

MR. SAENZ: Yes, sir.

MR. HOUGHTON: This also pertains to RMAs. Correct?

MR. SAENZ: This pertains to any project that's being developed within an area where there is a local tolling entity. And a local tolling entity is an RMA, a regional tollway authority like NTTA, or a county toll road authority.

MR. HOUGHTON: So if Michael Heiligenstein and the RMA agree on 290, we can waive this on a market valuation?

MR. SAENZ: If we　-- as 290 is a project that's on a list　--

MR. HOUGHTON: Everyone's real interested in this project.

MR. SAENZ: Right. And if we sit down and there has been enough work and we can present a market valuation and they're in agreement, well, then we can waive the actual development of a new market valuation.

MR. HOUGHTON: What kind of time do you cut off of that if we agree up front? You　-- I'm getting ahead of you, I know.

MR. SAENZ: All right. Okay. But we think that a market valuation could take anywhere from 60 days to 120 days, depending on the complexity of the project. I've kind of used as a rule of thumb in visiting some of our financial people about 90 days. So if you reach agreement prior to having to do it, you eliminate 90 days off of the process, on average.

MR. HOUGHTON: Okay. Then I'm going to ask you on total process. They get to review it?

MR. SAENZ: Right.

MR. HOUGHTON: They get to go through all the　--

MR. SAENZ: I've got that in the process so that we　-- maybe so we don't get confused, let me just carry this thing through. And we'll go through that process　--

MR. HOUGHTON: Yes, because I'd like to kind of have everybody understand how much time we can peel off by willing participants in the process.

MR. SAENZ: Right.

MR. WILLIAMSON: While you're asking that question, though, Ted, it jumps me to ask a question that's somewhat counter-intuitive to that, and that is, Why would you want to shave time off the process if the result was a less-than-true market valuation? And let me make my point.

When Amadeo was telling us what market research meant, he was giving us from the aspect of the private sector's interest in building this road. Is it also not the case that one would be concerned about increasing the ad valorem tax collections into a particular area if the road were built, additional sales tax collections in a particular area if the road were built, sales tax losses incurred in an area that suffered a decline in retail business as a result of the retail business being built further away from the core city?

I mean there are a lot of aspects of market research that could easily be sacrificed between　-- don't take offense at this　-- two transportation groups who are interested in getting that transportation asset built and not necessarily interested in understanding the full impact of the decision to build that asset on the broader community.

MR. HOUGHTON: Well, I look at the market valuation. And the one we have currently to look at is the SH-121.

Our market valuation internally with our consultants on SH-121 was what, Amadeo, on the front end?

MR. SAENZ: Somewhere between 750 million and $1 billion.

MR. HOUGHTON: A billion. Right?

MR. SAENZ: A billion, yes, sir.

MR. HOUGHTON: And it came in at 2.1. That was the market valuation. Was　--

MR. WILLIAMSON: Yes. But 2.1 billion came in because Cintra and the others who bid those high numbers　--

MR. HOUGHTON: But we don't get to do that process.

MR. WILLIAMSON: Right.

MR. HOUGHTON: So it's going to be a number out there based upon a valuation of the transportation asset, not a valuation based upon sales tax revenue, ad valorem or property tax revenue. It's going to be a valuation based upon that transportation asset, not as it affects the greater community.

MR. WILLIAMSON: Well, that's the point I'm trying to make. Staff has argued　-- and, again, I'm not picking on them.

This is the third time I've had to say this.

MR. SAENZ: That's okay.

MR. WILLIAMSON: I'm not picking on you.

MR. SAENZ: Somebody has to be picked on.

MR. WILLIAMSON: Staff has argued that he wants our authority to move forward on a process that includes short-circuiting market research of the local or regional affiliate, for lack of a better term, agrees. Now, my point is the representation we've made to the legislature is that these assets have a certain kind of value.

We've never looked at our transportation system as an asset in the past. This Governor and this commission brought this concept forward six years ago, and we've matured it through three legislative sessions on the basis that if you're going to build principally parallel roads to existing tax roads, then you should look at those parallel roads somewhat differently than you've looked at the tax roads of the past, and one way you should look at them is their asset value.

MR. HOUGHTON: Okay.

MR. WILLIAMSON: And asset value has two different angles. One is the value if this young lady in the pink shirt puts up a billion and it's going to earn a billion-and-a-half over a four-year period. That's one way of looking at it.

