April 24 Transcript

Texas Department of Transportation Commission Meeting

COMMISSION MEMBERS:

Hope Andrade, Chair
Ted Houghton, Jr.
Ned S. Holmes
Fred A. Underwood

STAFF:

Amadeo Saenz, Executive Director
Steve Simmons, Deputy Executive Director
Bob Jackson, General Counsel
Roger Polson, Executive Assistant to the
Deputy Executive Director
Dee Hernandez, Chief Minute Clerk

MS. ANDRADE: Good morning.

AUDIENCE: Good morning.

MS. ANDRADE: It's 9:05 a.m., and I would like to call the April 2008 meeting of the Texas Transportation Commission to order.

Note for the record that public notice of this meeting, containing all items on the agenda, was filed with the Office of Secretary of State at 4:37 p.m. on April 16, 2008.

Now, as is our custom, we will open with comments from our other commission members, beginning with Commissioner Fred Underwood, followed by Ned Holmes, and Ted Houghton.

MR. UNDERWOOD: Good morning, everyone. There's plenty of room up front if you'd like to move up. So good to have you.

MR. HOLMES: Good morning. I want to say a thank you to all of those that participated in the forum. It was a terrific turnout, and I think it was a very productive forum. Thank you.

MR. HOUGHTON: Good morning. Well, those of you who have come from wherever you have come from, welcome to Austin and the commission. And I echo Ned's remarks regarding the forum, and I'd like to express my appreciation to Coby and his shop for putting on a tremendous forum, and a lot of focus in that forum this year as to how do we get across the goal line in transportation funding and innovation.

But again, welcome, and enjoy today.

MS. ANDRADE: I also welcome my fellow commissioners' remarks and would like to thank everyone that attended our forum. I think it was a huge success. We always wait to see the results of our survey comments. And also would like to thank our staff, Coby and his staff, and a special thank you to Helen who, once again, did an incredible job. Thank you all that are here and that are joining us this morning.

Let me remind everyone that if you wish to address the commission during today's meeting, we ask that you complete a speaker's card at the registration table in the lobby. To comment on an agenda item, we ask that you fill out a yellow card and identify the agenda item. If it is not an agenda item, we will take your comments during the open comment period at the end of the meeting, and for those comments, we ask that you fill out a blue card. Regardless of the color of card, we request that each speaker limit their comments to three minutes. This will be crucial today as we have many rather lengthy items on our agenda.

Amadeo, before I turn it over to you, we do have a special guest in the audience, Representative Dennis Bonnen. If you would please like to come up and address us, sir. Good morning.

MR. BONNEN: Good morning. Thank you, Madame Chair, and thank you, commissioners. I will try and keep this brief. I greatly appreciate the opportunity and your accommodating us early.

Let me begin by introducing a few of my constituents and friends who have joined me here today. We have our county judge of Brazoria County, Judge Joe King is here. He has with him our county engineer, Gerald Roberts, who has also made the trip up. We have the mayor of Lake Jackson, Bob Sipple and his wife Lori. Both have come up and are going to watch Little League later this evening. And we also have Kent Burkett with the Toll Road Authority that Brazoria County has created.

And very importantly, we have Brazosport Chamber representatives. Our executive director is Sandra Shaw, who is, I think, probably one of the longest lasting chamber directors in the state in one place. And then Butch Murrell, the past chairman of the Brazosport Chamber and local businessman. And then, of course, state representative, my colleague in representing Brazoria County, Representative Mike O'Day was also very kind to be here.

Let me begin with the very positive. The State Highway 35 project through West Columbia　-- and this is a positive story　-- had significant delays, experienced utility conflicts, and then the contractor　-- which we think is good　-- was charged over $400,000 by the commission in damages for being delinquent in meeting that. Many of the businesses were in very severe danger of having to close due to the delays. There were complaints about some of the design on drainage and hazards that existed. Again, this is a positive story, though.

TxDOT has been exceptionally responsive and cooperative with our constituents on this matter. They met with the city and the project coordinator on January 29. They sent me a letter summarizing that discussion we received February 20. And then again, they held another meeting in the city on February 29 to discuss the progress and the final solutions to these challenges.

I've heard nothing but huge compliments on behalf of what TxDOT did to alleviate this situation, and I appreciate that. The top leadership of your organization and agency made it a priority to get this done right, and that was recognized and appreciated by our city manager there in West Columbia and the businesses and the citizens.

Locally, I have to recognize Larry Heckathorn, the TxDOT engineer out of Angleton. We have examples where a gentleman in Sweeney called and said he thought the intersection was dangerous. Larry, himself, went out and drove it and checked it. And I could tell you story after story where me or my office have directly contacted Mr. Heckathorn and he'll go out and handle the problem himself, view it himself.

Also, Karen Othon has been a great help. This coming Saturday we are going to unveil the Jason Olaf Memorial Highway sign. She's been very, very responsible and helpful to my office in getting that done. And then Denise has been outstanding, and whenever we have a question about what's going on with this project or that, she's exceptional.

So I want to tell you there are a lot of good things that the agency is doing and that I and my office see and we do appreciate.

With that said, I am mainly here for the concern that $276 million is the amount of projects in the Houston region that had to be delayed, and I understand the reasons behind that, I respect that. My concern is that 49.3 percent is the portion being carried by Brazoria County. That is $135 million. So basically half the Houston region cut in projects, Brazoria County is feeling the brunt of that.

The delayed projects are State Highway 332 through the heart of Lake Jackson, FM 2004 which we are going to rename Saturday, FM 2234, FM 865, State Highway 36, Highway 288, County Road 200, State Highway 99 and State Highway 35. Many of these actually are also partnerships with road bonds that the citizens of Brazoria County passed several years ago in hopes to move these projects forward and get them built. But the main issue is that it's a disproportionate share that our county is taking on in doing this.

And then the second significantly important is that State Highway 332 is and 288 and also Highway 36 are to be significant state evacuation routes, and it's of great concern that we would not be able to move forward on these.

The major route also is 332 and 288 for heavy trucks, servicing one of the world's largest petrochemical complexes. I'm proud to say that I have the largest petrochemical facility in North America in my district in Dow Chemical in Freeport. There are 33,000 vehicles that use State Highway 332 and 288 daily; 350 heavy trucks daily; 100,000 heavy trucks annually. Four thousand heavy trucks a day will be added by the Port of Freeport's expansion and growth over the next four years, and that's something we don't want to change because that is the economic driver. The number one economic driver in Brazoria County is the Port of Freeport, and we don't want to slow that.

The 332 project is significant to that. 332 would have created overpasses through the town to alleviate and keep traffic moving, whether it's in an evacuation or moving trucks in and out of our community. They're critical also to emergency situations beyond the hopefully unexpected event of a hurricane evacuation. They would significantly relieve the congestion.

I want to point out to you the recent Harvard study about hurricane readiness in high risk areas. Brazoria County was a part of this study; it was, I believe, 17 coastal counties. Seventy-three percent of the respondents said they would not evacuate in the event of a hurricane because they think the roads would be too crowded. That's of great concern to us. These are significant projects in 332 and 288 and also Highway 36 in alleviating that problem not only mentally but literally when it comes to getting people to safety in the event of an evacuation.

The City of Lake Jackson has spent $78,000 on engineering relocation, they've spent $96,000 encumbered for engineering. The total cost of the utility relocation will be $1.3 million. The city had hoped to save costs by utilizing the state's contractors and creating an economy of scales and saving on that. Also, I know on the 332 project, one thing that does concern me also is that my understanding is that you were prepared to put that out to bid this month or last month, and I don't even know what the cost TxDOT already has into this project and being prepared to move it forward, so I don't know what loss in dollars of engineering study and things of that sort which　-- as you know better than I even do　-- we can't go back and redo that at the same cost of we wait a year or two or three to do these things.

And I'll wrap it up with this. The Brazoria County Commissioners Court, the City of Lake Jackson, the City of Richwood, the City of Freeport and the Brazosport Area Chamber of Commerce, and of course, myself have all passed resolutions and written letters to TxDOT. You've been very kind, you've responded to us. But we just wanted the opportunity to point out the concerns that we have with these routes when it comes to hurricane evacuation, and quite candidly, the disproportionate share of the cuts　-- that we understand were necessary　-- that Brazoria County is taking.

So with that, I greatly appreciate your providing me this opportunity, your accommodating us here at the beginning of the meeting which I know is not the normal protocol. So I want to continue to work with you. I know you need my help in the Texas Legislature next session to work on these issues, but if there's anything we can do to work on these issues now and help move these projects forward, I would love to be a part of that with you. And I appreciate your kindness this morning. Thank you very much.

MS. ANDRADE: Thank you. Commissioners, any comments?

MR. HOLMES: Representative Bonnen, thank you for coming in this morning. We appreciate the large delegation that you have brought of distinguished leaders of Brazoria County, and you represent your district well.

MR. BONNEN: Thank you.

MR. HOLMES: Amadeo, is there something that we can do in respect of talking to the MPO and seeing how they have prioritized various projects that had to be delayed due to the lack of funding?

MR. SAENZ: Yes, sir, we can. And of course, we have been discussing with all of the MPOs the issues dealing with the development of the new Unified Transportation Plan that you will be considering later on today, and once that's in place, then, of course, we will be working with them on getting them to give us their priorities. So that's going to be important that we talk to the TPC about if these projects are ready and those are their priorities, how they can fit into a schedule.

MR. BONNEN: I appreciate that. And again, priorities are all justified in different ways, but I really believe that when you look at hurricane evacuation and hurricane preparedness and readiness, these are at the absolute top of that list. But we'll work through that at another time. Thank you, Commissioner.

MR. HOLMES: Well, I want to state that hurricane evacuation, as a resident of your part of the world, I'm very sensitive to that, and it's something that Ted Houghton and I have been focused on in respect of the Grand Parkway and 288, 36.

MR. BONNEN: And I tell you, 36 was slated to be a pass-through toll, so I think there's some real opportunity to keep that project moving. I'm not the one, or would I dare to make a decision like that at this point　-- not that I could　-- but I will tell you we've got to move either 332 or 36, one of those two must keep progressing. We respect that we can't have it all and you probably can't do both at this point in time, but we can't see both of those fall to the wayside for a couple of years, and whatever it is we have to do to work on that, we absolutely stand ready to do it.

MR. SAENZ: 　We have been in communication with the county on 36, and I think we have a meeting at the first part of next month to discuss the 36, I think on the 2nd.

MR. BONNEN: May 2.

MR. SAENZ: Yes, sir.

MS. ANDRADE: Ted.

MR. HOUGHTON: Representative Bonnen, glad to have you here, and I spent 14 hours on a whirlwind from Freeport all the way up 288. Had a wonderful time. That's a very fast growing area.

One of the things that our chair eloquently talked about yesterday in the Senate Finance was　-- what was the number?

MS. ANDRADE: $1.57-.

