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June 8, 2012 Special Meeting Transcript

Texas Department of Transportation Commission Special Meeting

Ric Williamson Hearing Room
Dewitt Greer Building
125 East 11th Street
Austin, Texas 78701-2483

Tuesday, June 8, 2010


Deirdre Delisi, Chair
Ted Houghton, Jr.
Ned S. Holmes
Fred Underwood
William Meadows


Amadeo Saenz, Executive Director
Steve Simmons, Deputy Executive Director
Bob Jackson, General Counsel
Roger Polson, Executive Assistant to the
Deputy Executive Director


MR. HOUGHTON: Good morning. It is 9:05 and I call this special meeting of the Transportation Commission to order. Note for the record, public notice of this meeting, containing all items on the agenda, was filed with the Office of the Secretary of State at 3:05 p.m. on May 28, 2010.

Before we begin, as customary, would you please take your cell phone and other communication devices and put them in the off or silent mode.

This special meeting was called primarily to further discuss the Grant Thornton management and organization review which was presented to the commission at last month's meeting. There are a further few items which we will address first; then we will have the Grant Thornton discussion. I also expect the commission will meet in executive session later today after the staff's presentation on Grant Thornton. We will accept public comment that is relevant to the posted agenda items but we will not have an open comment period at the end of this meeting.

To comment on any agenda item -- it's a yellow card like this one, and you can fill it out at the back of the room. We will limit each speaker to three minutes.

Before we begin the agenda today, as customary, we look for comments from my fellow commissioners.

Any comments?

(No response.)

MR. HOUGHTON: If not, we'll move on. And here she comes -- I've already done the heavy lifting. Happy Birthday, Madam Chair. We're done.

MS. DELISI: You're not going to sing?

MR. HOUGHTON: We're going to sing. Do you want me to sing? Would you help me? Please assist me.

MS. DELISI: I want your microphone on.

MR. HOUGHTON: You want my microphone on.

MR. HOLMES: On your knee.

MR. HOUGHTON: No, that's the other Ted that she is married to does that, not me. Please help me.

(General laughter; pause to sing Happy Birthday; applause.)

MS. DELISI: Thank you very much. Are the minutes going to reflect that you sang Happy Birthday?

MR. HOUGHTON: Duly noted.

MS. DELISI: Amadeo, it's all yours.

MR. SAENZ: Happy Birthday, Madam Chair.

The first item on today's agenda is a discussion about the new federal grant program being called TIGER II. We had a preliminary discussion last month, and Jim Randall will come up today to do some follow-up with some additional information.

So Jim, I turn it over to you.

MR. RANDALL: Thank you. Jim Randall with the Planning and Programming Division. Talk about a hard act to follow but I'll carry on.

At your last workshop on May 26, Mr. Barton led a discussion on the TIGER II Discretionary Grant Program. For a quick review, the US DOT is authorized to award $600 million in discretionary grants pursuant to the federal FY 2010 Appropriations Act. Funds will be awarded on a competitive basis for projects that will have significant impact on the nation, a metropolitan area, or a region. No more than $150 million can be awarded to any single state or $200 million with a multi-state involvement.

Per Mr. Barton's direction, the Transportation Planning and Programming Division and the Rail Division contacted the ports and rail companies to determine interest in this discretionary program. Ten projects were received and presented to a project selection task force made up of Mr. Roy Gilyard with the El Paso MPO, Mr. Tom Niskala with the Corpus Christi MPO, Ms. Melba Owen with the Midland-Odessa MPO, John Roby representing the Texas Ports Association, Dennis Kearns representing the Texas Rail Association, and Doug Allen who represented the Texas Transit Association, and Serenda Mora who helped him in our discussions.

The task force convened on June 3 to discuss and prioritize projects. As you may recall, the US DOT will consider the following criteria in the selection of a project: state of good repair, economic competitiveness, livability, sustainability, safety, job creation and economic stimulus, innovation and partnerships. The task force adopted the same approach in their evaluation.

The list of projects shown in your briefing book represents the projects provided to TxDOT from the ports and rail companies and are listed in order of their prioritization. There are seven rail projects, two port projects, and one rail-port project. The projects total approximately $205 million in grant requests.

Today we're seeking your direction on the submission of candidate projects. For example, would you prefer that the department submit the entire list of projects, limit the submission to a specific dollar figure, or would you rather take a more focused approach on the top two or three? Please keep in mind the pre-application deadline to submit is July 16. Based on past experience, the cost figures provided are preliminary in nature and may change in both pre-application and application phases. Such cost changes might significantly impact cost benefit analysis as well as local funding ability.

Bill Glavin is here with me today with the Rail Division. If you have any specific questions about these projects, we can address them at this time.

MS. DELISI: What's the total funding request?

MR. RANDALL: $205.3 million.

MR. MEADOWS: I have just a question on the environmental clearance status of each of these projects, some still show pending. I'm just trying to figure out which of those, or are any of those not going to meet base criteria in terms of shovel-ready which I assume is a criterion by which these are judged?

MR. RANDALL: There's three thresholds they'll be looking at: first is the project, is it an eligible project; number two, is the NEPA substantially complete; and three, is the local matching funds or commitment identified in the application?.

Now, in the June 1 notification from the Federal Register, they indicated that there could be a reasonable justification that you're not complete with your NEPA projects because you weren't expecting that these federal funds would be available so you haven't started your NEPA process yet, so that is a justification to put in your application that you will be working on your NEPA.

MR. MEADOWS: I'm just trying to work through a process by which we focus on the projects. Every one of these projects is important, but my sense of it is that if we focus our attention and effort on a handful of projects, and I don't know if that number is ten, two, one, three -- whatever that number is, that we are more likely to have a better yield. I mean, I don't know if that's true or not, but just intuitively you'd think that you would reach that conclusion. So if we go through these, if there are any that the environmental status poses an obstacle to that project moving ahead, we ought to figure out how to move some of these aside and really focus on those that are most likely to be candidates that would receive funding.

