Rick Perry's Texas Transportation Commission: Mouthpiece for private toll road consortiums
January 25, 2007
Texas Transportation Commission
A year ago, with the passage of the “Safe, Accountable, Flexible and Efficient Transportation Equity Act – A Legacy for Users” (SAFETEA-LU), the guiding principle of TxDOT’s federal legislative activities was “Building on Success.” This principle has notchanged; however, in order to ensure the future reliability of our state’s transportation infrastructure, we must now move forward and begin the process of educating ourpartners on the importance of both building on our past successes and forging new ones.
When Congress passed and the president signed SAFETEA-LU, federal highway, highway safety and transit programs were reauthorized through fiscal year 2009. What seemed far away at the time is now a mere 30 months down the road.
For more than two decades, the Texas Department of Transportation (TxDOT) has been actively engaged in federal legislative advocacy; however, our greatest challenge may yet be upon us. Experts in and out of the transportation industry predict that the funding levels authorized in SAFETEA-LU will exceed revenues to the Highway Trust Fund within the next few years, effectively rendering it bankrupt. The traditional modes of funding, operation and thinking are no longer working for our state or nation. TxDOT worked hard during the course of SAFETEA-LU to lay the groundwork for the use of new and innovative financing tools in transportation infrastructure delivery.
In many ways, TxDOT has already begun the education process through the many public meetings it holds throughout the state and the publications it distributes each month. During the 110th Congress, the department will work with members of Congress, the Bush administration and our other federal partners to not only protect the gains of SAFETEA-LU, but to strengthen them.
Contained in this report are brief synopses of our 2007, or post-SAFETEA-LU, federal priorities.
Questions regarding this report should be directed to Cindy Mueller (email@example.com) at 202/434-0230, Patrick Mullane (firstname.lastname@example.org)
at 202/434-0209, or Christopher Lippincott (email@example.com) at 512/463-9957 in the department’s Government and Business Enterprises Division, or in writing to:
125 East 11th Street, Austin, Texas 78701.
TEXAS TRANSPORTATION PRIORITIES
During the development of SAFETEA-LU, TxDOT and its partners —both public and private— fought hard to achieve advances in funding and policy flexibility. At the end of the day, success was achieved. Since the bill’s passage, we have worked, through the federal rulemaking process, to ensure congressional intent is maintained and that lawmakers understand that new laws are creating important new opportunities in Texas. As we move into the new 110th Congress, it is absolutely critical that we further our successes.
The following is an overview of broad policy issues. None of these issues can be considered new, but they continue to be important to the future of our state’s transportation infrastructure delivery system. TxDOT strongly advocated for and achieved success on many of these items during the passage of SAFETEA-LU. Other items, such as Aviation Reauthorization and the Water Resource Development Act (WRDA), are an element of timing. All of the issues in one way or another reflect the department’s commitment to achieving its five core goals of reducing congestion, enhancing safety, expanding economic opportunity, improving air quality, andincreasing the value of transportation assets.
IMPROVED FUNDING FLEXIBILITY
When looking into the future and exploring possibilities for funding Texas’ transportation infrastructure, the watchword is “flexibility.”
TxDOT has always been a leader in the nation’s transportation community. Legislative successes in SAFETEA-LU and at the state level have put Texas at the forefront when it comes to finding new and innovative financing. However, because of a traditional overreliance on fuel taxes, finding success has at times been challenging, making it even more apparent that the current system of funding transportation via motor fuel taxes is no longer sufficient.
In SAFETEA-LU, Congress called for the establishment of the National Surface Transportation Policy and Revenue Study Commission (Revenue Study Commission) to examine the nation’s surface transportation system, as well as alternative revenue sources to support the Highway Trust Fund (HTF). TxDOT believes that the Revenue Study Commission and Congress must upend traditional thinking and embrace innovation. We must strive to achieve a more results-driven funding process with clearly stated goals and objectives.
Over the years, countless studies and panels have been commissioned in an effort to address the future of the HTF and fuel taxation. It is our hope that, as a result of its work, the Revenue Study Commission will be able to develop a set of sound recommendations for Congress and the administration. For that to happen, the commission will need to keep meeting beyond their current deadline of July 1, 2007.
Transportation Secretary Mary Peters and others have called for the commission’s charge to be extended to year’s end. We support the proposed extension and remain ready to share details of the Texas experience with our federal partners.
Pursuing flexibility will allow Texas and other states to do more with the funds they have regardless of whether additional funds are made available for transportation projects. Formula programs would provide states with more certainty in funding. Since the formulas are established in authorization acts, the resulting distributions of apportionments to the states are known fairly soon after the legislation is enacted, and the formula programs would not be subjected to the earmarking process that dilute the impact of those funds.