MR. HOUGHTON: 　-- billion worth of diversions, and I know clean air is important, and I know you're chair of Natural Resources, and I think you know where I'm going with this. We've just got to find a way to stop those diversions and put Fund 6 where Fund 6 belongs, and that's back in projects like you're talking about.

MR. BONNEN: And actually, along that line　-- and I'm certain the commissioners know this　-- that was one of the more creative things that Commissioner Williamson and I were able to do together, actually, was that he and I worked, I think, an exceptionally deal for Texans where we take the $100,000 annually from the title transfer fees intended to fund the Clean Air program, and it's a phenomenal opportunity. I know TxDOT has already bonded that money. And so we created with $100 million　-- I may have mis-spoke a minute ago　-- $100 million annually, that money does flow out of Fund 6 but TxDOT is able to bond that, and Commissioner Williamson saw the wisdom of that and actually spearheaded it here, and Coby worked hard with us on that　-- not to put you in the hot seat there　-- and I believe it's creating around a billion dollars of bonding.

So I agree with you, I respect that, but also we have to look at the whole of the opportunity that's created when we do those creative things.

MS. ANDRADE: Thank you so much.

MR. BONNEN: Thank you, Madame Chair. Thank you, commissioners. Greatly appreciate your time.

MS. ANDRADE: We appreciate you being here and all of your delegation. Thank you.

Amadeo, the first item of business on today's agenda is approval of the minutes from the March 27 meeting. Members, the draft minutes are in your briefing materials. Do we have a motion?

MR. HOUGHTON: So moved.

MR. HOLMES: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Motion carries. Thank you.

Now, Amadeo, I will turn the meeting over to you to begin working through today's agenda.

MR. SAENZ: Thank you, Madame Chair. I guess we'll start by calling up Coby Chase, our director of our Government and Public Affairs Division, and he's going to continue with the ongoing discussions that we've had on our federal legislative priorities. Coby.

MR. CHASE: Good morning. For the record, my name is Coby Chase and I am the director of TxDOT's Government and Public Affairs Division. Today I'd like to provide you an update on federal activities that are of interest to TxDOT's mission and business.

And thank you again for the nice comments about the forum. Helen, Brandy and Deana did all the heavy lifting on that, that's for sure.

The most prominent recent hearing on transportation funding has been the Senate Banking, Housing and Urban Affairs Committee meeting on national infrastructure improvement held last March. The purpose of this committee hearing was to provide support for Senate Bill 1926. That bill creates what is called a National Infrastructure Bank to be governed by a presidentially-appointed, five-member board, with members serving six-year terms. It is envisioned that direct subsidies, general purpose bonds, and project-based bonds will be offered by the bank and all aid will be tax exempt. The maximum bond obligation listed in the bill is $60 billion.

Under S-1926, eligible projects must have a regional or national significance, have a public sponsor, and have a potential federal commitment of at least $75 million. Projects will be rated based on various evaluation criteria established for each type of project. Public sponsors for projects could be state or local governments, transit agencies, housing agencies, infrastructure agencies, or public entities partnering with a private entity.

Projects that leverage private financing, including public-private partnerships, will be given preference by the board. The ratings and development of the project development process will be conducted by United States Department of Transportation, HUD, the Army Corps of Engineers, and other relevant agencies. The bank could help TxDOT pay for some infrastructure projects, like mass transit systems, roads and bridges.

The panelists at the March committee hearing were members of the U.S. Chamber of Commerce, AFL-CIO, investment firms, and the Commission on Public Infrastructure. All were in agreement that the National Infrastructure Bank must be created and that infrastructure should be treated as investments rather than as line item expenses. They also noted that all levels of government, as well as the private sector, should provide funding for infrastructure　-- which, I believe, was one of the more important things said at the hearing.

Over in the House, two representatives, one from Minnesota, one from Massachusetts, have introduced a companion to S-1926 and it was referred to the Committee on Transportation Infrastructure, and in addition, to the Committee on Financial Services. After the March 11 Senate hearing took place, Speaker Pelosi expressed support at a press conference for the National Infrastructure Bank which may help this earn a place on the legislative agenda. That's actually good news. She also said last week at a press conference, I believe in New York, that Congress was going to have to understand how to deal with public-private partnerships, that they do have an important place in our future infrastructure.

Now, I do want to say　-- and this isn't in my prepared comments　-- I would like to add a note about this National Infrastructure Bank. While we should be very appreciative when Congress takes positive steps to address our infrastructure deficit, I believe in our community this National Infrastructure Bank, the discussion has left people with the impression that this is focused on transportation infrastructure. Transportation infrastructure is one of many things eligible in this: sewage treatment, water treatment, low income housing. And it is $60 billion, and if you were to spread $60 billion evenly among 50 states, that's $1.2 billion. That's not a lot of road infrastructure, if you were lucky enough to get nothing but road infrastructure or transit infrastructure.

Now, from what I understand　-- and my understanding is limited　-- there are definitely some leverage opportunities and this is definitely new money, it's not gas tax money, so at the end of the day it could be one project which would be nice. But I think we need to step back and understand the discussion is much broader than the infrastructure TxDOT is responsible for, so I just want to temper that. Let's not build this as the solve all problems, but it is a step, a small step.

In addition, the Senate voted and passed SAFETEA-LU Technical Corrections Act of 2008 one week ago. That's HR-1195, and it had been stalled in the Senate since it was voted out of the House back in March of 2007 and reported out of the Senate Environment and Public Works Committee in June of 2007. This bill will now be reconciled with the bill that was passed by the House of Representatives. This is what they do after every big authorization bill, they have to go in and make technical corrections. They're so big, it just happens to occur.

Three items of interest are present in this version of 1195. The first lies with our Highway Safety Program. The bill reduces apportionments to certain states, with Texas's FY 2008 share being approximately a $493,000 reduction. The decrease in federal funds under the Highway Safety Program decreases by $515,000 in 2009.

Second, HR-1195 commissions a new study on converting safety shoulders to travel lanes. The bill asks U.S. DOT to analyze use of shoulders for general purpose traffic, high occupancy vehicles, and public transportation vehicles. It also requires an evaluation of whether or not the conversion or lack of a safety shoulder impacts the number of accidents or impacts highway safety. Statistics and all required information must be compiled and a report must be finished no later than one of the date of enactment. We'll be actively monitoring that.

And then lastly, rescissions, the A R@ word. HR-1195 increases by $100 million the much anticipated FY 2009 national rescission that has been living in SAFETEA-LU since its enactment in 2005. The upcoming rescission nationwide now has increased from $8.6 billion to $8.7 billion, and we estimate this $100 million increase in the rescission grows Texas's proportion by several million dollars, of course. If enacted, our estimated portion of the rescission now totals $729 million.

Unfortunately, rescissions have become a fact of doing business in today's unstable federal funding environment. These rescissions are no surprise. We need to continue to be prepared here in Texas to address what is the mounting loss of federal funding to address the transportation needs of the state. We also need to continue to work better to inform all Texans on the impact these rescissions have on us.

As such, I think we are all pleased that the department, at the encouragement of State Senator Kirk Watson, and under John Barton's direction, will be establishing a stakeholders' group comprised of select MPOs to assist us in understanding these effect and in helping us disseminate information regarding the same.

It is important to note to all, however, that the direction that Congress and FHWA appear to be heading at this time is one in which the manner that rescissions are handled at the state level is becoming more prescriptive all the time. In other words, our ability to actually have the latitude we once had to select where the pain is felt is being reduced.

Another item of interest is a report that Americans for Transportation Mobility, or ATM　-- what a great name　-- released recently on the relationship between transportation and the U.S. economy and which was touched upon by Janet Kavinoky, the Chamber's director of Transportation & Infrastructure at this week's Texas Transportation Forum. The report states that transportation infrastructure is vital to the success of the five major economic sectors of agriculture, natural resources services, manufacturing, retail, and transportation providers. These five sectors account for 84 percent of the U.S. economy.

The report had several key findings that served to further underscore what we know is obvious. First, it acknowledged that if the U.S. continues to under invest and fails to meet transportation needs of industry, the U.S. economy will become less productive and less globally competitive. Second, investments in transportation have measurable benefits to the economy and society. And finally, the report recommends that the U.S. needs strategic investment criteria and improved institutional processes for selecting and prioritizing projects for national and economic growth and competitiveness.

We continue to see that the unreliability of federal funding is very real and finding a solution to this unreliable funding source will depend on Congress elevating transportation issues and funding in the next fiscal year. Appropriations bills are currently being finalized and provided to the committees.

We shall, of course, prepare for the successor legislation to SAFETEA-LU. Our relationships forged with the delegation, public and private transportation groups and state legislators will be important to provide input into this key legislation. We need Congress to provide flexible and innovative funding solutions so that we can continue to grow our economy and provide transportation services to the public.

That concludes my remarks for today.

MS. ANDRADE: Members, any questions or comments for Coby?

MR. HOLMES: Coby, I share your concern about the $60 billion in the Infrastructure Bank, but how do you determine that it would be appropriate to divide the $60- by 50 states rather than the allocation that is currently made?

MR. CHASE: It was simply just a way to divide the money at my own doing. I'm not sure that it would necessarily be divided that way, but the discussions　-- when I first heard of the Infrastructure Bank, my brain only has one definition of infrastructure, and the more I got into the details, it became clear that　-- well, there has been a discussion of dividing it by 50 and making that each state's allocation, that was discussed. I think the bill is still writing itself, especially on the House side, but it would have a panel that would decide projects of significance. But when we're competing with all different types of infrastructure, I would say the best we could hope for is $1.2 billion.

MR. HOLMES: Clearly, if other types of infrastructure take a significant portion of the $60 billion, and even if we followed the kind of existing formula of around 8 percent or so, it could be quite a small number. And it's just a little one-shot deal, anyway, it's not a fix to the funding problem.

MR. CHASE: And I understand they're also talking about 50-year terms on the debt for this program. That's a new one.

(General laughter.)

MS. ANDRADE: Coby, thank you so much.

MR. CHASE: Thank you.

MR. SAENZ: Thank you, Coby.

Agenda item number 3, we'll have Bill Fuller from our Aviation Division who will present a minute order for you on some airport improvement projects.

MR. FULLER: Good morning. My name is Bill Fuller. I'm with the Aviation Division.

This minute order contains a request for grant funding approval for eleven airport improvement projects. The total estimated cost of all requests, as shown in Exhibit A, is $14,930,700, comprised of $12,211,625 federal, $1,094,760 state, and $1,624,320 local funds.

A public hearing was held on March 20, 2008. No comments were received, and we do recommend approval of this minute order.

MS. ANDRADE: Members, you've heard staff's recommendation. Any comments or questions? Fred, you're good?

MR. UNDERWOOD: Yes, ma'am.

MR. HOUGHTON: So moved.

MR. UNDERWOOD: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Thank you so much.

MR. FULLER: Thank you.

MR. SAENZ: Thank you, Bill.