MR. RANDALL: Okay, sir. If you'll look on your list, there's two projects that the status indicates they have not started on them, the rest of them they're either in the planning or pending or even had approval.

MR. HOUGHTON: But what does that mean, pending?

MR. MEADOWS: Yes, I don't know what it means.

MR. HOUGHTON: What does pending mean? When is the award of this grant?

MR. RANDALL: The grants are to be submitted by August 23, 2010; the award will be sometime after September 2010.

MR. HOUGHTON: Sometime after, we don't know when after.

MR. RANDALL: No, sir.

MR. HOUGHTON: So I'll just pick on North Texas since it's Commissioner Meadows' area. We've got Tower 55, it's pending; do we know the environmental status will be cleared by the time the award could be made?

MR. RANDALL: I'm going to have to call Mr. Glavin up here and see if he has that. He's right behind me.

MR. HOLMES: Well, there's a follow-on question to that. Does the environmental have to be cleared before the award is given, or is it given subject to?

MR. RANDALL: You have to give an indication how far along you are on your NEPA process. Like I said, in the rules they indicated they understand that not all the projects have even begun their NEPA because there wasn't an anticipation that these funds would be available.

MR. HOUGHTON: So shovel-ready is not then a criteria if you don't have your NEPA.

MR. RANDALL: Evidently they'll take that into consideration that you won't have your NEPA because of, again, the announcement of the TIGER II Grant. For example, one of the port projects, they weren't even aware TIGER II was out there until we notified them that this is a process, so they do have a port plan but they haven't even started their NEPA process because they weren't aware that the TIGER II funding grants were out there available to be used.

MS. DELISI: And don't we have longer to spend this money than we would have under TIGER I?

MR. RANDALL: September, I believe, 2012, is when it has to be obligated.

MR. GLAVIN: For the record, I'm Bill Glavin, director of the Rail Division of the Texas Department of Transportation.

Regarding Tower 55, the NEPA process is in progress, it has been in progress when it was submitted in the first round of TIGER and also when it was submitted in the High Speed and Intercity Passenger Rail program of last year. The work has not ceased on it; it has continued, and as a matter of fact, we're having a meeting with the BNSF on Thursday to discuss continuing the progress of the NEPA process. We expect that that will be in place pending the award.

The other rail projects that are on there, since it's typically rehab and renewal, fall under cat ex, categorical exclusion.

MR. MEADOWS: Bill, I don't know if you're the one to try to answer this question, but I think the question before us is should we be, the State of Texas be the applicant for any or all of these projects. Is that correct?

MR. GLAVIN: That is correct, sir.

MR. MEADOWS: I'm wondering in TIGER I, through the TIGER I process, most, if not all of these projects, actually did apply. Is that correct?

MR. GLAVIN: I'd have to do a specific count, but at least six of them did.

MR. MEADOWS: And in those instances, we were not the applicant but the local entity actually was the applicant. Is that correct?

MR. GLAVIN: That is correct.

MR. MEADOWS: Now, we're assuming that having the State of Texas be the applicant strengthens the application in some way, but I'm not sure that's true. In fact, what we saw in TIGER I, there were several recipients of TIGER I funds in the State of Texas where we weren't the applicant and it was a local entity that was the applicant. Do we know, is this being presumptuous on our part to assume that these entities would actually want us to be the applicant? Would Brownsville Navigation District rather just go ahead and apply on their own?

MR. GLAVIN: No. These particular projects that were advanced were ones that they specifically wanted TxDOT to progress. There are other projects, like in the Gulf Coast Rail District, that they will progress through the City of Houston; there are other projects, for example, the Union Pacific, that is progressing in other states and did not want to dilute that with additional applications here in Texas. And judging by the history of TIGER I, and specifically of TIGER I, the applicant being the state department of transportation strengthened it and heightened its awareness in Washington and in the approval process.

MR. MEADOWS: Okay. Well, that's helpful to me. Then we have a couple of choices. If we're supposed to make a decision as to how to proceed today, you could either make application on behalf of all ten of these, or in some way or other employ some what is going to obviously appear to be an arbitrary selection process by which we narrow it down, and I don't know the answer. I'm comfortable making an application for all ten, but I don't know how my colleagues feel about that.

MR. HOLMES: Have each one of these entities asked TxDOT to make application on their behalf?

MR. GLAVIN: Yes. In fact, they filled out the preliminary nomination form for us.

MR. HOLMES: And Bill, were there additional projects that were requested of TxDOT that did not make this list?

MR. GLAVIN: No, there were not. We are forwarding all of the projects that came in to the commission for evaluation.

MR. HOLMES: And the workload required to submit these applications, is that something that is internal to TxDOT, or would the Gulf Coast or Brownsville or Corpus, et cetera work on those?

MR. GLAVIN: They would work on them as well, but what we would do is bring them into a standardization for the cost benefit analysis. For example, because right now, the analyses were each done locally and we're not sure of how they interconnect, we want to put forth a uniform application on each of the proposals that we would progress.

MR. HOLMES: And do we have the manpower to handle that workload between now and when did you say, August?

MR. GLAVIN: The pre-application is due in July with the final application in August, and we believe we do, especially being backed up by the nominating entities.

MR. HOLMES: And so an important part of that workload would be shared by the nominating entities?

MR. GLAVIN: That is correct, sir.

MR. HOLMES: Then I tend to agree with Commissioner Meadows.

MS. DELISI: Are there any other questions? We've got some people signed up to testify. Richard Stroot.

MR. STROOT: Good morning, Madam Chair, commissioners. I represent the Port of Corpus Christi and Port of Brownsville on our application for a TIGER II grant to upgrade bridges in South Texas.