The other way of looking at it is: This young man with the string around his neck owns 1,000 acres of rural property upon which he is rendering the value at only $400 an acre for his deer lease, and he is suddenly going to have 1,000 acres of commercial real estate worth $20,000 an acre if this road is built here.

That kind of research, it seems to me, ought to at least be given lip service before we move on down the road, so to speak, because the worst thing that can happen in all of this　-- you know, the biggest weakness in the privatization move　-- and it's one that even I overlook at times　-- is the kind of soft, underbellied criticism that comes with giving special favors to special people in special places.

We happen to have the opinion that in many cases, special favors to special people in special places occurs in the government monopoly system and not so much in the private sector system, but we have to protect ourselves with that position by kind of insisting that market research is market research and, if you're going to go out and　-- if we're going to　-- if we're fixing to tell CTRMA that we've got ten candidate toll projects in Travis and Williamson counties and there is a process by which we are going to get to a value for that road, if we don't at least give some thought to the impact on the tax base and the retail community in determining the value of that asset and, thus, setting the toll rate, we haven't done ourselves or the citizens we represent a full service, because the reason Cintra was willing to bid as much as they bid for 121 was their belief that housing patterns and commercial development would occur such that they could charge the maximum toll rate we were going to let them charge under the contract.

That's what drove them to decide that the traffic patterns would be high enough to justify what they were willing to pay. If we don't recognize that same market pressure which will drive people to get on that toll road and pay her the toll and make his land worth more in the setting of the toll rate, then we won't have a true market-based toll rate.

Am I making sense to you?

MR. SAENZ: Yes. What　--

MR. WILLIAMSON: The worst thing you can do, Ted, it seems to me is skip the process and just decide, you know, The cost of this asset's a billion, and the interest rate's 4 percent, and the deterioration rate's 6 percent, i. e., a toll rate of 11 cents per mile.

MR. HOUGHTON: No. I'm not advocating skipping or short-circuiting the process, but most of these assets that we're talking about are in urbanized areas. And I picked on 290. 290 is from　-- my understanding and limited knowledge of 290 is of redeveloping that asset. It's already there. You're going to put toll lanes in it, and you're going to have frontage roads.

So I picked on 290. That　-- we have a pretty good idea of what the value is and what the impact is to the region. I think we've gone through that process. There are certain assets that need that analysis, what you're talking about, but most of the assets are in urbanized areas that have built around it. The asset　-- I mean the development is already built. It's there. It's just a matter of building a new transportation asset, new lanes, new lane miles.

MR. SAENZ: Capacity.

MR. HOUGHTON: That's what I'm looking for: The lane miles. So I'm not going to ask Mike to weigh in on　-- maybe later I will, but not right now.

I agree with you. No　-- on certain assets, yes, I absolutely agree.

MR. HOLMES: Just to expand slightly, it does seem to me, Chairman, that there's a distinction between 290 and State Highway 99, which does not exist at all. And it would be going through in many cases absolutely virgin territory. And so the　-- I think you would really need to be extremely careful about how you did the market analysis on a brand-new road.

You have a base of data already on 290, because it exists. That doesn't mean you don't do the process. It means that it's　-- you have a lot of information already at hand.

MR. WILLIAMSON: Yes. I mean　-- you know, as must be obvious to the audience, that gives you a good example of how we don't discuss this stuff privately.

(General laughter.)

MR. WILLIAMSON: We　-- I just have some concerns that I wish staff to hear clearly. We don't need to be in the business, it seems to me, of building assets and completely ignoring their impact on the community in which they're located, on the economies of those communities and, by inference, the beneficiaries of those assets by the setting of a toll rate that is below the market standard. That's all.

MR. SAENZ: Right. And　--

MR. WILLIAMSON: I mean if I owned land in downtown Houston, the last thing I'd want to see is a 6-cents-a-mile toll rate to incent people to leave downtown Houston. And I can understand why someone who owns land in downtown Houston might want us to be pretty judicious about how we approach this stuff.

MR. HOUGHTON: That's called a subsidized rate if it's 6 cents a mile.

MR. WILLIAMSON: Well, I would argue that, you know, 11 cents a mile is subsidized, Ted. That's what this all　-- whole argument's about. I argued that　--

MR. HOUGHTON: I agree with you.

MR. WILLIAMSON: 　-- 20-cents-a-gallon gasoline tax is subsidizing.