Moving on, agenda item number 4 is dealing with Public Transportation. Eric Gleason, Public Transportation Division director will present the minute order for Bowie and Cooke counties.

MR. GLEASON: Good morning. Once again, my name is Eric Gleason, TxDOT director of Public Transportation.

Agenda item 4 awards a total of $60,000 of Federal Section 5304 State Planning and Research Program funds and $15,000 in state matching funds for two planning projects for a total of $75,000. The first project is to assist the Texarkana Urban Transit District to perform an analysis of its fixed route system, and the second project is to assist the Texoma Council of Governments to investigate the viability of a Job Access/Reverse Commute project with Gainesville as the destination.

Both of these efforts will result in valuable information improving the efficiency and effectiveness of public transportation services in each of the respective areas. We recommend your approval of this minute order.

MS. ANDRADE: Members, you've heard staff's recommendation. Any comments or questions?

(No response.)

MS. ANDRADE: What is your pleasure?

MR. HOUGHTON: So moved.

MR. UNDERWOOD: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: Opposed, nay.

(No response.)

MS. ANDRADE: Thank you so much.

MR. GLEASON: Thank you.

MR. SAENZ: Thank you, Eric.

Agenda item number 5 deals with the Promulgation of Rules, and 5(a) deals with Proposed Rules for Chapter 15, Transportation Planning and Programming, dealing with the State Highway Fund Bond Program, and James will present these proposed rules.

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

This minute order proposes amendments to the rules in the Texas Administrative Code concerning the State Highway Fund Bond Program, otherwise known as Prop 14.

A discrepancy currently exists between the current rules and statute as to the dollar amount of bonds that can be issued in aggregate and annually and the amount allocated to safety projects. The amendments would remedy this by referring to the statutory parameters rather than stating a fixed dollar amount, thereby eliminating the need to amend the rules should the legislature choose to adjust these limitations in the future.

If you approve, the proposed amendments would be published in the Texas Register in order to receive public comments. Staff recommends your approval.

MS. ANDRADE: Members, you've heard staff's recommendation.

MR. HOUGHTON: So moved.

MR. HOLMES: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Thank you so much.

MR. BASS: Thank you.

MR. SAENZ: Thank you, James.

Agenda item 5(b) deals with Final Adoption of rules. 5(b)(1) deals with rules in Chapter 25, Traffic Operations. Jim Randall will present these rules dealing with the Statewide Bicycle Road Use.

MR. RANDALL: Good morning, commissioners. Jim Randall, Transportation Planning and Programming Division.

Item 5(b)(1), this minute order adopts amendments to Section 25.50, 25.51 and 25.53, to be codified under Title 43, Texas Administrative Code, Part 1, concerning Statewide Bicycle Road Use.

In the course of reviewing the administrative rules pertaining to Bicycle Road Use, the department identified three sections that require minor revisions. Amendments to Sections 25.50 and 25.51 correct an outdated statutory reference and an outdated reference to a division of the chapter. Amendments to Section 25.53 delete a paragraph related to the preparation of a Statewide Comprehensive Bicycle Plan. When this section was originally adopted, it was considered the best practice for the department to prepare the plan, however, this work is currently accomplished by local government entities. Department staff members participate and provide assistance to the local entities with regard to these planning efforts.

These amendments were proposed by Minute Order 111200, dated January 31, 2008, and were published in the February 15, 2008 issue of the Texas Register. No comments were received. Staff recommends approval of this minute order.

MS. ANDRADE: Members, you've heard staff's recommendation. Any questions or comments?

MR. HOLMES: So moved.

MR. HOUGHTON: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

(No response.)

MS. ANDRADE: Thank you so much.

MR. RANDALL: Thank you.

MR. SAENZ: Thank you, Jim.

Agenda item 5(b)(2) deals with Chapter 28, Oversize and Overweight Vehicles and Loads, and this is to implement legislation that was passed this last legislative session. Carol Davis　-- or Bob Jackson will be her stand-in. Bob, you're on.

MR. JACKSON: Bob Jackson, General Counsel.

The commission proposed rules three months ago regarding motor carriers and size and weight, vehicles and loads. These rules primarily deal with increased enforcement implementing legislation from last session. We received one public comment and we made change pursuant to that comment on a technical issue.

Recommend approval of final adoption of these rules.

MS. ANDRADE: Members, any questions, comments?

MR. HOLMES: So moved.

MR. HOUGHTON: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Thank you.

MR. JACKSON: Thank you.

MR. SAENZ: Thank you, Bob.

Agenda item number 6, commissioners, staff is this item, staff is recommending that we defer. This item had to do with the adoption of some policies regarding ownership, regarding location of some of the major principals of the Trans-Texas Corridor and toll roads across the state. You have recently named the two corridor advisory committees, and staff would like to take these policies over to the corridor advisory committees and get them to give us some feedback before we bring them back to you. So we would defer them for this commission meeting and bring them back at a subsequent commission meeting.

Agenda item number 7 deals with Toll Projects, there are two minute orders. Phil Russell, assistant executive director for Innovative Project Development will present a minute order in Dallas County and then he'll also present a minute order accepting the General Engineering Consultant report. The first one will be the minute order on 161.

MR. RUSSELL: Thanks, Amadeo. Good morning, Commissioners. For the record again, I'm Phillip Russell. I'm the assistant executive director for Innovative Project Development.

Commissioners, as you know, the 161 project itself has been a long and winding road. It was a project that was required to go through market valuation. We initiated that process probably last July or so, and so the intervening nine months has been interesting. I think Bill Hale has been not only our department negotiator but he and his staff have done, I think, a remarkable job in working through that process and at this point　-- or I guess at last month's commission meeting, they had successfully agreed to the business terms and a market valuator, and the major step, of course, was to come to an agreement on the market valuation process itself. And so, again, they've been working diligently through that process.

At the same time, as you all know, the region has discussed the need for the development of 161 for various reasons in that mid-cities area. With that backdrop, you all approved a minute order last month which essentially said that if we can bring the market valuation process to a successful conclusion, then we will let a construction project for two pieces, Segments 2 and 3 on 161, and that those can move forward to construction.

Now, subsequent to last month's commission meeting, we talked further about it and we felt like probably the most efficient way to bring that to a successful conclusion was for both parties to weigh the market valuation, sit down and negotiate a value of what that project should be. That was successfully completed last week. Of course, Mr. Saenz and Bill Hale were instrumental in bringing that project to fruition. The bottom line valuation was at $458 million. That's money up front that the region can use for other transportation projects in the area.

So I come to you today with the minute order before you, and essentially what it would be, it would reflect and show that we did get to the market valuation, the conclusion that was intended. It was a slightly different process in that we sat down and had a market valuation, but ultimately it led to the same conclusion of value that the region is comfortable with and it allowed the project to move forward with construction which did start on Monday.

So I'd be happy to address any questions you might have, and staff would recommend approval of this minute order.

MS. ANDRADE: Members, any questions, comments?

MR. UNDERWOOD: Yes. Phil, please pass on to the TxDOT staff how much we appreciate the professionalism that they had during this process, because it was a trying process and we really appreciate their professionalism.

MR. RUSSELL: Yes, sir, Commissioner Underwood, I certainly will. And again, I can't stress enough the patience that Bill Hale and Bob Brown and everybody else had, working through that difficult process, and I will certainly pass on your comments. Thank you.

MR. HOLMES: Phil, I echo Commissioner Underwood's comments in terms of commending the staff.

Now let me ask one other question.

MR. RUSSELL: Yes, sir.

MR. HOLMES: From here forward, there's about a six-month process that NTTA has to take up the project. Is that accurate?

MR. RUSSELL: Yes, sir.

MR. HOLMES: And while we fully anticipate that that will occur, in the event that it does not, then what happens?

MR. RUSSELL: Well, again, just to back up a bit, you're exactly right, Commissioner, and thanks for bringing that point out. I think a lot of folks assume now that we've come to a successful conclusion of the market valuation process that NTTA will automatically develop the project. We assume that's the case, but as you correctly pointed out, they will have six months to decide whether to execute primacy. The best I understand is they anticipate probably June or July of when they will make that decision because of some of the turmoil in the financial world. So if what we expect to occur, they initiate primacy, then we'll move forward as per our discussions. If they don't, then the department would have a couple of months to decide whether we want to develop the project.

We do have a pending procurement, CDA procurement that's outstanding. We've put it in suspense mode for the last six or eight months, the last ten months, I guess, and we could reactivate that if that ultimately is the will of everybody involved. We would hold it suspended until we get word back from NTTA.

MR. HOLMES: Suspended, not canceled.

MR. RUSSELL: Correct.

MS. ANDRADE: Ted?

MR. HOUGHTON: No.

MS. ANDRADE: Phil, I believe that in this process we held 60-some meetings.

MR. RUSSELL: Sixty-three, I think I heard Michael Moore say yesterday.

MS. ANDRADE: Well, you have to be sure that you communicate to Bill Hale how appreciative we are. I've certainly got lots of positive feedback on all the contributions he made to this effort. And a special thank you to our executive director. He went in at the end and closed this and there was lots of people involved, and we're just glad that everyone agreed and it went back to local control.

But did we learn something from this, that we can support or help in the future of market valuations? I mean, let's think about that and see if we can't streamline the process. You know, yesterday we heard that perhaps 60 meetings was not too many for the size of this project, but perhaps it was. So let's look at what we learned and hopefully we can streamline the process and take the lessons we learned into the next one. And maybe use Bill Hale as the expert or something.

(General laughter.)

MR. RUSSELL: Well, Madame Chair, I think you're exactly right, and I did hear a lot of different opinions yesterday at Senate Transportation, whether it was too long or too short, but I think ultimately what we have to figure out, just as you just mentioned, that on the one hand the US 281 market valuation in San Antonio went very quickly, we had about a dozen business terms, everybody seemed to come to agreement very quickly, yet on 161 we had 200-something business terms. And so we need to closely scrutinize that process and see why that one required so many business terms, yet the other one only had ten or twelve and apparently was a very efficient, streamlined process. We absolutely will look into that.

MS. ANDRADE: Yes. I think each one of them will be customized to its needs, but let's take a look and let's see if there's something we can do to help. I know that on this one, one of the things that was of concern was the maintenance issues, and that's why we had all those 200 items.

MR. RUSSELL: That's right.

MS. ANDRADE: So each one is going to be different, but let's just take a look at what we learned and see where we can use that lesson towards others.

MR. RUSSELL: Absolutely, we will.

MS. ANDRADE: Thank you. Members?

MR. HOLMES: Madame Chair, I'd like to congratulate you on your participation in it as well.

MS. ANDRADE: Thank you.

MR. HOLMES: And I'd move approval.

MR. UNDERWOOD: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Thank you so much. Congratulations.

MR. RUSSELL: Thank you, commissioners.

MR. SAENZ: Let's go on to 7(b), Phil, dealing with the Travis-Williamson County General Engineering report for the CTTS project.