I just want to thank the commission and the task force for moving forward on this project and helping support us, also recognizing the tremendous growth we see out of the truck-diversion study, increased rail, reduced highway maintenance, et cetera, and the economic growth in some severely economically depressed communities in that area.

So again, I just want to thank you for all your efforts, and if you have any questions, I'd be more than happy to answer anything.

MS. DELISI: Thank you.

And then I have two folks from Rail America, and if you don't mind, I'd like to call you up at the same time, Dave Arganbright and Scott Linn.

MR. LINN: First of all, let me thank all the commissioners for letting me briefly address you this morning. My name is Scott Linn; I'm the vice president of engineering for Rail America. We're the owners of the Dallas, Garland & Northeastern Railroad, the Texas Northeastern Railroad, and the Kiamichi Railroad. We're pleased that TxDOT has put together a selection committee to thoroughly vet the various rail and port projects that will be discussed here today.

The Sunbelt Regional Shortline Project includes improvements to the three rail lines I just mentioned which are located in Texas, southwest Arkansas and southeast Oklahoma. We believe that this project is unique in that it is the only one that is multi-regional in its scope. While many of the other projects will have impacts on the region, this project will provide direct jobs and infrastructure improvements in three states.

This is important because the three main freight rail projects funded in the TIGER I, the CSX's National Gateway, Norfolk Southern's Crescent Corridor, and R.J. Corman's Appalachian regional shortline project, all included these infrastructure projects in multiple states. This is one of the key attributes to our Sunbelt project and why we feel it will compete very well.

We met with US DOT's policy office four weeks ago to review this project in detail. Becky Reyes, TxDOT's rep in D.C. accompanied us on this visit. We were encouraged by the meeting and the positive indications that we received on the scope of this project and the initial benefit cost analysis presented to them.

We agree with the selecting committee that Tower 55 should be ranked as the top project; however, we strongly believe that since TIGER II will have both rural and urban pots of money to allocate, and ours being a rural project, it will compete alongside Tower 55 and not against it. We have met with relevant Texas congressional members, and if the Sunbelt project is approved by the commission today, we are confident that we will receive letters of support from Congressman Hall, as well as many others.

We are committed to improving the unemployment numbers in North Texas. As such, we will encourage all contractors bidding on this work to hire local labor. We have seen federal funds benefit workers who temporarily relocate to a location to do some work and then eventually return to their permanent home states. Our railroad employees live and work in their communities and we want northern Texas to enjoy the long-term benefits of having our contractors use local labor so the multiplier effect will benefit this specific region.

The Sunbelt project is the highest ranked project that will be completed before December 2011 and we hope that you will take this into consideration when deciding which project to support. I thank you for your time and we hope that you will support the TIGER II application for the Sunbelt project since over 50 percent of the funding will be spent in the State of Texas, with the remainder going in Arkansas and Oklahoma. Thank you.

MR. ARGANBRIGHT: Good morning. I'll try not to repeat some of the things that Scott just mentioned to you.

Thank you, commissioners, for letting me briefly address you this morning as well. My name is Dave Arganbright, vice president of government affairs for Rail America.

I would, first of all, like to commend TxDOT for recently creating the Rail Division and appointing Bill Glavin as its director. We appreciate the recognition that railroads are an important partner in the continued growth and development of Texas. As Scott mentioned, your willingness to back port and rail projects in the TIGER II process is also appreciated.

I'm here to speak with you specifically today about the shortline railroad industry which was largely a creation of the Staggers Rail Act of 1980. This legislation which deregulated the railroad industry also allowed the larger Class I railroads to more efficiently sell or abandon track segments that no longer met their revenue requirements. Companies such as Rail America were created to preserve and protect services for shippers and communities that would have otherwise lost this access to the national rail system.

Although we have accomplished our mission today, the challenge which continues to plague us is that these line segments suffered decades of neglect and disinvestment before they were finally spun off to us. Although we regularly invest nearly 20 percent of our annual revenue back into our infrastructure each year, we are still challenged to do more than simply preserve the existing condition of the assets that were conveyed to us.

I would now like to reinforce some of the data that you have in the documents before you regarding the Sunbelt project. Let me mention these are very conservative numbers. We will ensure that 375,000 trucks continue to stay off the local highway system each year. This means that taxpayers will continue to save approximately $1.4 million annually in avoidable highway maintenance costs. More importantly, the completion of this project will immediately remove an additional 14,000 truck trips from the local highway system, and those are just customer projections generated from our initial meetings with them regarding the project, it does not include normal growth that you would expect to occur through increased capacity.

We will serve to remove 368 tons of nitrogen oxide, an additional 36,000 of carbon dioxide annually. These are the numbers that US DOT will value at $51 million over the next 20 years. The Sunbelt railroads will also save $2.9 million gallons of fuel each year by taking this freight off of the highway. This provides a transportation cost savings of $8.7 million a year that ultimately flows directly to the end consumer.

The shortline railroads operate in Collin, Denton and Rockwall Counties, all of which are currently in EPA non-attainment for eight-hour ozone. The Dallas, Garland & Northeastern has previously worked with the Texas Commission on Environmental Quality to procure two ultra low-emitting Genset locomotives for use in the greater Dallas area. We are committed to reducing our carbon footprint through the deployment of these new technologies.

We've received widespread customer and political support for our project. Our largest supportive customer in Texas is Lattimore Materials which currently has two large terminals in Melissa and Royce City. We have a history of working with the US DOT and we understand very clearly what a successful TIGER II application will need to look like and address. We have specifically designed and tailored the Sunbelt Regional Shortline project to be highly competitive in the rural category for port and rail projects. We believe we have a strong chance of success in this endeavor and encourage the commission to provide its full support in submitting this project.