MR. HOUGHTON: I agree with you. I think 11 cents is subsidized. We haven't yet gotten to a true market rate. And rates that aren't just flat　-- they're　-- you know, the imagination and the thinking is　--

Amadeo, help me, or somebody help me with this, the time of day rates.

MR. SAENZ: Congestion pricing?

MR. HOUGHTON: Congestion pricing, those types of rates. I don't think we've seen that yet. And I don't understand　--

MR. SAENZ: All of that will be looked at with respect to, What is the proper toll rate. We can run　--

MR. HOUGHTON: Right.

MR. SAENZ: 　-- elasticity analyses that will look at that and that will take into account all of that.

I guess I mentioned that the reason that the waiver is allowed　-- and it was included in the legislation. That would give the department and the tolling entity, should the conditions be right, that one or the other could request, but both have to agree, to waive it. And　--

MR. HOUGHTON: Well, to piggy-back Commissioner Holmes' comment, there are assets out there on the list that we'll see here shortly that are in virgin territory, brand-new lane miles, nothing there, versus a 290 that's already there　-- now I get to do my hometown　-- versus the southern relief route, which is mostly there, but it's constrained by the Rio Grande River and constrained by Interstate Highway 10, and you don't have the availability of development along those. So there's going to be mishmash of valuations and how we value these assets.

MR. WILLIAMSON: Now I think I've forced a discussion, Amadeo. I'll just emphasize to staff we understand that you're asking us at the end of this for approval to move forward, and I don't have any reason to believe that we won't do that. We're trying to illustrate to you some of the rough spots in this from our standpoint.

And just let's don't take one standard and apply it to every situation, as Ned pointed out, but let's don't avoid the fact that market value of an asset means a lot more than just what the lady in pink is willing to pay for the right to collect the tolls. It means some things more than that.

MR. SAENZ: Right. And as I mentioned, all of those, everything, will be looked at on a project-by-project basis and taken into consideration.

If the department and the toll entity cannot agree to the terms and conditions that will be used to develop the market valuation, then the project cannot proceed. So that would put a brake on the project.

Note that the terms and conditions　-- I mentioned earlier that the State Highway 99 project, the Grand Parkway, was unique and it was　-- that went through a special process. For the Grand Parkway project, the terms and conditions must also be approved by the MPO.

MR. WILLIAMSON: Now, Amadeo, there was　-- during the session, it became clear to us that there's not a universal viewpoint of how the MPO process works and there's not universality in how the MPO is formed and congregates and associates itself with local transportation leadership. We have sort of planted our stake on the mound of the MPO as our regional organization structure of choice. We don't want to　-- from a department perspective, we don't want to abandon that process.

While the law doesn't　-- and in fact, the law specifically exempts the MPO from the process except in the one case, by omission.

MR. SAENZ: Right. The　--

MR. WILLIAMSON: We want to be sure we keep the affected MPOs fully informed of what we're doing from our perspective.

MR. SAENZ: Right. The law does allow the MPO, for an area that has a regional mobility authority, apart from the State Highway 99 project, for them to agree to the market valuation　-- to agree with the market valuation. They agree or do not agree with the market valuation, and then they can request that the market valuation maybe be looked at again: should it be higher, or should it be lower. For RMAs, that is included in the law.

But the MPO has been our champion; TxDOT and the commission has delegated to them to be responsible for the planning and the development of projects. Those projects need to be put in plans. A lot of those projects will require toll equity that　-- they'll have to make a decision on whether they want to participate in that project or not. So the MPO will still remain an integral player even though it was extracted from the valuation process.

MS. ANDRADE: But what happens if the MPO does not agree?

MR. SAENZ: If the MPO　-- it's not that they don't approve or disapprove the market valuation or the terms. They say that they agree or not agree that the valuation is right or wrong　-- does it need to be higher, or does it need　-- or should it be lower. If they say it needs to be higher, then that work can be done, and you can come back with a higher number.

For example, let's say the market valuation was based on a 6-cent　-- since Ted brought up 6 cents.

MR. HOUGHTON: On, no. No, I didn't bring that up.

MR. SAENZ: Okay. The Chairman brought up　--

MR. HOUGHTON: The Chairman brought that up.

MR. SAENZ: 　-- the 6-cent toll rate. An MPO could come back and say where an RMA is, We think that 6-cent toll rate is too low; it should be more like 14 cents; and if it's 14 cents, then the market value for this project is X; we think that's what we're willing to live with. So they could say that.