MR. RUSSELL: Agenda item 7(b) is our traditional quarterly update on the Central Texas Turnpike project. It's for the time period between December 1 and February 29. I'm happy to report that the project is continuing to show progress, and in fact, is winding down the construction phase. If you'll note in the report, it suggests that the fourth phase, that piece from 71 around to 183 there on State Highway 130, is projected to be completed by April 30, and although that's outside the framework of this quarterly update, I'm happy to say that the district is planning on opening up that fourth section on April 30, next week. So we are bringing that to close from a construction standpoint.

The project continues to be delivered well under cost. It's currently estimated to be $387 million under budget. So staff would recommend approval of this General Engineering report, and again, I'd be happy to address any questions you might have.

MS. ANDRADE: Members?

MR. HOLMES: Glad to hear it's under budget, Phil. You've got a couple of change orders that are mentioned in this minute order.

MR. RUSSELL: Yes, sir.

MR. HOLMES: Give me a sense of kind of order of magnitude. How much of those change order for the Hester's Crossing bridge.

MR. RUSSELL: The one on Section 5 and 6, those were relatively small, million dollars or so, relatively small. The one that's talked about, I think it's on Section 6, the Hester's Crossing, it's about a $21 million change order. The reason being for that, we worked in concert with the City of Round Rock　-- they're essentially putting up about half of that cost, we are as well　-- and it creates a system of what's called collector-distributors.

Essentially what it is, there were some concerns that if we pushed a lot of traffic out through the frontage road, on the southbound side they would have to hit the signal there at Hester's Crossing　-- if you're familiar with that. There was concerns that we'd load up that intersection that's a quickly growing area, and so we devised, working in concert with the city, a collector-distributor route that would allow people to kind of circumvent that intersection as they went around 45 itself.

And I think some of that is the result when we built that huge interchange there, you had direct connectors from southbound 35 to westbound 45, and I think the city had some concern about traffic flow. So it's that, it was building some U-turns and realigning that Hester's bridge, and ultimately, between the City of Round Rock and TxDOT, it's about a $21 million change order.

MS. ANDRADE: Members, anything else? What is your pleasure?

MR. HOLMES: Move it.

MR. UNDERWOOD: Second.

MS. ANDRADE: We have a motion and a second.

MR. RUSSELL: One last thing　-- and I should have said that, Commissioner　-- and it's delineated in here　-- that's not part of the 2002 project but since it's closely associated with it, they felt like it should be put in here. I'll make sure I clarify that.

MS. ANDRADE: Phil, we have a motion and a second. Don't hurt it.

MR. RUSSELL: But I'm sure I've got somebody in the Securities and Exchange Commission, somebody asking that question.

(General laughter.)

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Motion carries. We're on a roll here.

MR. SAENZ: Agenda item number 8 deals with Finance, basically your acceptance of the Quarterly Investment Report for the same time period that's required by the Public Finance Investment Act. James.

MS. ANDRADE: Don't be overly confident.

MR. BASS: Good morning once again. I'm James Bass, chief financial officer at TxDOT, and I'll see if I can't slow the meeting down.

MS. ANDRADE: All right.

MR. BASS: Item 8 presents the Quarterly Investment Report for the second quarter of fiscal year 2008 which ended February 29. The investments covered in the report are associated with the 2002 project of the Central Texas Turnpike System. The details of these investments have been provided to you in the quarterly report.

Staff would recommend your acceptance of the report, and I will be happy to answer any questions that you may have.

MS. ANDRADE: Members?

MR. HOLMES: Thank you. James, there was a term in here that I wasn't familiar with, and it was the flexible repurchase agreement, $114,900,000 and some odd, in the CTTP that had a maturity of 2022.

MR. BASS: Yes, sir.

MR. HOLMES: Help me understand what that is.

MR. BASS: That roughly $115 million is the funds that are in the first tier debt service reserve fund, and back in 2002 when we initially sold the bonds, we also entered into guaranteed investment contracts, GICs, and one of those that we entered into　was with　-- well, back then it was Solomon Smith Barney, but it would be CitiGroup today as the counter-party. And we entered into looking at the pro forma cash flows, when that money might be needed and when it would be prudent to put it out as far as the maturity, and working with our advisors, we ended up at the 2022 stage, and by locking in, that money I think is earning in the neighborhood of 5.2 percent today for us. And so there's a guaranteed rate and we have the counter-party of Solomon Smith Barney, or CitiGroup on it.

Does that address your question?

MR. HOLMES: What is the flexible part?

MR. BASS: Well, the flexible part　-- and I'll get you a better defined response　-- but it's flexible repurchase　-- and I believe this may heighten your interest　-- associated with mortgages and securities that are repurchased throughout the process. And I apologize, I can't give you a more detailed response than that right now off the top of my head, but we can certainly get you a better definition of that.

MR. HOLMES: But this is not collateralized.

MR. BASS: They're not CDOs.

MR. HOLMES: CDOs, right. I mean, it's the full faith and credit of CitiCorp.

MR. BASS: Right, well, the underlying securities that are in there, but yes, it is a guaranteed investment contract with the counter-party being CitiGroup.

MR. HOLMES: And it's an interest reserve that doesn't mature until 2022?

MR. BASS: First tier debt service reserve fund, so it's kind of the rainy day fund, and so if we would need that　-- which the pro formas obviously were showing that we did not need it, that we need the money there for safety and security　-- kind of the belt-and-suspenders approach　-- if we have to liquidate any of that prior to 2022, we would, of course, be at the risk of whatever the market value of those securities would be at the time we needed to liquidate a portion of it. But we think that risk is small and that risk could be positive or negative, depending upon the market when we get there, but in exchange for locking it in for that period of time, we also locked in a 5.2 percent interest rate through 2022 which, obviously, today looks very good.

MR. HOLMES: This is a GIC, though. Right?

MR. BASS: Right .

MR. HOLMES: The flexible part means that it is redeemable at some point relative to market valuation.

MR. BASS: And the underlying securities could change. The flexibility is with CitiGroup to manage that portfolio and achieve the guaranteed interest rate, and so they're able to change that over time.

MR. HOLMES: But it is a guaranteed interest rate.

MR. BASS: Yes, sir.

MR. UNDERWOOD: So the only guarantee is the interest rate, not what it's invested in.

MR. BASS: Correct. There are limitations on what it can be invested in, but the specific underlying securities may change throughout the duration.

MR. UNDERWOOD: There's no penalty, other than the fact that you don't know the value of what they've invested in, if you withdraw early.

MR. BASS: Correct, there would be liquidity risks. Again, if we had to call upon that money market risk of whatever the value would be at that time for the portion that we would need, but again, as we looked at it with our advisors back in 2002, the projection showed that we would not need to access those funds, but obviously, in order to issue the debt, you have to have that reserve fund in place.

MR. HOLMES: James, you said liquidity risk. That's different than interest rate risk that determines value, whether it's 115 or 120 or 110.

MR. BASS: Right.

MR. HOLMES: When you said liquidity risk, that heightened my interest.

MR. BASS: Well, the market value of the underlying security, if we needed $20 million out of the $115- that was in there, on whatever particular day we needed that $15 million, the underlying security may or may not be valued in the market at $15 million that day. And so when we would have to gain access to it and when we would have to take the security and liquify it, if you will, into cash on that day, the market value on that day might be different than the book value that it's being carried at.

MR. HOLMES: I understand market valuation that might vary, but not liquidity. Liquidity, to me, means whether or not you have access to the capital, and the market valuation relative to interest rate risk is where the valuation is.

MR. BASS: Perhaps I described it poorly. It might be a liquidity cost. In order to take the security and convert it into cash, you then have the market risk associated with that at the timing when you do it. I apologize for the poor description there.

MS. ANDRADE: Anything else? Members, what is your pleasure?

MR. HOUGHTON: So moved.

MR. HOLMES: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Thank you so much, James.

MR. SAENZ: James will continue with agenda item number 9 and present some preliminary approvals of some State Infrastructure Bank loans, for Hidalgo County, item 9(a).

MR. BASS: Item 9(a) seeks preliminary approval of a loan to Hidalgo County in an amount just over $911,000, with a 20 percent contingency, to pay preconstruction costs for the expansion of four roads in the county. Staff recommends your approval so we may begin negotiations with the county.

MS. ANDRADE: Members, any questions, comments?

MR. HOLMES: So moved.

MR. HOUGHTON: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Thank you.

MR. SAENZ: Thank you, James. Agenda item 9(b), staff recommends deferring this agenda item. This also had to do with a SIB loan for the Hidalgo County Regional Mobility Authority. The county and the regional mobility authority need to go back and clear some things so they can clarify their application. So we're going ahead and deferring it this month.

MS. ANDRADE: Thank you.

MR. SAENZ: Moving on to agenda item number 10 dealing with Transportation Planning, we've got several minute orders. James Bass will present the minute order dealing with the project selection process for the 2009 Statewide Preservation and the Statewide Mobility programs.

MR. BASS: Thank you, Amadeo.

In accordance with Section 201.602 of the Transportation Code, the commission conducted a public hearing on December 13 of last year to receive testimony concerning the highway project selection process and the relative importance on the various criteria on which the commission bases its process selection decisions. There were no oral comments received at the public hearing, and written comments were accepted through January 18 of this year, but none were received.

The UTP currently encompasses two documents: the Statewide Preservation Program, often referred to as the SPP, which consists of funding strategies to maintain the existing transportation system; the second document is the Statewide Mobility Program, or SMP, which includes strategies to enhance the transportation system.

In an effort to improve the clarity of our communication with external parties and to more clearly describe the type of projects that are being developed, we believe it's desirable to rename those two sub documents of the UTP. We suggest, and the minute order recommends, renaming the Statewide Preservation Program to the Statewide Preservation and Safety Program, and also suggests renaming the State Mobility Program to the Statewide Mobility and Supplemental Transportation Program.

Staff recommends your approval of this minute order, and I'd be happy to answer any questions.

MS. ANDRADE: Members, any comments or questions?

MR. HOLMES: So moved.

MR. UNDERWOOD: Second.

MR. HOUGHTON: Comments, questions. It's troubling to me　-- or not troubling, but curious that we got no comments on this.

MR. BASS: That, I think, has been an ongoing and is a routine result of this process, unfortunately, and Chairman Williamson, as I was sitting in the audience over the years, had a concern over that and ways to try and improve and actually get public involvement. I know that Jim Randall and his staff over the years have changed this process and actually have a DVD and a presentation of that project selection process to try and make it easier for everyone to understand the process and the issues that we're seeking comment and input on. Even given those additional efforts, to date we haven't seen any results from that, with the results being increased public commentary on the process.

MR. HOUGHTON: I mean, I heard a senator yesterday talk about not getting his fair share, I heard a state rep this morning not getting their fair share, and we still get no comments. Hard to believe.

MS. ANDRADE: Anything else? Members, what is your wish?