Thank you very much for your time.

MS. DELISI: Thank you.

MR. MEADOWS: One last question, just a point of clarification. This list of ten projects that we're looking at -- we arrived at this list through a process that you described earlier; you described the participants that were part of the process which included people from outside the agency, representatives of each of the businesses and industry types were reflected and engaged, so I'm convinced it was a comprehensive process that really was a fair representation of what these issues are. My clarification, is are these ten listed by priority ranking?

MR. RANDALL: Yes, sir.

MR. MEADOWS: Okay. I think that's important for us to know that as we look at these ten, they're not numbered, but in fact, it's a priority ranking of projects by the committee, this comprehensive committee that reflected the interests of geographically the state, as well as business and industry types. So I think it's important for us to recognize that as we move forward.

MR. RANDALL: Yes, sir. And if you need to know like what will $150 million -- how many projects will that, of the top projects, I can give you that too.

MR. MEADOWS: That's all right.

MR. HOLMES: And Jim, just for edification, our ranking in terms of priority, will the federal government be required to follow our ranking, or will they rank it themselves?

MR. RANDALL: They'll rank it themselves. We just followed the selection criteria that they'll be looking at.

MR. HOLMES: And so there's not any specific allocation to Texas in any event. Right? And so Texas may get one; it may get none. There are other entities around the state that are making application as well. I think you mentioned Gulf Coast is applying through the City of Houston. Do we know of other entities that are applying and what the total applications for Texas might be?

MR. RANDALL: I'm not aware of any in the port realm. I don't know about in the rail, but basically, you've got to remember that the state cannot receive more than $150 million in projects, so that's our limiting factor right there.

MR. HOLMES: And won't receive less than zero.

MR. RANDALL: They could range from $10- to $200 million if you have a multi-state application.

MR. HOLMES: Do we have any idea what the total number of applications, the actual number of applications and the dollar value are that are going to be submitted from entities in Texas?

MR. RANDALL: I don't at this time; I just have what we concentrated on here and what we presented to you.

MR. HOLMES: We know this ten and we know that there are others. We just don't know what that dollar value is.

MR. RANDALL: Yes, sir, we're not aware. You've still got two other categories: you have the Highway/Bridge category; you also have the Public Transportation category, so other entities could be making application under that criteria.

MS. DELISI: Will we know once the pre-application period is over with?

MR. RANDALL: Yes, ma'am.

MS. DELISI: So we'll know in July.

Are there any other questions? I guess all you need is some direction from us.

MR. SAENZ: I think the direction that I saw is that we work with our partners and work on all ten and move them forward and, of course, we will find out more come the 16th of July when the pre-applications get turned in and we'll see what other applications are going to be vying for or competing for this funding at the federal level.

MR. RANDALL: Thank you.

MR. SAENZ: Thank you, Jim.

Agenda item number 2 deals with the Pass-Through Toll Program. Steve Simmons will make this presentation. As you know, commissioners, John today is in Amarillo; he presented the item last month, but he's in Amarillo at a Senate hearing so Steve will pinch hit for John.

MR. SIMMONS: Good morning, Madam Chair, and happy birthday, and commissioners, for the record, I'm Steve Simmons, and I was singing bass on the Happy Birthday song.

This minute order would authorize the executive director or his designee to add an actual cost provision on all pass-through toll agreements that were negotiated with those public entities whose proposals were selected by the commission under the February 26, 2009 Pass-Through Toll Program that have not already been executed. Specifically, this provision will base the pass-through toll reimbursements paid by the department on the actual bids received by the selected public entities for construction of the projects.

The department recommends these pass-through toll agreements be amended to contain a provision that limits the pass-through toll reimbursement obligation to the department's proportional share of the actual low bid award amount for labor and materials required for construction of the projects. The department's maximum reimbursement will be capped at 110 percent of its estimated total reimbursement amount.

The department will reimburse cost underruns up to a maximum of 10 percent of the estimated costs of construction, but that amount must either be expended on the same project or other mutually acceptable state highway projects located in the entity's jurisdiction. All other financial terms, including the reimbursement rate, minimum reimbursement amount per year and the maximum reimbursement amount per year, will stay the same.

The primary purpose of the Pass-Through Toll Program is to provide reimbursement to a local government for the development and construction of a specific facility on the state highway system. This enables the local government to advance a project that otherwise would take much longer to develop. A failure to make allowance for some cost overrun increases the risk to the local government, a failure to account for cost underruns could result in the diversion of very limited funding from other much needed transportation projects.

Staff recommends your approval of this minute order and I'll be happy to answer any questions, and if they are technical in nature, I'll be happy to bring up somebody that can help me answer the question.

MS. DELISI: Are there any questions for Steve? If there are no questions, then I'd like to call up Commissioner Andy Meyers.

MR. MEYERS: Chairman Delisi, commissioners, thank you for allowing me to speak today. My name is Andy Meyers. I'm a county commissioner in Fort Bend County.

Two weeks ago, Fulshear Mayor Tommy Kuykendahl, Commissioner Richard Morrison and I were here before you speaking against the then proposed minute order on pass-through funding agreement. I'm here today representing Fort Bend County to testify in favor of this particular minute order. We believe that the new proposed language does protect the state, as well as the local government, participants from unreasonable risk.

I'd like to acknowledge John Barton and the TxDOT staff for effectively wordsmithing a rather complex concept, and I'd particularly like to acknowledge and thank Commissioner Ned Holmes for his leadership in crafting and proposing this compromise. And frankly, Fort Bend County is ready to start widening FM 1093 so we're anxious to get a finalized agreement so that we can execute it and get started.

Thank you again for allowing me to testify, and I would urge you to please pass this minute order. And Madam Chair, happy birthday.

MS. DELISI: Thank you.

MR. MEYERS: Any questions?