Flexibility in federal funding and accountability from state transportation departments are not mutually exclusive. Federal funds sent to states with the proviso that certain goals be achieved with those funds will demand the responsibility and creativity that are the hallmarks of locally-driven problem-solving processes.
We Propose To:
• Work with the National Surface Transportation Policy and Revenue Commission and our other federal partners to ensure flexible and innovative federal funding for transportation infrastructure needs; and
• Support an amendment to federal law to extend the current tenure of the National Surface Transportation Policy and Revenue Study Commission.
• Support the expansion of goal-oriented formula or block grant funding for transportation.
TRANSPORTATION INFRASTRUCTURE INVESTMENT
Transportation is in need of additional sources of capital. With the passage of SAFETEA-LU, Congress expanded our ability to issue debt and eased a variety of associated restrictions, allowing for greater private-sector participation in transportation infrastructure.
We must now take the next step by urging Congress to allow for expanded means of investment such as equity capital. The use of equity capital for investment in transportation infrastructure is gaining attention. Pension funds, both public and private sector, have $7 billion of capital and comprise the largest potential source of investment for future transportation projects.
We Propose To:
• Work with Congress to amend federal law to allow equity capital to be utilized as a transportation investment source.
• Work with Congress to amend federal Tax Code to exempt partnership distributions or corporate dividends related to ownership of toll road from income taxation.
PRIVATE ACTIVITY BOND REFINEMENT
TxDOT’s successful advocacy for the expansion of the SAFETEA-LU Private Activity Bond (PAB) program to include highway, rail and intermodal projects has paved the way to raise more than $1.8 billion in private funds for work on State Highway (SH) 121 outside Dallas.
PABs are used to attract private investment for projects that have a distinct public benefit, such as water and sewage facilities, and public and low-income housing. The tax exemption increases the normally low value of the investor return, allowing public infrastructure projects to better compete for private investment dollars. Until now, airports and maritime ports were the only eligible transportation projects.
In adopting the new provisions, Congress did not provide guidance regarding federal limitations on the investment and expenditure of the revenue generated by issuance of these bonds. As a consequence, there are questions regarding arbitrage limitations, and limitations on right-of-way acquisition and use of PAB funds for the purchase of existing infrastructure within the given project.
These limitations could significantly limit the ability of departments of transportation to fully utilize PABs for projects such as SH 121. TxDOT will continue to work with its partners in both the legislative and regulatory arenas in an effort to find workable solutions to these issues.
We Propose To:
• Pursue legislative remedies to amend restricting provisions and remove limitations on PAB issuance.
• TxDOT will also work with the Department of the Treasury to adapt regulations to accommodate for the unique needs of highway, rail and intermodal projects under the PAB program.
TOLLING AUTHORITY EXPANSION
SAFETEA-LU recognized the importance of tolling and expanded the ability of state DOTs to utilize tolls on certain types of federally funded projects. It also created three new opportunities to utilize vehicle tolls as a means to finance interstate construction and/or reconstruction, reduce congestion and improve air quality.
TxDOT has been at the forefront of using all available federal tools, and we have seen other states follow our lead to meet their mobility needs. The Government Accountability Office released a report in June of 2006 that cited Texas (and Governor Perry specifically) as a leader in using tolls to reduce congestion. Tolling isn’t an easy or popular decision for states, but TxDOT is leading a national trend toward innovative financing.
Despite our successes in SAFETEA-LU to expand tolling options, federal law still severely curtails states’ ability to use tolling to meet their financing and mobility needs. History has shown that it is unlikely the next reauthorization will fully supplement a federal gas tax that has decreased in value for decades. For this reason, states cannot afford to be denied reasonable and efficient funding solutions, such as tolling. TxDOT will work to educate Congress of the importance to include new, innovative federal funding resources in the next reauthorization bill.
We Propose To:
• Reduce restrictions on tolling programs and remove their pilot project status to give states, such as Texas, as many opportunities as possible for new funding alternatives; and
• Authorize states to implement interstate tolling options beyond current SAFETEA-LU pilot programs and allow toll revenues from toll financed facilities to be used for other critical system needs; and
• Allow states to “buy back” or reimburse the federal government for its share of investment in interstate segments.
SAFTEA-LU amended federal law to allow for the use of “design-build,” an innovative method of project delivery that combines the design and construction of a toll project into one contract rather than the traditional “design-bid-build” method. FHWA opened its rulemaking process during the summer of 2006 to amend design-build contracting provisions. Unfortunately, elements of the proposed rules did not follow congressional intent in some regards. TxDOT worked closely with its partner states and associations and submitted comments detailing its concerns with the draft, and we will work actively with U.S. DOT and our partners to create the appropriate rules.