MR. HOLMES: I think we've already had a motion and a second.

MS. ANDRADE: Is there a motion and a second? I missed that. We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Thank you.

MR. BASS: Item 10(b) seeks your approval for the department's variance from federal aid apportionment formulas when allocating funds to various parts of the state. The Transportation Code requires the commission distribute federal aid transportation funds to various parts of the state through the selection of highway projects in a manner that is consistent with federal formulas that determine the amount of federal aid received by the State of Texas. The commission may vary from the distribution procedures provided a minute order is passed that identifies the variance and provides particular justification for the variance. This is required for the annual update of the UTP.

Exhibit A contains an individual evaluation of each of the federal aid apportionment programs, including particular justification for any variance from the federal aid apportionment formula and the proposed distribution of the transportation funds through the 2009 UTP. The real easy part is the statute says that we have to follow precisely the formula that the federal government does in distributing money to the states when we then allocate it throughout the districts, and many of those are just technically not feasible.

The one that jumps off the page from the federal side is they look at gas tax collections from states as part of their formula. As we all know, within the state of Texas we have no way of knowing how much gas tax precisely is generated by one county versus another or one district versus another, and so simply because of that reason and some others, we have to pass this variance minute order. And staff recommends your approval.

MR. HOUGHTON: Questions, comments, fellow commissioners?

MR. HOLMES: James, working with David Casteel and John Barton trying to come up with a surrogate for gas tax allocation by district or county, and we were working on vehicle miles traveled and how that might relate, recognizing that it may be more efficient to drive in a rural district at 60 miles an hour versus a metropolitan district at 5 or 10.

MR. BASS: And you have different variations of truck traffic throughout the state.

MR. HOLMES: Yes. But it's going to be a rough approximation and we're working on that.

MR. BASS: And just technically, even if we use that, since technically it would be different, it's a proxy for what the gas tax collections are but it technically is not the same. Even that would require this variance minute order.

MR. HOLMES: I'm not suggesting that it wouldn't, it was mainly for understanding better how allocations were made, and addressing the point that Commissioner Houghton made a minute ago about continually hearing from virtually every part of the state that they're not getting their fair share.

MR. HOUGHTON: I heard a comment yesterday at the Transportation Committee hearing that the Houston area produced　-- or got back, I think it was 60-40, I don't remember. Do you remember what was said?

MR. BASS: No, and there was a discussion on a chart, and I think we agreed to review it, but I haven't seen the particular chart that was being discussed during the hearing. I think it may have been Houston-Galveston Area Council that had provided it.

MR. HOUGHTON: That there's so much produced in gas tax in that region and the dollars gotten back.

MR. SAENZ: Commissioner, there was a statement, I think, by one of the presenters that said that the Houston area and the Dallas Metroplex area, I think, produce 40 percent of the gas tax revenue. I think that was one of the statements that was made.

MR. BASS: And I think it's a very reasonable approach, but the only way you can get close to a determination of motor fuel tax is vehicle miles traveled.

MR. HOUGHTON: Right.

MR. BASS: There's some limitations within that. But as you well know, motor fuel tax is not the sole funding source for our program, we also have vehicle registration fees which is going to be the number of registered vehicles in a particular county or area of the state that also contributes to our funding mechanisms.

MR. SAENZ: I guess just going back, the project selection process, as well as the allocation within a certain category, were recommendations made by working groups about four years ago, and one of the recommendations was they said that about every five years they would like to come back and look at those formulas that they developed. For example, we had all of the metropolitan areas in one working group and they decided what criteria they would look at to allocate within the eight metro areas.

MR. HOUGHTON: And at risk of misquoting the state senator, I think it was producing 60 percent of the gas tax and getting 40 percent of the revenue back is what I remember. Now, that may, again, trust this memory.

MR. SAENZ: We'll go back and check the transcript and see what it is.

MR. HOUGHTON: So I mean, numbers get thrown out all the time without okay, let's either verify/validate that number.

MR. BASS: I think at the hearing there was a request for TxDOT to have an opportunity to review that particular graph.

MR. SAENZ: But the graph simply, James, was a calculation of motor fuel receipts, gas tax receipts.

MR. HOUGHTON: And it's not a criticism, it's just in an effort to really understand where revenue comes from and where it's produced, I'm interested.

MR. SAENZ: I think in looking at it, since it's been four years since those groups looked at the way that they would distribute money within the different sub categories, I think it would be a good idea to bring them back and start looking at it again, and also start looking at other sources, very similar to what we talked about, the vehicle miles traveled, to come up with maybe a different distribution between the metro areas, different distribution between the urbanized areas of the state, and of course, the rural connectivity, they had different criteria that they used.

MR. HOLMES: Well, that was a suggestion that I had made, as well, that I think it's always useful to revisit formulas as times change and population changes. I don't see John and David　-- there they are out there. They've been working on some calculations at my request　-- which I greatly appreciate　-- and helping me better understand it, and they've got a little bit more work to do to add in more than just lettings, but really kind of the full allocation of overheads and internal maintenance, et cetera. But it would cover all the funds because it doesn't break it out by motor fuel tax alone　-- I mean, it isn't broken out that way. but I think it will be kind of a guidepost that may help defuse some of the misunderstandings　-- maybe.

MS. ANDRADE: Members, anything else?

MR. HOUGHTON: So moved.

MR. HOLMES: Second.

MS. ANDRADE: We have a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MS. ANDRADE: All opposed, nay.

(No response.)

MS. ANDRADE: Thank you so much.

MR. SAENZ: Thank you. Agenda item 10(c) deals with the approval of the target funding levels for the 2009 Unified Transportation Program, and James will present that. This is a follow-up to our discussion item that we had last month.

MR. BASS: During last month's commission meeting, I led a discussion regarding the development of the 2009 Unified Transportation Program, commonly referred to as the UTP. The purpose of that discussion was several fold, but most importantly, I repeatedly stressed the need to ensure that this agency's primary planning document reflects the financial reality that we face today.

To reiterate some of the information from my previous presentation, the UTP is an eleven-year plan that guides the commission, the department and metropolitan planning organizations across the state on the development and construction of transportation projects. Again, I would like to reiterate and remind everybody that the UTP is not, nor has it ever been, TxDOT's budget. In addition, it is not, nor has it ever been, a guarantee of future funding.

I also believe it's important to point out again that we need to deliver to the federal government our Statewide Transportation Improvement Program, or STIP, for which adoption and development of the 2009 UTP is essential.

Today we are asking the commission to approve the targeted funding levels of the UTP so that our districts and MPOs can start developing and prioritizing projects. Once that is complete, the commission can then approve the actual 2009 UTP document later this year.

What we know is this: the amount of cash we forecast for the eleven-year period of 2009 to '19 to be available for funding new construction and preventive maintenance and rehabilitation contracts is approximately $28.2 billion. This is the same slide you saw last month. This is based on an estimate of available funding that only includes current sources of revenue. This figure does not encompass numerous department responsibilities including, among others, engineering and right of way costs, routine maintenance, employee salaries, regulation of motor vehicle dealers, and issuance of vehicle titles and registration.

This $28.2 billion figure depicts only the funding available from revenues that I, as your CFO, feel that I can rely on to deliver new letting while ensuring that we have balanced the books. Therefore, this figure does not include the issuance of additional Prop 14 debt, nor does this figure reflect what the legislature might decide to do on Proposition 12 debt. $28.2 billion is what we forecast to be available for statewide distribution to awarding contracts for highway construction, preventive maintenance, and rehabilitation over the eleven-year period.

This slide depicts the three different UTP funding scenarios dividing up the $28.2 billion pie that I shared with you during last month's commission meeting. Remember, these are only three scenarios amongst literally an unlimited number of options on how the funds could be reallocated.

I'll just give a brief recap of the three, just as a reminder. Scenario A would dedicate the maximum amount of funding possible for maintenance and rehabilitation work after meeting all of the required funding levels in the other categories, but provides no funding for mobility projects.

Scenario B funds maintenance, Category 1, at an average of $1.325 billion per year which is a lower level than Scenario A, obviously, and therefore, it frees up some funding for mobility projects across the state but not at a level to meet the expectations of our districts and local partners. I'll point out that Scenario B also differs from Scenario A in that it provides $400 million in additional funding to Category 12, strategic priority, to be used at the commission's discretion for statewide priorities.

MR. HOUGHTON: Can I stop you as we go through?

MR. BASS: Yes.

MR. HOUGHTON: Why did we increase it by $400 million?

MR. BASS: It was simply one of a myriad of possibilities. One thing I would point out, the $696- under Scenario A, that $696 million is already spoken for. Through previous actions of the commission in adoption of prior minute orders, the commission has committed to provide funding to specific projects across the state at $700 million. Those projects have not yet been let, so in our future cash flow we needed to find $700 million to back up those prior commitments. So if we kept it merely at $700 million, then for the next eleven years the commission would have no discretion to address unforeseen BRAC needs, base realignment needs, economic development needs, and so we felt like there needed to be more than that $700 million in there. The figure that was arrived at was $400 million. Ultimately that's a decision for the commission to decide if that figure should be $400 million or something else. It's just one of a myriad of possibilities.

MR. HOUGHTON: Are you aware of any tags on that $400 million, promises on that $400 million?

MR. BASS: Not that I'm aware of.

MR. HOUGHTON: It seems $400 million is just $400 million.

MR. BASS: Right. What we've heard over several months is that a particular commissioner or a particular member of the administration has agreed to work with different entities and deliver money for project XYZ, but in our review, there was no formal action, no formal commitment other than the $696- that we put in there.

MR. HOUGHTON: So the $400- is just $400-.

MR. BASS: Correct.

MR. SAENZ: The $400- was $400 million that we put in there to give you flexibility should an statewide economic development opportunity come up　-- for example, another Toyota in San Antonio or another Toyota comes to Houston or something, and it would give you the flexibility to have some money to address those on a statewide basis. You also have the flexibility, should we have an emergency that we have to do something with hurricane routes or we have to do something with another type of emergency, you have the flexibility to select some projects. The same thing with military deployment with the BRACs, with base closures. That's what Category 12 was intended for so we put $400 million there for you to have.

MR. HOLMES: Yes, it seems to me that having some flexibility is a good idea.

James, back on the $696 million, those are projects that were committed by minute order. Is that correct?

MR. BASS: Yes, sir. And in addition, historically the pass-through funding agreements adopted by the commission, the funding source for the repayments on those has come from Category 12, so that would be another possible or potential use of the additional $400 million in there.

MS. ANDRADE: That was my question. We have been using that money for pass-through agreements. And the $400 million is over ten years?

MR. BASS: Over eleven years.

MS. ANDRADE: Eleven years. So it's not that much, when you think about it, what we have available per year to use for economic development opportunity across the state.

MR. BASS: Yes.

MS. ANDRADE: To attract businesses to Texas that keeps us competitive.

MR. BASS: Yes.