MS. DELISI: Thank you.

Dick Kallerman.

MR. KALLERMAN: Thank you, commissioners. My name is Dick Kallerman; I'm with the state and local Sierra Club, and my job is to try and get some sense in transportation issues in the State of Texas.

In the pass-through tolling modification you're making this morning, it seems to me you're making a small change to a very troublesome program, and that's pass-through tolling which I don't agree with and the Sierra Club doesn't agree with, for financial reasons. You're promising local organizations who spend money on transportation projects that they'll be reimbursed in the future. The source of funds of TxDOT is very weak, as far as we can see. One source of funds is the gasoline tax and it hasn't been changed since, I don't know, 1992, and considering the experience in the last legislature, it doesn't appear it's going to be changed in the future.

The federal government has given money to the Texas Department of Transportation; the federal government is now $13 trillion in debt; the federal government must in the near future go into a serious austerity program. Other nations in the world -- Britain, Greece, Spain, and they're all in the same condition that the federal government is here.

The Texas Department of Transportation could probably borrow money but I don't know what bonding guarantee you could give to having those bonds paid off. There's been privatization of some road building; there's been toll roads. That's some places that income can come to TxDOT. But toll road bonds are going to be hard to sell today and they're going to be hard to sell in the future.

We just don't see where the money is coming from in the future to promise to pay back to the counties and cities and so forth that are spending their money today. We assume you've got some sources we don't know about, or you've got a rabbit in a hat you're going to pull out, but frankly, it kind of scares us that a lot of agencies in Texas are going to be stuck with a lot of transportation money spent that they're not going to be reimbursed for.

I'll be glad to answer any questions, although I'm not in any way an expert in this financing business so I don't know what I could say. But I appreciate you listening to me. Thank you very much.

MS. DELISI: Thank you very much.

MR. SIMMONS: If I might address the comments the previous speaker talked about. We are under a requirement in statute that requires us to spend a certain amount on the Pass-Through Toll Program each year so that's why we're moving forward with this call. In addition, Mr. Bass's forecast takes into account the future expenditures that we'll have to make on the pass-through tolls into our forecasts.

MR. HOUGHTON: Could I ask Bob Jackson a question? Bob, is it appropriate in a minute order to talk about assignment requiring a project manager to each and every one of these pass-through toll projects?

MR. JACKSON: I don't know if it would be for this particular minute order and with the way it was crafted.

MR. HOUGHTON: That's the question. Thanks.

I would encourage the administration to assign a project manager to each and every one of these projects and let us know the disposition thereof.

MR. SIMMONS: Yes, sir, and we have been thinking along those lines and have already started Mr. Casteel with our field operations to go through and start establishing a closer connection with all these pass-through toll projects.

MS. DELISI: If there are no more questions, is there a motion?

MR. HOLMES: So moved.


MS. DELISI: All in favor?

(A chorus of ayes.)

MS. DELISI: The motion passes.

MR. SIMMONS: Thank you, commissioners. I would like to -- again, I know Amadeo mentioned John Barton working real hard and I know the commissioner did also, but we also had J.D. Ewald working very hard on this, and I would be negligent if I didn't recognize J.D. and John for their hard work on this.

MR. SAENZ: Thank you, Steve.

Commission, agenda item number 3 deals with our Proposition 12 Bond Program and it's the approval of a work program that allows us to start some projects and do the engineering, and Mark Marek will present that minute order for us today.

MR. MAREK: For the record, my name is Mark Marek. I'm the director of the Design Division for TxDOT.

This minute order approves work to be performed in connection with highway improvement projects to be funded from the proceeds of general obligation bonds, notes and other public securities that may be issued to fund these projects, or what is referred to as Proposition 12 Bonds.

The Texas Legislature in House Bill 1 in the 81st Legislative Session, the first called session in 2009, enacted the enabling legislation for the Prop 12 Bonds. The department recently received approval from the Legislative Budget Board to expend $150 million in bond proceeds for engineering that will enable the development of highway improvement projects to reduce congestion on some of Texas' most congested corridors.

As directed by the commission, staff worked with the state's transportation partners to develop a list of highway improvement projects to be developed with these funds. This minute order would provide commission approval for the expenditure of the proceeds of Prop 12 Bonds to fund design consultant costs for these projects.

Staff recommends approval of this minute order.

MS. DELISI: Are there any questions?

Is there a motion?

MR. HOUGHTON: So moved.

MR. HOLMES: Second.

MS. DELISI: All in favor?

(A chorus of ayes.)

MS. DELISI: The motion passes.

MR. SAENZ: Thank you, Mark.

Agenda item number 4. Brian Ragland, Finance Division director, will present a State Infrastructure Bank final approval.

MR. RAGLAND: Thank you. Good morning. For the record, my name is Brian Ragland, director of the Finance Division.

This proposed minute order amends a previous final approval for a SIB loan to the Camino Real RMA, granted in December 2009 and amended in February of this year. The applicant has requested a reduction from $35 million to $30 million due to a reduction in scope of the project.

I will mention there are three contingencies in the minute order. First of all, an agreement between the City of El Paso and the RMA needs to be executed which transfers and pledges transportation reinvestment zone, or TRZ, revenues and specifies the city's commitment to pay the loan obligation if other repayment source prove insufficient. The second contingency is that the TRZ needs to be created. And then finally, a financial assessment must be submitted to the department that demonstrates the bonding capacity of the subject TRZ and the resulting sufficiency to secure the loan.

With that, staff recommends your adoption of this minute order.

MS. DELISI: Are there any questions?

MR. HOUGHTON: So moved.


MS. DELISI: All in favor?

(A chorus of ayes.)

MS. DELISI: The motion passes.

MR. RAGLAND: Thank you.

MR. SAENZ: Thank you, Brian.