On the other hand, what they could say is, Oh, we think that the market valuation based on a 20-cent toll rate is too high; it needs to be 10 cents. Okay? Well, that will have a negative impact on the value of that project, which will probably make that project go from a positive revenue market value project to a negative revenue market value project.

And what that's going to dictate is　-- then the MPO will say, Okay, we're willing to put up this money. But they'll see what the ramifications are that will take place should they want to change that market valuation number.

MS. ANDRADE: But in the meantime, they can stop the project?

MR. SAENZ: No. They can't stop the project. They just have to agree that　-- whether the market valuation is okay or should be something different.

MR. HOUGHTON: Is that in the law? Is that in the statute?

MR. SAENZ: Yes, sir. That is in the statute for areas where an RMA exists or will be formed.

MS. ANDRADE: So while they're negotiating, the project can move forward?

MR. SAENZ: Yes.

Okay. After agreeing on the terms and conditions, there will be　--

MR. WILLIAMSON: Wait a second.

MR. SAENZ: Yes, sir.

MR. HOUGHTON: Yes. I knew you would chime in.

MR. WILLIAMSON: So are you telling me if the Bexar County MPO says, "We don't approve 281, this toll road, period, and we will not put it in our plan"　--

MR. SAENZ: Then the project doesn't exist.

MR. WILLIAMSON: Well, then you need to answer her question correctly.

MR. SAENZ: Okay. Well, she was　-- well, I guess I answered her question based on that if they didn't agree on the market valuation and they're negotiating the market valuation, then they have not cancelled the project.

MR. WILLIAMSON: But　--

MR. SAENZ: They've identified it as a toll project, but they　--

MR. WILLIAMSON: But if that project is not in the Houston's　-- the HGAC TIP　--

MR. SAENZ: But they have to be in their long-range plan. And if it's　--

MR. WILLIAMSON: Their long-range plan.

MR. SAENZ: If it's a short-term project, it would probably be in the TIP.

MR. WILLIAMSON: If it's of regional significance, even if it doesn't involve any federal funding, that project's not going to move forward, is it?

MR. SAENZ: The project does not move forward. That project will not　-- we won't even be discussing market valuation.

MR. WILLIAMSON: Well, maybe it's　--

MR. SAENZ: I'm sorry. I think　--

MR. WILLIAMSON: Maybe it's in the long-range plan and you start discussing market valuation and, for whatever reason, HCTRA and Fort Bend County are going to partner a deal and the suggested toll rate for market valuation purposes is 32 cents a mile and HGAC says, "No, it's not; that's too high; we don't want that project at 32 cents," and HCTRA and Fort Bend say, "Sorry; we're going to build it anyway," and so HGAC says, "Fine; we'll just pull it out of the TIP." What happens?

MR. SAENZ: Then that project dies.

MR. WILLIAMSON: Okay. And so　--

MR. SAENZ: The project dies.

MR. WILLIAMSON: 　-- the answer is, Yes, the MPO can kill the project　--

MS. ANDRADE: So　--

MR. SAENZ: Right.

MR. WILLIAMSON: 　-- not necessarily because they didn't agree with the terms and conditions, but because they think the terms and conditions, for whatever reason, are so egregious to the air quality plan or the transportation plan of the region that they don't want that project built, because they think that toll rate will have an impact adverse to clean air and congestion mitigation?

MR. SAENZ: Right. Or they could agree to, I guess, subsidize a project through toll equity. That could be another scenario, but that means that they would have to reprioritize and use money that they were using for other projects.

MR. WILLIAMSON: Now, you might ask and I can sense some of our colleagues on that end of the table sitting here thinking about, What are the real terms and conditions or circumstances by which that decision would be made? And I'm going to give you one.

These decisions are not made in a vacuum. When NTTA elects to build 121 and when RTC agrees to do that, if that's what they do today, a whole series of tax-supported assets will suddenly be on the table to be approved.

So if you permit your regional authority to accept an asset that somebody else is going to pay for, knowing that you're going to have to allocate $500 million over the next five years for the connectors and the parallels and the feeders that will support that change in behavior, and you don't have the 500 million to reallocate or you don't have the political support in the MPO to reallocate, you've got a problem.

It doesn't matter that NTTA wants to build 121 and that it's a great thing to celebrate.