Scenario C is the staff's recommendation for development of the UTP. Scenario C re-prioritizes funding for maintenance to address preventive maintenance and only the most pressing rehabilitation needs. This approach requires that we shift our priority to preventive maintenance, allowing us to forestall more costly rehabilitation work. This provides approximately $4.5 billion to meet the expectations of our local partners with respect to funding from the Texas Mobility Fund and also to provide funding for many mobility projects in the metro, urban and rural areas of our state, and it also would honor all previous commitments made by the commission from Category 12, and again, Scenario C has an additional $400 million in Category 12.

In addition, Scenario C, we believe, would result in additional projects above and beyond the $28.2 billion through toll equity, working with our regional mobility partners or other local tolling partners, and through development of CDA projects by leveraging the amounts that we have available here from the State Highway Fund.

During our discussion on the UTP at last month's commission meeting, you posed several questions and comments pertaining to the issues that I, along with Mr. Barton, will now spend some time responding to. The first is a rundown on the math that gets us to this $28.2 billion figure; the second is the effect that the reduced level of maintenance funding might have on the condition of our roads; and then finally, there were recommendations on outreach with our partners on this particular issue.

I'll try and tackle the first issue and then I'll ask John to provide you comments on the remainder of the questions from last month, and then I'll be back, once John wraps up, to be back before you to formally present the minute order.

This slide depicts the amount of revenue we forecast to be available over the eleven-year period, again, from 2009 through 2019, along with the corresponding expenditures of those funds. Revenues to the State Highway Fund from state motor fuel tax, motor vehicle registration fees, federal reimbursements and various other sources will total some $78.2 billion over that eleven-year period.

From that total, over on the right side I've grouped together, for the purposes of discussion, what is a myriad of important obligations that the agency funds that do not directly address the responsibility we have for constructing and maintaining the state highway system. These include our research program, maintaining the ferry system, activities with the Gulf Intracoastal Waterway, travel information, vehicle registrations and titling, funding the Automobile Burglary and Theft Prevention Authority, public transportation, aviation, vehicle dealer regulation, other agencies which includes everything from the Employees Retirement System, to the Historic Commission, transfers to fund a share of general government support operations and the cost of short-term borrowing.

In addition, I have calculated into our forecast an inflation factor that applies to all of our programs, both above the subtotal and below. Simply put, all program areas will need to be funded at higher levels in the future simply for no other reason than the inflationary cost of doing business. In addition, history has shown us that additional programs will be funded from the State Highway Fund over time, and an estimate for that is also included.

Totaling all of these non-construction and non-maintenance related expenditures over the eleven-year period leaves the agency with approximately $51.5 billion for investing in transportation projects and for maintaining our system.

Now if we talk about the expenditure of funds that are directly associated with construction and maintenance of the highway system, we forecast that we will need to expend $4.7 billion on engineering over this time period and another $1.6 billion for right of way. We have existing toll equity obligations of $210 million, and we have $2.7 billion of debt service on our already issued Proposition 14 bonds. I anticipate that based on existing pass-through financing agreements, we will need to expend $1.3 billion on that program during this eleven-year period.

We will be expending $6.1 billion for routine maintenance conducted by TxDOT employees for items like patching potholes, installing signing and striping, performing spot maintenance repairs, and responding to emergencies like accidents on our system, ice and snow storms, wildfires, other natural disasters. We also forecast we will expend another $5.3 billion over these eleven years on contracted routine maintenance items like mowing, litter pickup, sign and signal installation, and also some pavement repair.

Backing all of this out of that $51.5 billion leaves $29.6 billion available for contractor payments during this period. However, I'm also forecasting that we will need to expend, on balance, $1.4 billion on payments for contracts as we transition into and out of this UTP period. This is due to the fact that existing contracts will end during 2009 and 2010 and new ones that we start in 2018 and 2019 will continue and have payments beyond this eleven-year period which ends in 2019. So what does this leave us to start new projects over the next eleven years? $28.2 billion.

There's does exist, of course, a couple of other sources of revenue that, by law, are dedicated for projects back in a particular district or region. This slide indicates what we know, and that is that there was the $3.2 billion payment from NTTA for State Highway 121 that will be used for other projects in the Dallas District. What will actually go to contract during the UTP period will be somewhat less than that $3.2 billion, as a portion of that amount will be needed for engineering and right of way acquisition and currently does not show up in the UTP, and then the fact that some projects to be funded by that $3.2 billion have already been let or will be let before we start fiscal year 2009.

In addition, there is the $25 million payment associated with the State Highway 135 and 6 agreement that must be spent in the Austin and San Antonio districts.

For just a moment, I want to talk about, take some time and acknowledge what lies before us as both a challenge and opportunity. Legislative leadership in the state has made it clear that transportation funding will be on the front burner this next legislative session.

As we all know, back in November, voters in the state approved the issuance of general revenue backed debt for highways with the passage of Proposition 12. The legislature must now enact the enabling legislation to make these Prop 12 bonds a reality. Should the legislature dedicate such general revenue to the program　-- and I estimate that ultimately that would cost about $400 million per year in debt service　-- this could provide an additional $5 billion in total funding to the highway program. Approximately $1 billion of that would be needed for engineering and right of way acquisition, with the remainder feeding into the UTP once that becomes a reality.

In addition, there are two items on Prop 14 debt that I would like to acknowledge. The first is that, yes, the commission does have the ability next fiscal year to issue another $1.5 billion in Proposition 14 debt, backed by payments from existing State Highway Fund revenues. However, keep in mind that issuance of this debt now, with no new additional revenue to retire that debt, will alter the long term cash forecast that you see here and that we're discussing today. We may have more capital up front by issuing the debt, but we would do so at the expense of the program in the long run because we would have to pay the debt service for those projects.

This is why I'm encouraged by the recent communications we've had from legislative leadership which indicate a strong willingness on their part to redirect Fund 6 revenues presently going to other state agencies, in an amount at least sufficient to cover the cost of the debt service on the additional $1.5 billion in Prop 14 debt, which would be in the neighborhood of $120- to $125 million per year. If that happens this next legislative session, that obviously would be a very positive step forward for transportation.

MR. HOLMES: James, it would also be a very small step.

MR. BASS: Yes, but a positive one in the right direction.

MR. HOUGHTON: Well, James, let me ask you another question. On Prop 12 that was passed by the voters, fully underwritten, allocated, issued, what would be the debt service on that?

MR. BASS: Roughly $400 million a year once the full $5 billion were outstanding.

MR. HOUGHTON: What do you think the appetite of the legislature is to cover $400 million a year?

MR. BASS: I am not intimately familiar with the revenue forecast for general revenue or the obligations already against that.

MR. HOUGHTON: Anybody have an idea? Coby, do you have an idea of the appetite of $400 million a year in general revenue?

MR. CHASE: I do not know.

MR. HOUGHTON: So we hope.

MR. BASS: It is a significant amount of money.

MR. HOUGHTON: It's a leap.

MS. ANDRADE: Although, if I remember correctly, we did say that with these new projects hopefully new business would come in and it would pay itself, it would generate enough revenue to pay the debt.

MR. BASS: We've all seen, once a transportation improvement project goes in, development around that project happens or increases, and so there's been some commentary that by that fact and that increased development, the revenues coming into the general revenue fund would then also increase through state sales and use tax, and hopefully that would be an amount close to or sufficient to help fund that $400 million.

MR. HOUGHTON: Somebody needs to find out how the new state franchise tax is working. I hear it may be under estimate a little bit?

MR. BASS: I'm not sure. I know a number of people are interested in the performance of that tax, and I'm not sure if there's been enough data received yet for any forecast to be altered.

MR. HOUGHTON: Any forecast of our surplus or deficit for the biennium?

MR. BASS: Not that I've heard, no, not a recent one.

MR. HOLMES: I've not heard any official forecast but I've heard it both ways: that it's significantly over and somewhat under.

MR. BASS: So it sounds like they asked at least two people.

(General laughter.)

MR. HOUGHTON: So the $5 billion is an if.

MR. BASS: Yes, and that's why it's not loaded into our forecast right now, because it's not existing law today.

Another possible source of additional revenue over this eleven-year period that I would like to put before you　-- and I've discussed with some of you individually　-- is the possibility of additional funds from the Texas Mobility Fund, and this could happen primarily in one of two ways.

The first is that the state's economy continues to grow and over time the Comptroller's Office may increase their revenue estimate for the funds coming into the Mobility Fund, and therefore, that would make more bond proceeds available through the program.

The second is a bit more involved, but as you may recall, the Mobility Fund requires 110 percent debt service coverage. This means that if the revenue estimates come true, there will be 10 percent left over to cover additional costs. At this point these projections are uncertain, and the 10 percent left may be needed to fund cost overruns or change orders on already committed projects. As you know, we have the authority and ability to issue $6.4 billion of bond proceeds from the Mobility Fund. We've actually committed more than that in projects and work against it. We've been working here the past few months to realign those commitments and obligations back in line with the $6.4-. My concern is as soon as we do that, there's going to be another round of change orders or something else that's going to need additional funding, and the source of that funding may need to be this surplus that's provided by the coverage.

So at this point we're not yet comfortable committing that surplus to new additional projects. We want to hold it back in reserve to make sure that the existing projects can be fully funded, and if they experience any cost overruns, it's not going to cause a disruption somewhere else within the program.

MR. HOUGHTON: How much of that money that is allocated, the $6.4- plus, are associated with toll projects, leveraged projects?

MR. BASS: I'm not sure. The one I know for sure is State Highway 45 Southeast here in Austin and a portion, at least　-- I'm not sure that it's 100 percent, but a great portion of that project is being funded by proceeds of the Mobility Fund. There may be others but that's the one I know for certain.

I want to clarify　-- and you already talked about it earlier with Mr. Russell　-- the up-front payment for NTTA, the State Highway 161 project, should it become a reality　-- which we all expect it to　-- it would also go to fund projects solely in the Dallas District and that could be incorporated as we go forward.

MR. HOUGHTON: But James, those things such as the 161 payment and the 121 payment, are on top of their current allocation.

MR. BASS: Correct. The $28.2- that we've been discussing, the way that I've characterized it or described it, is available for statewide allocation through the various formulas in the UTP. Now, the $3.2 billion for 121, that's on top of that for Dallas District only. $25 million for State Highway 135 and 6, that is for San Antonio and the Austin district. When we receive the $458 million from the State Highway 161, that will get added on top again for the Dallas District for projects within their area, their district.

I also would like to point out the fact that we hope to see the continuation of possible future pass-through financing which would attract and bring additional local participation in projects. And of course, we always can hold out hope that the funding picture will improve at either the federal or the state level or both, and at this point, we're not comfortable committing additional projects from these potential funds, but as we continue the planning process, we'll continue to monitor these opportunities.