Agenda item number 5, commissioners, deals with the award or rejection of a highway construction building project in the Bryan District, and Russel Lenz will present this minute order.

MR. LENZ: Good morning, Madam Chair, commissioners. For the record, I'm Russel Lenz, the director of the Construction Division.

Item 5 is for the consideration of the award or rejection of the department building construction contract for construction of the Bryan District headquarters, Brazos County Job Number 4033 that was let on May 12 of 2010. Eleven bids were received. After the analysis of the added alternates that were included in the bid process, the low bid was 1.72 percent over the engineer's estimate, and staff recommends award of this project.

Any questions?

MR. HOUGHTON: So moved.

MR. HOLMES: Second.

MS. DELISI: All in favor?

(A chorus of ayes.)

MS. DELISI: The motion passes.

MR. SAENZ: Thank you, Russel.

Commission, I'm going to go to the podium, but item number 6 will be a presentation from me on the Grant Thornton Management and Organizational Review Report and kind of the department's staff response. So I'll move over for the presentation.

Good morning, commissioners, Madam Chair. Thank you for the opportunity to respond to the Grant Thornton report. For the record, I am Amadeo Saenz, executive director of the Texas Department of Transportation.

First let me say that I appreciate the commission's leadership in conducting this review. I especially appreciate the level of involvement by Commissioners Underwood and Holmes for taking the lead on this review as members of the Subcommittee on Transparency.

Before I get into some of the recommendations in the report, I want to preface my remarks by reminding everyone that this is a very comprehensive review, an almost one-year undertaking that resulted in an over 600-page report, so my remarks this morning are going to concentrate really on the heart and soul of the report and I'm specifically talking about Section 5 of the report that made the recommendation summaries. And we still continue to review the report and we will provide additional update to the commission as we go through the different detailed chapters of the report. But if you have any questions today on any other sections, I will be happy to discuss those also with you or at any other time.

As you know, commissioners, we've had our fair share of audits in our history, and quite a few in the recent years, both internal audits and external audits, including the ongoing Sunset review process. Each one has made us look hard at the way that we do our business. The Grant Thornton report catalogs and adds clarity to a great deal of what has been discussed about TxDOT, what has been reported and what has been implemented, and it appears to do a good job of collecting and analyzing stakeholder expectations across a number of levels and in a manner that we haven't had done before. Given commission guidance for those activities you wish to implement, I believe the report can help us move from where we are to where we should be.

The department and transportation in general are undergoing transformations that might not always be under one direct control but which we should be planning for and also setting a good management plan for them. Funding is at the top of the list of those things under which we have no direct control. We've said over and over again, but it bears repeating, unless new funding sources are in place by 2012, no additional mobility projects will be added to the agency's plan. And it is also forecasted that the maintenance of our pavements will decline in quality in future years based on the fundings that have been identified as we move forward.

For a person who has dedicated his life to Texas transportation, increased congestion and poor quality roadways are hard pills to swallow. Every day I look at the agency and I think, how do we do something different to mitigate the funding issues that we face? Sometimes these are hard decisions and they're painful for me to implement as a leader, but in all cases, I do what needs to be done to keep our roads as safe as possible and in the best condition possible.

However, there are some things that we are in control of. There are some things which we should be able to recognize, recognize them sooner, and manage in order to adjust our operations to meet our customers' expectations. As we move forward, we must commit to doing a better job in this area.

Enterprise, adaptability and transparency are often sacrificed for the tasks at hand, and my management team and I have taken too many of those tasks when they would have been more appropriately delegated to staff, and a lot of times it's because we did not react quick enough so we're trying to put out a fire, you might say.

Clearly, the Grant Thornton report found important things that we must correct as an agency; it found some areas that we need to do a better job in, and I promise you that my team and I will make the changes that you direct. If the commission invests the same amount of time and the same amount of vigor in guiding the implementation as Grant Thornton did in creating the report, we can all anticipate a very positive outcome.

The report points out that we need to change our implementation-now ask-questions-later tendencies, and I understand that perception. I agree wholeheartedly with the statement that is in Part 1, Section 5 of the recommendation summary. It reads: "To be effective, as TxDOT undertakes implementation of many of the management and organizational review recommendations, it is important that people be provided consistent direction against a well thought-out plan."

Before I focus this morning on some of the changes that the Grant Thornton team has recommended, I want to review some of the efforts that we've undertaken, and I think that says that when change is necessary, we don't shy away from it. This is not to say that the Grant Thornton report is too little, too late, it is really quite the opposite. This reinforces that we still have a ways to go and we can make ourselves better.

For the past year or so, we have been making some important changes to make us a more modern, a more accountable, more transparent, and a more efficient agency. Right now we're updating our next Strategic Plan. This plan is being developed with public input, it lists some specific goals for TxDOT, some specific action steps that we need to take, and it gives us some definite performance measures and targets that we need to meet.

We regionalized the support operations of our districts, regionalizing them and consolidating some of our functions to stretch our state's limited dollars in a time when revenue was not at the levels we anticipated and when we had to cover some huge costs associated with Hurricane Ike. We acted to cover those shortfalls from our operational budget as much as possible so that the construction budget and private contracts would not be cut. We have moved too fast for comfort but we've moved with a purpose.

We also implemented some operational changes that were suggested by the Sunset Report, specifically those changes that would not require changes in law were implemented. The Sunset Report recommended that we develop and implement a public involvement policy that guides and encourages more meaningful public involvement. We're recruiting one of the top universities in the state to evaluate our current process and to give us suggestions and recommendations on how to make those improvements.

We are rewriting our project development rules with the help of an advisory committee that's made up of cities, counties, MPOs, transit agencies and toll authorities. Those draft rules require TxDOT to lay out criteria for project selection, to define the categories and the detail of a right of way plan and a detailed letting plan for projects that are going to be moving forward. These changes that we're making are some of the ideas outlined in the Grant Thornton report and the suggestions that they make will make this agency must better.