I look forward to Jerry Thompson cutting that one sentence out of my quote and posting it on his website.

It doesn't matter that HCTRA wants to build 290 and that's a great thing to celebrate. What matters is the decision in its totality and who pays for what piece.

And I can well see where market evaluation based just on her toll collections would support the building of this toll road and the collecting of tolls at 32 cents for the investor, in this case HCTRA, while, at the same time, the greater public, who's dealing with limited tax dollars, would look at that decision and say, Now, wait a minute; when that's finished, that means traffic patterns over here are going to change this way; we're going to have to build this lane/rate separation; traffic patterns over here are going to change, and this property that used to be worth $21 a square foot is now going to be worth $3 a square foot; and traffic patterns down here are going to change, and we're going to have to build a loop to take care of everyone trying to get away from this 32-cent toll road.

And that's what I mean by there will be cases where the MPO might not necessarily want to leave a proposed toll road in their transportation plan, depending upon what those terms and conditions are, because it will happen on 281.

Continue please.

MR. SAENZ: Okay. Well, let me find out where I was at.

I'll go back and start at the beginning of this slide. After agreeing on the terms and conditions that will be used in the market valuation, the entities shall agree on the selection of an entity that will perform the market valuation. We could do it, they could do it, or we could agree on a third person.

The entity could　-- if any third person that person that performs the market　-- this valuation function cannot invest money in a toll project, or control the toll project. So it's going to be limited as to who can perform this market valuation.

If the local tolling entity and the department are unable to agree on the entity that will perform the market valuation, then the project cannot move forward, so the project stops at that point also.

In order to address transparency, which was one of the issues of 792, what we're proposing is that the department, as we get together with the tolling entities, that we have one point of contact that will be our department negotiator for the particular projects.

It could be particular projects in the region, it could be project specific. But we would have one person that would be TxDOT's voice and represent the department in this negotiation for the toll valuation.

We would also propose that we want these negotiations to be held in an open forum, open to the public, and also, if they're not open to the public, that they be recorded so that all the data is available for anyone that wants to see what went into this market valuation, or what went into these negotiations could be　-- it was documented so that anyone had a chance that wants to see it could see it.

MR. HOUGHTON: Why wouldn't they be open to the public?

MR. SAENZ: They can be.

MR. HOUGHTON: No, but why　-- you just said if they were not open to the public.

MR. SAENZ: Well, if they're not open to the public, in a public forum, or in a public meeting, that we were sitting down and we're negotiating, for example, with NTTA or with HCTRA, and it was not in a public setting that anyone could come in, then we would say then we want this thing recorded so that we have a record of what was talked about and negotiated for future reference if anyone needed it.

I'm just throwing out both options. Those are options that　--

MR. HOUGHTON: We not open at all. Negotiations. There's no proprietary information.

MR. WILLIAMSON: I'm trying to think how to characterize an answer to your question, Ted. It is my belief that there was not a tremendous amount of proprietary information that needed to be protected in the 121 event, but, unfortunately, some outside our world chose to accuse the department of speaking from different perspectives at different times with different stories.

And as I think back to how sort of messy that things become, it occurs to me that it would have been very easy early on for us to have said to the RTC and the NTTA, Bill Hale is the only person authorized to speak for the Department of Transportation, and every negotiating session will be recorded so that we don't get confused over what you said and what we said.

It would have eliminated an awful lot of nonsense that has drug us through a considerable amount of pig poop.

MR. SAENZ: And continues to do that.

MR. WILLIAMSON: And I just think that if we're going to do this process, that's the way it needs to be. We just need to say, CTRMA, and Alamo RMA, and HCTRA, and NTTA, and Fort Bend, and Grayson County, here's the project, here's the designated TxDOT person.

We're not afraid of anything our employees, so it's open meetings posted, or it's recorded, video and voice, and made available. That's the way it is.

MR. HOUGHTON: That was my question, Mr. Chairman, why would we not open all those meetings to the public?

MR. SAENZ: That will　--

MR. HOUGHTON: It's okay with me.

MR. SAENZ: 　-- be acceptable to us. That would acceptable to　--

MR. HOUGHTON: There's nothing to hide, we're talking about　--

MR. SAENZ: But if they're not, then we would request that they be recorded so that　--

MR. WILLIAMSON: No, they're going to be recorded anyway.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Anyway. Whether it's a private conversation, or a public conversation. We're going to insist that it be recorded. That record is going to be available for everyone that'll look and make their own judgments about. If it be your will.