And at this point I'd like to point out　-- because sometimes it gets lost in the discussion　-- the UTP, while it's an eleven-year planning document, it's essentially in place for one year. And so we will revisit this issue as frequently as appropriate in light of shifts in the economic conditions or changes in state or federal funding as they become evident. So the action you take today is not a lock-down for the next eleven years, it's a planning document for the next eleven years, and as we go through this planning cycle, as we see changes in our revenue pattern, we'll be coming back to the commission to update and continue this planning process throughout the eleven-year period.

MS. ANDRADE: So James　--

MR. UNDERWOOD: James, let me interrupt. Pardon me, Madame Chair.

MS. ANDRADE: Go ahead, please, Fred.

MR. UNDERWOOD: Ladies first, please.

MS. ANDRADE: So what you're saying is if this should not work out, we get some new funding sources, we could always go back and revisit this and change it to what's best.

MR. BASS: Right. The plan will be at some point in the future, whether that's later this calendar year, ten months from now, or at the end of the next legislative session, but at some point in the next twelve months, and perhaps sooner, staff will be coming back to the commission for a 2010 to 2020 UTP. After that, we'll be coming back for a 2011 through 2021. And if something were to come in, we would be coming to the commission for what I would term a supplemental program to the existing UTP if it's perhaps not significant enough to redo the whole base document.

There's another item here today, and we did one a couple of months ago, when the $3.2 billion came in, we didn't redo the whole UTP but we came with a work program for the Dallas District to utilize some of those $3.2 billion. So as these events occur, there are mechanisms to come in and adjust whatever the base UTP is at that time or update it with an entirely new document.

MS. ANDRADE: Thank you. Commissioner Underwood.

MR. UNDERWOOD: James, let me ask you again. When do we normally do the UTP document.

MR. BASS: I'm probably not the best person to answer since this is my first time.

MR. UNDERWOOD: Okay. Amadeo?

MR. SAENZ: We normally start in the last quarter of the year. We start by having the public hearing on the project selection criteria. This is the first time that we've brought to you the approval of the funding levels. So we'll start bringing back the new funding levels for the next UTP probably by the end of the year, December.

MR. UNDERWOOD: So you're saying December we'll be able to have another look at this and see where we are.

MR. SAENZ: As we develop the 2010 to '20 UTP. So every year we'll be able to make the adjustments to see what factors have changed.

MR. UNDERWOOD: Because we close our books when, James?

MR. BASS: Our fiscal year and the state's fiscal year closes August 31.

MR. UNDERWOOD: So you'll be able to get those figures to Amadeo to where we can be able to take another look at it in December and see exactly where we are.

MR. BASS: Yes, sir.

MR. UNDERWOOD: See what decision we make today, how it's affected us up until that point.

MR. BASS: And at some point, what's going to happen at the federal level is going to begin to crystallize. When that will actually be, we don't know if that will be before the election or after, but in addition to closing our books, at some point we're going to have a better feel for what's going to happen at the federal level and that will improve the accuracy of our forecast for federal funds. It might increase it, it might decrease it, it might say we were spot on, but it will give us a greater degree of comfort in our forecast as we move forward.

MR. UNDERWOOD: But also, part of your forecasting is seeing what we actually spent for the previous year.

MR. BASS: Correct.

MR. UNDERWOOD: You're only basing off of previous years, not the past year.

MR. BASS: And what we expect to spend, yes, sir.

MR. UNDERWOOD: Right. So we don't know how inflation will affect it or other things or lack of federal gas tax money, state gas tax money, how much is being used.

MR. BASS: Correct.

MR. UNDERWOOD: So we'll be a lot smarter in December is my point. Thank you.

MR. BASS: As I previously mentioned, other issues were raised by you on the subject during last month's commission meeting. John Barton will address those issues and I will then return to present the UTP funding minute order to you once Mr. Barton has concluded.

MS. ANDRADE: Thank you.

MR. BARTON: Good morning, Madame Chair, commissioners. For the record, my name is John Barton, and I'm the assistant executive director for engineering operations for the Department of Transportation.

As James mentioned, the commission also asked questions regarding what the impacts of the reduced funding for maintenance under Scenario C would have on the condition of our roadways during last month's meeting. And as I shared with you at last month's commission meeting, changes in the way that we manage and administer the maintenance funds will help us minimize any negative effects that the funding levels available under Scenario C will have on the overall condition of our pavements.

We were asked by you to quantify these management strategies and innovations and to relate to you the impacts that these approaches would have on mitigating the pavement decline that might be predicted based on the limited funding available for maintenance envisioned under Scenario C.

These management strategies and innovative approaches include such things as: expanding focus on our preventive maintenance and rehabilitation funds to the areas where they have the greatest needs; designing our preventive maintenance and rehabilitation projects to an appropriate design standard in regards to geometry and other issues; limiting the use of our maintenance and rehabilitation funds for non-pavement related issues; expanding the use of competing materials or alternative materials to drive down the cost of our projects; implementing maintenance peer reviews from district to district and expanding the integration of our routine maintenance work as well as our routine maintenance contracts to get the biggest bang for the buck out of those activities; taking advantage of privatized asset management strategies where that's appropriate; and lastly, targeting safety improvements on our roadway through these programs.

As you can see, the effects of these management strategies and innovations are shown on this slide, and by implementing these approaches together in a holistic manner and actively managing our work in combination with these expanded innovations and management strategies to focus our preventive maintenance and rehabilitation funds on the pavements themselves, the funding levels proposed under Scenario C for maintenance will likely result in 80 percent or more of our roads here in Texas being in good or better condition by the year 2019. This is a 10 percent number below the goal of 90 percent good or better that we have here in Texas and reflects a 7 percent decline from our current conditions. We estimate that approximately $9 billion of additional or supplemental funding would be required in the year 2019 to return our pavement conditions to the levels that are established by our goals under Scenario C.

MR. HOUGHTON: John, let me ask you a question.

MR. BARTON: Yes, sir.

MR. HOUGHTON: $9 billion in what year's dollars?

MR. BARTON: That would be in the 2019 dollars projecting forward.

MR. HOUGHTON: So you've inflated those dollars.

MR. BARTON: Yes, sir.

MR. HOUGHTON: What is the projected revenue source for the $9 billion?

MR. BARTON: That's yet to be determined. As James said, there's obviously opportunities that might exist in the future.

MR. HOUGHTON: Operative word is might.

MR. BARTON: That's correct.

MR. HOUGHTON: Okay.

MR. BARTON: The commission members also asked us to engage our stakeholder groups to discuss scenarios that we might be able to consider for distributing available funding to the various work categories under the UTP, and in response to that, we met with the 25 metropolitan planning organizations' staffs, as well as all the district engineers from around the state, and we discussed in detail with them the specifics of the UTP, the assumptions that were used to generate the UTP funding forecast, and the logic that was used in developing the three funding scenarios under the UTP that James presented to you at last month's commission meeting, and then we solicited their input on those particular scenarios.

I can't tell you that any of them were happy with the forecasted funding availability over the next eleven years, but I would summarize their feedback to us as a strong support for Scenario C, and they all shared with us that they agreed that Scenario C treated all the MPOs fairly and it honored what they believe were commitments that had been made to them in the past.

Staff also met with representatives of the Associated General Contractors, the AGC, as well as the Texas Council of Engineering Companies, again, the CEC, and reviewed with them the same information as we did with the MPOs. The CEC and AGC representatives indicated that they understood the reasoning behind the staff's recommendation of Scenario C and their feedback to us was to strongly encourage the department to consider all funding opportunities that are available to us and all options that are available to us to make additional funding available for construction and maintenance projects in the future.

We have also strongly considered input from the legislature as well as other elected officials in this decision, and furthermore, we have also received a smattering of letters and e-mails, comments and phone calls from a variety of individuals offering comments on the funding levels within the categories of the UTP, ranging from strongly supporting one of the three scenarios that James presented to you at the last month's commission meeting, to suggestions that we spend all of the money in El Paso or perhaps that we spend all the money on a specific mode of transportation. Overall, I would characterize the majority of the feedback that we received as supportive of the staff recommendation which is Scenario C.

So with that, at this time I would like to turn this back over to James to allow him to present to you formally the minute order that is before you today.

MR. UNDERWOOD: A quick question for you, John.

MR. BARTON: Yes, sir.

MR. UNDERWOOD: Madame Chairman?

MS. ANDRADE: Yes, please.

MR. UNDERWOOD: Looking at these scenarios or whatnot, you're recommending Scenario C. Is that correct?

MR. BARTON: That's correct.

MR. UNDERWOOD: How will that affect, say, rural Texas compared to the other areas, the metro and whatnot?

MR. BARTON: I think the impact on the metro areas and the urban areas and rural areas is kind of equally distributed under Scenario C. In other terms, the maintenance activities that we do under contract through our preventive maintenance or rehabilitation contracts would be lower than under the other scenarios, but the activities that we do on expanding the system through mobility type projects will be increased. And as you can see under Scenario C, there are fundings provided to not only the metro areas but the urban areas and the rural areas as well.

MR. UNDERWOOD: Thank you, John.

MS. ANDRADE: Members, we have someone that has signed up to speak on this agenda item. Would you like to hear him before you have any other questions for James? All right. At this time I'd like to call Robbie Martin.

MR. MARTIN: I'm Robbie Martin associated with Sem Group, material supply company, and I appreciate the opportunity to make some remarks today, and my remarks will be primarily directed toward the UTP that's being discussed before you, and primarily in relation to the maintenance of our system.

I'd like to sell you on the idea that I'm coming at you strictly as a taxpayer today, as well as you folks are all taxpayers, but my comments are really based on 40-plus years of experience in pavement maintenance systems and pavement management systems, and this has been first with TxDOT, contractors, and then as a material supplier. This 40-plus years experience has been considerably in Texas, Oklahoma, Arkansas, Louisiana, and while I know congestion is a serious problem, maybe so in Texas than those other states that I just referred to, believe me, I have observed in those other states I mentioned what deferred roadway maintenance can do. It can be catastrophic, a snowball effect can happen before you know it; not only is your business climate destroyed, but also politically can become a great battleground.

So I would urge you, even though you have tremendous pressure, I'm sure, from the congestion side of the issues, to pay a lot of attention to the long term pavement management and pavement maintenance funds that are being proposed here today. I'm familiar with five of the objectives that are in your highway mission. I can't name all of them real quick like Amadeo can always do. You had to learn to do that early on. Right?

(General laughter.)

MR. MARTIN: And I believe in those and I agree with them, but I would propose that at least two, if maybe not three of those, are not possible to sustain or improve on without really strong preventive maintenance and maintenance programs.

So I came in today without any real prepared comments, but I had an interest in this issue and I appreciate the time and comments.

MS. ANDRADE: Thank you very much, sir. James.

MR. BASS: In summary, let me highlight just a couple of thoughts that have been noted here. First is the need to tie the planning element of this agency's primary work program with the reality of the cash flow forecast we are facing today I believe is absolutely critical to development of sound financial practices and is equally critical to regaining public confidence in this component of the agency's operations. Second is that we have listed the input from a disparate group of stakeholders and have listened to the state's leadership. Over the past month, in a couple of different hearings, we certainly heard from a number of members of the legislature.