Some of the major themes that are included in the Grant Thornton. The Grant Thornton report noted major themes that will drive the overall success of the implementation, and I'd like to briefly comment on those.

The first one is leadership. The report mentions that senior leaders must accept that traditional ways of operation are not meeting expectations. The core group must provide the strategic vision for TxDOT so that we can move forward on a renewed path that motivates the workforce. I agree and I will lead the evolution of our agency to meet the transportation needs and challenges facing our state.

Strategic management and accountability. The report also states that the agency does not align activities to the mission nor, as the team suggests, do our strategic planning documents contain the substance they need or the foundational role for mission execution and performance review. I agree with this but only to a certain point. Over the last year the agency and the commission have set measurable goals. We've done this slowly and deliberately; we've done it also very publicly, and so far, as my memory goes, this is the first time in history that we have developed a Strategic Plan and have developed goals and measures and included accountability.

While we still have some work to do, I am confident that once that the commission formally adopts the agency's Strategic Plan later on this month, Mary Meyland and her team can move to the next step, and that step is to develop the enterprise-wide accountability through performance-based action plans that deliver the commission's desire and the department's desired outcomes. As we track our performance in these areas, we will be posting on the web to heighten even further our level of transparency and our level of accountability.

Also, as the commission is aware, John Barton is leading the statewide long-range transportation plan effort. It's been 16 years since the agency updated the state's transportation plan blueprint. Once that is complete in November, we can then calibrate our Strategic Plan, if it's necessary. We've made huge steps forward in this effort during the past two years by reconciling our Unified Transportation Program with the cash forecast by developing a long-range, category-specific forecast for future funding, allocating those to the districts and the MPOs, getting them to work together. The commission adopted those funding levels. The districts and the MPOs are now working to develop project-specific plans that will utilize those new forecasts to be incorporated into the statewide long-range transportation plan.

We must also improve the discipline by which we plan and implement change. These changes must be evaluated at the enterprise level, be guided by well-established best practices, underpinned with improved internal and external two-way and meaningful communications and approached from a portfolio standpoint, meaning that we weigh priorities and then align our resources appropriately, and I totally agree with that.

Our strategic planning efforts are laying the foundation for this. While we have trained our employees to be the best at their respective fields from a technical perspective, we must now focus on being better at planning for and implementing changes. By doing this, we'll be more effective in evolving into a transportation agency that the state needs.

Management. As the report mentions, our organizational structure can be complex. It's agreed, but frankly, there are some tasks that the agency performs that need to be decentralized, need to be done at the local level; there are some functions that need to be centralized, and we've been looking at those, and there are some functions that we have identified that can be done as a hybrid at the regional levels so that we can better use our resources.

I also recognize that this method can also put us at risk unnecessarily and most likely it keeps our costs higher than they should be -- in other words, there could be some hidden tax because of the way that we're operating. The Grant Thornton team provides some very good recommendations ranging from organizational feedback and performance expectations to cost viability and project management discipline. We can and should do a better job in the accountability of this department.

Drilling down to the next levels of the report, where we look at the different business processes, I'll cover them and then I'll conclude and open it up for questions.

In the area of transportation plan, design and build, as the report mentions, the transportation planning, designing and building parts of our mission are complex. Just getting a project from concept to concrete takes years and many years sometimes because there's so many steps that must be followed, many of them dictated by state or federal law. Following the process can be like being in a maze and that's why we've taken steps in recent years to move more of our planning procedures and look at our planning procedures. Putting the rules in Administrative Code begins to identify so that everybody knows what the process is and how projects will be

developed and managed.

We recognize that we can't build a transportation plan for this state in a vacuum. We also recognize that one transportation solution will not work for the entire state. We need to work with folks who use the transportation system and find out what they're looking for in it. That's why we're updating our long-range transportation plan and why we put together the public meetings at the top of the list to get more Texans involved in the development of these plans.

We've asked our districts, and particularly our district engineers, to spend more time out in their areas not just talking to Texans but listening to them as well. We work hand in hand with our metropolitan planning organizations to develop plans that local areas not only want but that they can get behind and support. And even with these efforts, I know that we can do a better job.

The planning rules the commission set out for public comment last month will go a long way to bringing clarity into our process. We can and we will do a better job of helping Texans understand the process; we can and will do a better job of bringing more stakeholders to the table because it's going to take all of us to resolve the transportation issues that we face.

The area of human resources and intelligent technology, IT. Some of the major and most far-reaching issues that Grant Thornton's report brought to the commission's attention, and to ours as well, is the need to make better use of our human resources and our information technology functions. The report was absolutely correct. Both of those roles are essential to our operation and need to be at the forefront of our tactical thinking and not added as an after-the-fact thought.

We need to hire employees that bring new ideas, new methods to our work. The recent hiring of Lisa Gregg as the East Regional director, Eric Gleason as our Public Transportation director, and Bill Glavin as our Rail Division director, are just some of the real-life examples of how valuable the non-institutionalized insight and fresh perspectives of persons new to the agency can be. And we need to make sure that we train all our existing employees in those areas and functions that make us a better transportation agency.

That said, I want to make sure that you, as well as our audience, know that I wake up every single morning proud to be associated with the men and women of the Texas Department of Transportation. They are creative; they are adaptable. They are the best the state has to offer. I cannot go far enough to make sure that the workplace and the tools are in place that will allow them to succeed at doing their jobs. I agree that our hiring process needs to be improved to ensure that we attract the most talented candidates and that the process must not favor one candidate over the other, and those changes need to be looked at and made.

We also need to make sure that our IT functions support and enhance our operations and our mission and vision, and that we use them to become more efficient, more effective, more accountable, more transparent.