MR. UNDERWOOD: What you're saying, Mr. Chairman, is delete the or, you know, it'd be public and it'll be recorded.

MR. WILLIAMSON: Yes.

MR. HOUGHTON: That's my question.

MR. WILLIAMSON: Yes.

MR. HOUGHTON: The or should come out.

MR. WILLIAMSON: Yes, video and audio, Mr. Saenz. And you included this in the market valuation process, but I think your intention was　--

MR. SAENZ: It's the whole thing.

MR. WILLIAMSON: 　-- it's the whole thing.

MR. SAENZ: Yes, sir, it is the whole thing.

MR. WILLIAMSON: Okay. If we're going to be the neutral third-party referee, then we need to be sure that no one puts us in the position of saying, "Well, you wanted us to do that because you told us that, and you wanted us to do that because you told us that"　-- all that ya-ya-ya stuff. I don't want any of that.

I want this to be an adult deal　--

MR. SAENZ: The whole record from beginning to end.

MR. WILLIAMSON: Yes.

MR. SAENZ: Now moving forward, we reached　-- we agreed on the terms and conditions, we have agreed on the toll valuator, the valuator has gone out there and done his valuation and comes back with a submitted valuation report.

The statute requires 90 days to review and comment by either party on this valuation. That's in statute, so we do that.

If either entity has some issues with the valuation, they can sit down and hash them out, and if additional work needs　-- if agreed, the additional work can be done.

If it's not agreed, and after the 90 days, should either party not agree with that valuation, then the valuation that was based on agreed upon terms and conditions becomes final.

So you have　-- in other words, we have 90 days to argue about whether we agree or don't agree with a valuation, but if either party　-- if both parties don't agree to make any changes, then that becomes final at the end of 90 days.

Once the market valuation process is complete, the local tolling entity will be granted the first option to develop the project, and has six months to exercise that option.

If the tolling entity chooses within those six months to develop the project, it will have six months from that date to exercise its option and develop the project by starting the environmental process, if the environmental process has not been started, or is ongoing.

And if　-- then from that　-- once the environmental process is complete, the tolling entity will have two years after that completion of that environmental process, and also address any legal challenges to enter into the construction contract, and commit to either making a payment to the regional sub-account, based on the market valuation　-- so that market valuation is very important because if the project was valued at $300 million plus the cost of the project, and the local entity, the local tolling entity, decides to take that project, they will then have to meet the timelines of starting the contract.

And within that timeline they still have to commit to not only entering into a contract, but also within that two years, commit to putting into a sub-account the value of that project so that other projects in that region can be constructed. They can also put in, or agree to construct, other projects with an agreed time frame that will equal up to the value of that project.

So that market valuation will help address, Mr. Chairman, some of the issues and concerns that you brought up with some of the other tax development that needs to be　-- that needs to happen.

And as part of this market valuation, the additional value that it brings, that requires infrastructure, could be addressed as part of the market valuation price, and then those assets can then be used to develop those projects.

MR. WILLIAMSON: Okay.

MR. HOUGHTON: Back to my original question. The time element here, if you add all of that time up and they take all the statutory time that is available, then you're talking about three years, three months just to start construction　-- just to start construction?

MR. SAENZ: Yes, sir.

MR. HOUGHTON: And then you have construction on top of that. How long does it take to construct 290?

MR. SAENZ: Depends on the type of project. The 290 project I would imagine would take from　-- that 290 project is from 130 all the way to 183, I would probably venture to say　-- and I'll get verification from Mr. Heiligenstein　-- from somewhere between three to four years.

MR. HOUGHTON: So you're talking about three　-- you're talking about seven years from today, if we started today.

MR. SAENZ: Yes, sir.

MR. HOUGHTON: If they took all the statutory time.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And 290 may be the wrong example to use as that, Ted, but　--

MR. HOUGHTON: I'm just trying to illustrate a point.

MR. WILLIAMSON: 　-- but let's assume that 290 is a good project to illustrate. By inference, with what we're fixing to do, if we approve this, we're going to almost have to turn around and tell the department now, the single most important piece of this asset now becomes the environmental document.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: So if you're fixing to move out, Amadeo, with however many projects you're fixing to move out with, what we probably are going to have be prepared to do is instruct the staff in the next month or so to make a substantial shift in its environmental　--

MR. SAENZ: Right.