The minute order before you identifies the cash that I believe will be available over this eleven-year period to fund highway construction and preventive maintenance and rehabilitation contracts. This minute order would establish the funding levels for all categories within the 2009 to 2019 UTP.

Staff recommends that Scenario C be adopted by the commission, and I would be happy to respond to any additional questions that the members may have at this time.

MR. UNDERWOOD: James.

MS. ANDRADE: Please.

MR. UNDERWOOD: When you were doing your studies, you did take into account that we are having over a thousand people a day still moving into Texas. Is that correct?

MR. BASS: Yes, sir. One of the things primarily that impacts us, obviously in two ways, one, simply vehicle registrations. Most of the people moving into the state are bringing at least one vehicle, if not more, with them, and so we have that built into our forecast. In addition, while on a national level we're seeing motor fuel tax receipts stagnant or even declining, some report I got a couple of weeks ago said that for the week ending March 28, the purchase of fuel was 1.7 percent less than it was twelve months prior. That is not the experience we're having in Texas, due in large part to those thousand-plus people moving in every day.

And so people are changing their driving behavior because of the $3.30 a gallon gasoline, but we continue to have more and more people in the state driving. And so whereas, many other states and the federal government is forecasting flat or declining motor fuel tax receipts, we're forecasting ours to grow in the neighborhood of 1-1/2 percent per year which has been roughly the average the last three years.

MR. UNDERWOOD: Even with that forecast, my point is that even picking Scenario C, this is really not going to solve our problem because of all the people moving in.

MR. BASS: Correct.

MR. UNDERWOOD: This is a band-aid.

MR. BASS: Yes, sir, and the needs over the eleven-year period far exceed $28.2 billion.

MR. UNDERWOOD: Right. Thank you, sir.

MR. HOLMES: James, you have forecast the revenues based on known elements of our funding system.

MR. BASS: Yes.

MR. HOLMES: And with this $5 billion Prop 12 bond potential out there, I'm assuming that you did not include that because you feel like it is not responsible to forecast that expenditure before the legislature has acted.

MR. BASS: Correct. The forecast is based upon current law and current tax rates, fee structures.

MR. HOLMES: It would make everybody feel better to forecast receiving it, maybe even increasing the gas tax at the state level, the federal level. All that would be purely speculation, wouldn't it?

MR. BASS: Yes, sir.

MR. HOLMES: Which is why you've left it out.

MR. BASS: Yes.

MR. UNDERWOOD: I want to make one final statement. I apologize. I understand, Madame Chairman, Amadeo, James, I understand we need to move this process along　-- we're really kind of behind the curve if we normally do it in December　-- but it's imperative to me that we revisit this in December of this year, the whole UTP process, please.

MS. ANDRADE: Thank you. Commissioner Holmes, please, go ahead.

MR. HOLMES: One last question, and I'm not sure, James, if this is for you or John, but in December we won't know　-- unless there's a special session between now and then　-- that the $5 billion is available. It could be somewhere toward the end of the session. Assuming it's available, would you change the amount that you were putting into maintenance?

MR. BASS: If there were more money, if there's more than $28.2 billion available, is that your question?

MR. HOLMES: Yes.

MR. BASS: Ultimately when we go through and there's more than $28.2 billion available?

MR. HOLMES: Yes.

MR. BASS: Ultimately, that would be, obviously, again a decision for the commission to make in December. I certainly think　--

MR. HOLMES: I'm talking about the staff recommendation.

MR. BASS: 　-- the staff recommendation would be yes, to put the next money that comes in, as one member of the staff, would be directed back towards maintenance.

MR. HOLMES: All of it?

MR. BASS: I can only speak for one member of the staff.

(General laughter.)

MR. SIMMONS: Good morning. Steve Simmons, deputy executive director of the Texas Department of Transportation.

I did want to kind of address this a little bit because you're right, we need to start planning now for what if that $5 billion comes, and we are working right now to develop a plan to reach out and figure out how folks think it would be best to divide up that $5 billion and a management plan on how we would focus on a program to select projects and then see that they come through on schedule and on budget. So we've passed some stuff out to your staff and asked them to share with you about how we move forward with that.

But that's going to be one of the critical things is how we determine, if we should get that money, how it is divided up. We believe we need to backfill into the maintenance and we need to see if we can't meet some of the other commitments when it comes to mobility. But the commission will be looking to the legislature, we'll be looking to the MPOs on how to move that $5 billion program, if it should come about.

MS. ANDRADE: Thank you. Commissioner Houghton.

MR. HOUGHTON: Philosophically, John and James and Steve and staff, I don't think you let your house deteriorate and then go build a new garage. That's my philosophical approach to this, and not to have a $9 billion source of revenue to fill in　-- and I'm with the gentleman that spoke here earlier　-- then I think we're headed down　-- no pun intended　-- a very rocky road.

The other things that haven't been brought up here today is the reasons why we're here. I think we're here because our allocation system is broken, and I don't have any assurance that we're going to track these projects from here forward because what was not talked about here today is that the allocation going forward to those regions of the state that have underspent versus those regions of the state that have overspent. Those regions of the state that have not spent their allocation will only get 80 percent of their allocation and they'll get Mobility Fund dollars in 2004 dollars, and when you apply inflation over an eleven-year period, their purchasing power is less than that, maybe 40 percent allocation when you look at it in true dollars.

So I don't see how these regions get repatriated with real dollars and I think they're being disadvantaged, and that's El Paso, that's Dallas, that's Fort Worth, and Austin, primarily.

MR. BASS: What we plan to do with the UTP going forward, as far as managing the allocations, is to manage it different than what we've done in the past. In the past, as one district was able to advance projects by having it ready and perhaps another district had projects lagging because they were trying to save up their allocation to do a large project, or they ran into environmental issues or right of way issues, one district or other districts were able to advance their projects and use future money in order to deliver those projects sooner. There was no direct tracking of District X was able to advance because District Y was, in effect, providing $10- or $20 million to advance that project.

From a financial perspective, the term future money, if you're trying to spend it today, my head hurts. And so we're going to track and manage that differently, and if one district is moving ahead of their allocation, it will be delineated that they're moving forward because another district, in effect, is loaning them money, and then that other district will need to pay them back, and it will be for the districts or the MPOs to agree if I give you $10 million today, you need to give me something more than that in the future to address the inflationary effects.

MR. HOUGHTON: When you were discussing this, John, with other districts, did you let them know that other districts overspent their allocation by more than 100 percent, and they were underspent and now they're going to have to take an 80 percent allocation going forward? Did they understand that?

MR. BARTON: Our conversations with the districts and the district engineers, yes, sir, we did explain all that.

MR. HOUGHTON: The district engineers understood that, but the MPOs know it, did the mayors know it, did the county judges know it?

MR. BARTON: In the development of the Texas Metropolitan Mobility Plans that were done back in 2003-2004 time frame, then after that the Texas Urban Mobility plans, those kind of conversations occurred that the time value of money was important and these projects that did move forward were agreed upon by those metropolitan and urban MPOs to be moved forward on the schedule that they had. The impact of what we're facing today is that the future funding that was forecasted is now limited and we're having to go back and reevaluate how much money is available to each MPO.

But the time value of money has been something that's been discussed, and as James said, moving forward into the future, it's going to be imperative that we capture that more accurately and account for it.

MR. HOUGHTON: I tell you what, with the earlier agenda item that we talked about public input on the project selection was zero, I can't believe that the Metroplex area is willing to say we're going to get 80 percent of our allocation going forward and Fort Worth is willing to take 80 percent in today's dollars and apply that inflation over that period of time. I know El Paso, when you discuss it with the legislators that I've discussed it with in the last ten days had no clue about this issue. And when this gets fully vetted out into the system on what we're doing, I think we're going to have hell to pay that we are going to disenfranchise those folks because when you add the cost of doing business over that period of time, they're not getting their fully allocation, that 80 percent allocation, and to go back to 2004 on the TMF, when other communities have already spent their TMF at a different level.

I guess the issues here are two. Number one, you don't let your house rot to build something new　-- I have a philosophical difference with that　-- and it hasn't been fully discussed about the 80 percent allocation issue, because what you're doing, you're taking 2004 to 2010 and you get that 80 percent average. But if you look at 2004 to 2007, the go-go years when we had all the bonding, all the cash coming in, that's where the money was spent, and to bring that average down to put everybody at 80 percent, those folks that got their money first are in pretty good shape, those folks that didn't are further behind.

So Madame Chair, I can't support this UTP with those caveats, that we haven't fully explained in real dollars to the legislature and to the leadership　-- and this is part of our problem　-- these issues. And I think those communities ought to be first in line. I've seen the spread as to how you're going to allocate these dollars out over an eleven-year period, but if they have projects, if they're ready to go　-- and this is incumbent now on the MPOs to perform　-- if they're ready to go, they ought to be first in line.

MR. BARTON: And Amadeo, I'll address that quickly. That's something that wasn't discussed in the presentation today, but depending on the vote the commission makes today, the next activity for the department is to get with the MPOs and start moving forward with the development of how projects will be moved forward under whatever scenario you pick and depending on what is.

MR. HOUGHTON: Well, the problem with the scenario, John, is you have this 80 percent in here.

MS. ANDRADE: Amadeo, go ahead.

MR. SAENZ: But Commissioner, what you're approving today is a funding level. You could approve one funding level that says I'm putting all the money in maintenance and there's zero projects for mobility, so nobody gets any mobility projects.

MR. HOUGHTON: Correct.

MR. SAENZ: You could approve the Scenario C that we're moving money from maintenance into mobility, and then now we've got to work with the MPOs to allocate those monies within those funding levels.

MR. HOUGHTON: I understand, but what the recommendation on C and what has been discussed with me is these are the percentages that you will now get. It's 80 percent over 2004 to 2010 which is not an accurate depiction of really what happened. And you'll get your 100 percent of your TMF money over that eleven-year period at 2004 levels when others have spent at higher levels. I understand the C and that staff recommendation is C, but when you buy it, you get those percentages.

MR. SAENZ: Those were the assumptions that were made to calculate the value that went in C to put in Categories 2, 3 and 4. Next step is to work with the metropolitan planning organizations.

MR. HOUGHTON: I am understanding that, but the point is in your recommendation is the 80 percent over that period of time, and the 80 percent was calculated from 2004 to 2010.

MR. BARTON: 2004 to 2014.

MR. HOUGHTON: But the spending took place in 2004 to 2007, and the over and under that we keep looking at, I know who the overs are and who the unders are, and those folks spent more than 100 percent of their allocation. So you go back to the original issue is faith and confidence in the allocation system, and in my opinion, it's not working. Now, how are we going to track in the future　-- James, you talked about that　-- and dis