In the area of procurement, the Grant Thornton report confirmed that we do a pretty good job in the procurement aspect of our business overall with respect to our letting activities and also the purchasing of material activities, but they recognize, as we do, that we have room to improve in the standardizing of our procurement of our negotiated contracts for professional services. In the professional service contract arena, we need to be more focused, more accountable. We need training and consistency in the procurement and management of these contracts. Additionally, they recommend that we need to have a comprehensive procurement database for these contracts capable of capturing, maintaining and reporting critical information and data that we can use as we improve the process.

Actually, this is really tied to some of the recommendations that are in the Sunset report. Areas that we've been working on to address by strengthening our oversight and accountability of our professional service contracts include primarily the areas of monitoring our contracts and moving these tasks over to the regional level. And while this is a step going in the direction that the recommendation makes, it does not mean that we're there already. I also recognize that we still have a long way to go and we're committed to making the changes needed to get the procurement process for professional services to be at the same level of proficiency as our letting and also our material purchasing.

The area of financial management, this issue was not addressed in detail in Chapter 5 but it is discussed throughout the report and it was also one of the focus areas that we looked at. It underpins everything else. If we can't manage effectively the funds provided to us, then we cannot expect the trust of the funds to follow. We've made mistakes in the past, and when I took over the agency, at the time everything was coming to a head.

Commissioners, this is at the top of my radar screen. I understand that this is an area where we must have checks and balances and a strong and deliberate oversight. We're making some strides -- I think everybody knows that, and we're working hand-in-hand with the Comptroller, but there are still some bridges that we need to cross and some improvements that we need to make.

In the area of communication, I could not agree more with what Grant Thornton's overall assessment is, that we need to do a better job in communicating with our external and internal stakeholders, and while I think we've made some strides in this arena over the past couple of years, I do acknowledge that we can do a much better job of quantifying what we hear, selecting the best possible methods, and building that input into our decisions.

We are a public agency; we answer to the citizens of Texas and to the legislature of this state. We exist to provide them with a transportation system that serves them. It is in our best interests to make sure that our communication efforts are two-way. Texans want to know what we're doing at this agency; they want to know how we're doing it and what we need to do to do it better. Frankly, we've not always been the best at that, but I know that we can get there.

Overall, I think the Grant Thornton recommendations follow some specific themes: TxDOT should plan strategically; we need to identify the goals, the standards and the measures; we need to follow a process that is designed to make us succeed. All of these are recommendations that can make a good agency an even better agency, and whatever changes you determine should be made, I know that we can make them. I'm looking forward to making our agency even better than what it is today and making it the best agency in the state.

I thank you and I'll be happy to answer any questions.

MR. UNDERWOOD: One quick comment, Amadeo. I appreciate your willingness to work and to make this organization better. I'd just like to remind everybody, don't get out in front of the commission on this.

MR. SAENZ: Totally understood. Really, we want to wait to see the recommendations that the commission wants to move forward; as we move forward, we want to work with the commission to identify and prioritize which are the ones that should move forward and see how they tie together so that we can have a systematic way to be able to implement them that we do not lose any ground. So we will work with the commission before anything is done.

MR. UNDERWOOD: Not work with it; don't get in front of the commission on this issue.

MR. SAENZ: Yes, sir.

MR. UNDERWOOD: Thank you.

MR. HOLMES: One quick comment. Amadeo, I appreciate the positive attitude that you've taken and that staff has taken in addressing issues that have been brought forward in this report. It's a very comprehensive report with a lot of suggestions and it's going to take time, effort and good will and hard work on the part of the commission and staff and others to kind of work through this. We appreciate your taking it as a positive and steps for improvement rather than being defensive; I think that's an important start.

MR. SAENZ: Thank you, sir, and we can always improve ourselves in what we do, and even as you put something in place, you always need to be able to measure to determine your accomplishing what the goal was and also look at are there better things that come in the future that make you even better, so that's just part of the planning process.

MS. DELISI: Thanks, Amadeo. I think the goal before us as a commission now is to figure out -- in the spirit of the Grant Thornton report. we have to plan how we're going to implement this, so these are the discussions that we need to have, and hopefully we'll have a plan and a process in place sooner rather than later to start the process of implementing, identifying and planning, coordinating so we can implement the change and manage the change in the best way. So that's, I think, our responsibility now that we have the report. We've heard from staff, so we have a significant responsibility to this agency and to the state to put together the plan for how we're going to implement it. It's not a small task and I recognize that.

Thank you for your input, Amadeo.

MR. SAENZ: Thank you.

MS. DELISI: That concludes the posted items on today's agenda, and now the commission will recess into an executive session under Section 551.074 of the Texas Administrative Code to conduct deliberations on the employment and duties of a person who would be responsible for implementing changes that result from the independent management review and organizational review of the department.

(Whereupon, at 10:09 a.m., the meeting was recessed, to reconvene following conclusion of the executive session.)

MS. DELISI: The meeting of the Texas Transportation Commission is reconvened. For the record, the time is 11:36 a.m. The commission has concluded its executive session. Is there any other business to come before the commission?


MS. DELISI: There being none, I will entertain a motion to adjourn.

MR. UNDERWOOD: So moved.

MR. MEADOWS: Second.

MS. DELISI: All in favor?

(A chorus of ayes.)

MS. DELISI: The motion passes.

Please note for the record that it is 11:36 a.m. and this meeting stands adjourned.

(Whereupon, at 11:36 a.m., the meeting was concluded.)


MEETING OF: Texas Transportation Commission
Special Meeting
LOCATION: Austin, Texas
DATE: June 8, 2010
I do hereby certify that the foregoing pages, numbers 1 through 53, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Nancy King before the Texas Transportation Commission.

(Transcriber) (Date)

On the Record Reporting, Inc.
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Austin, Texas 78731


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