MR. WILLIAMSON: 　-- section and open up a whole series of environmental documents sooner than we first thought, for two reasons. One, you know, what if HCTRA comes back to it, and then it says, Yes, we'll do this, we're ready, where's the environmental?

Or worse, they say, You guys handle this one, and we're sitting here with our thumb in our ear and big grin on our face. So there's some　--

MR. SAENZ: Environmental　--

MR. WILLIAMSON: 　-- departmental change that will have to occur, based upon what we're fixing to do.

MR. SAENZ: Right. The environmental process plays a key role in that that's an unknown that will　--

MR. HOUGHTON: That's my point.

MR. SAENZ: 　-- that's add　-- will add time to the project.

MR. HOUGHTON: That's right. We're just talking about statutory time to the tolling authorities plus　--

MR. SAENZ: The way that　--

MR. HOUGHTON: 　-- then you add the construction of that asset. So getting these things to market　-- I mean on the ground where they're being used sooner than later　--

MR. SAENZ: Sure.

MR. HOUGHTON: 　-- those are the issues we're talking about. When you're talking about inflation, you're talking about lack of resources that you talked about. I mean, you're talking about　we're going to find out who's serious　--

MR. SAENZ: Right.

MR. HOUGHTON: 　-- I think, is what we're looking at. We're going to find out who's serious about moving these things to market sooner than later.

MR. SAENZ: Right. And, of course, the environmental can be started by ourselves, it could be started by the local tolling entity.

MR. HOUGHTON: Right.

MR. SAENZ: If, for some reason, as we get through the market valuation process, a different party is going to move forward with the project, then we can transfer, we can procure, or purchase that, where we can then pass on that environmental work that's been done.

MR. HOLMES: Amadeo, just to follow on the Chairman and Ted's comments, currently, the timelines that you've been referring to are codified. I mean, they're in statute basically. Correct?

MR. SAENZ: Yes, sir.

MR. HOLMES: And there is nothing to say that the environmental piece couldn't run on a dual track, along these same timelines.

MR. SAENZ: That's correct.

MR. HOLMES: And presumably that could be agreed between the local entity and TxDOT as to who was going to quarterback that, fund it, and then there would be some sort of even up when that actual project was then assigned or accepted by a given entity.

MR. SAENZ: And that's what other point that I was trying to make is in our first contact with the tolling entity is we need to discuss the status of environmental, and either they or we can agree, we will more forward with this environmental.

And if at the end of the day they take over the project, and they move the project, the environmental document could then be completed by us, or could be transferred at some point so that they complete it. But the environmental will play a key, and that process needs to start almost immediately.

MR. HOLMES: Yes, I agree with that. I understand that environmentals have, in fact, started on some of these projects.

MR. SAENZ: Yes, sir. A lot of these projects have environmental documents that are well under way.

MR. HOLMES: I also understand that Fort Bend has actually started acquiring right of way on one or the other of their projects.

MR. SAENZ: That　-- I would　-- I mean, I think they are, but I think the project, the right of way that they're acquiring are the projects that are exempt from the process that they will be developing.

MR. HOLMES: I think that is correct.

MR. HOUGHTON: I know you're getting ready to go over the list, Amadeo, but how many of these set projects that we're going to get ready to look at are 100 percent toll viable?

MR. SAENZ: A hundred percent toll viable.

MR. WILLIAMSON: Well, we won't know until they market till they do the market valuation.

MR. SAENZ: I won't know until I have the market valuations.

MR. HOUGHTON: Well, we've got an idea. We have an idea of the gold plate　-- I call them the gold plated projects.

MR. SAENZ: I think there's some projects there that are　-- for example, the 161 project　--

MR. HOUGHTON: Well, I mean, without going through a list, but you're talking about　--

MR. SAENZ: Let's say maybe　--

MR. WILLIAMSON: In fact, let's don't　-- let's do not　identify　--

MR. SAENZ: I don't want　--

MR. WILLIAMSON: 　-- those　--

MR. HOUGHTON: I don't want　-- I just kind of　-- the reason I'm getting there is, we've only got　-- there's going to be a lot of these projects that require toll equity. And there's only so much money that we have available to invest in projects.

So the announcement to the RMAs, to the tolling authorities is, the faster we get to an agreement that these projects ought to be developed is, I don't want to say first come first served, but we just don't have the resources　-- do we have