We Propose To:
• Work with our federal partners to ensure that final administrative rules follow legislative intent and do not impose more cumbersome restrictions on the design-build process.
AUTHORITY TO PURCHASE FEDERAL CONTRACTING DOLLARS
Finally, because of issues related to matching earmarks to transportation plans, DOTs often run the risk of their contract authority lapsing. At other times, states’ contract authority can lapse because they do not have sufficient non-federal funds to match these dollars. TxDOT believes states that have available non-federal funds should be able to provide financial assistance to other states by purchasing their unused contract authority (e.g. demonstration projects, surface transportation program, safety, bridges, etc.).
We Propose To:
• Amend federal law to provide a state authorization to purchase unused federal contract authority from other state departments of transportation prior to the lapse date.
Currently, each state DOT is required to set aside 10 percent of its federal Surface Transportation Program formula funds for use on transportation enhancement projects such as hike-and-bike trails, education, beautification, and historical preservation. With the passage of SAFETEA-LU, Congress dedicated over $333 million of Texas’ federal funding to the Transportation Enhancement Program. While this program is important, its lack of flexibility severely hampers the ability of state DOTs to maximize federal funds to meet more pressing mobility needs, such as highway construction and maintenance for congestion relief and safety. A review of other states found DOTs exercising little creativity or flexibility with their enhancement dollars. The Enhancement Program would benefit from provisions that more clearly support using those funds to support states’ mobility needs.
We Propose To:
• Amend federal law to allow state DOTs greater flexibility in their use of enhancement funding.
DEMONSTRATION PROJECT REFORM
While well intended, demonstration projects, or “earmarks” as they are more commonly known, can create significant financial problems for state and local entities. This issue is particularly evident in authorization legislation such as SAFETEA-LU, yet can also be seen in annual appropriation processes. In SAFETEA-LU, a sum of over $669 million was earmarked for highway-related transportation projects throughout the State of Texas. While this may seem like a substantial and useful sum, approximately a third of the total dollar amount was designated for projects that had not been approved via a local or regional planning process. Furthermore, authorization bill earmarks do not bring additional funds to the state. As a consequence, communities throughout the state have to "rob Peter to pay Paul." Mobility projects that have been approved for funding by local officials must be moved off priority lists so that funding can be reallocated in an effort to fully fund the newly authorized demonstration projects. These local entities, working with TxDOT, must make the agonizing choice about which approved high- priority projects will lose funds to underfunded, lower priority demonstration projects.
This issue is neither new, nor isolated to Texas. DOTs throughout the nation are struggling with how best to address this issue. TxDOT will continue to work with the Texas Congressional Delegation, and regional and local governmental entities in an effort to ensure that that funding appropriated for projects throughout Texas can beutilized in the most efficient manner possible.
We Propose To:
• Seeking further public input to formulate a Commission position.
FEDERAL AVIATION REAUTHORIZATION
General aviation plays a vital role in Texas and supports local economies. It is a necessary access link to business and industry throughout the state. In addition to access benefits, the state’s general aviation industry has an annual impact of over $5.9 billion. As a participant in the Federal Aviation Administration’s (FAA) State Block Grant Program since 1993, TxDOT is responsible for taking the lead in carrying out the state’s Airport Improvement Program (AIP) for all reliever and non-reliever general aviation airports in Texas. As such, TxDOT supports a stable, reliably funded federal Airport Improvement Program.
VISION 100, or the Century of Aviation Authorization Act, expires on September 30, 2007. As Congress begins work on the aviation authorization bill, TxDOT will be educating members and emphasizing the need for a more stable source of funding for general aviation and opposing any efforts to divert funding from the Airport Improvement Program. As airport congestion continues to grow, providing air service to smaller communities will become an even greater issue.
As previously discussed, demonstration projects can be a challenge for Block Grant states such as Texas. These states do not always receive discretionary funding from the FAA to for congressionally designated AIP demonstration projects, requiring them to work with local communities to reallocate funding from one project to another.
We Propose To:
• Work with Congress and our other federal partners through theaviation reauthorization process to ensure and protect a stable Airport Improvement Program funding source; and
• Work with Congress and FAA to ease discretionary funding restrictions placed on Block Grant states in receipt of AIP demonstration projects.
WATER RESOURCES DEVELOPMENT ACT
A Water Resources Development Act (WRDA) reauthorization has not been passed by both houses of Congress since the Act expired over four years ago in 2002. The most recent reauthorization report proposal passed both the House and Senate; however, the conference failed to reach consensus in the final days of the 109th Congress.
WRDA reauthorizations are traditionally project-driven processes. As in the past, TxDOT will provide key legislators with a list of projects from throughout the state that have been deemed in need of funding by our local and regional partners.
TxDOT’s greatest concern in passage of WRDA is the establishment of a more stable source of funding for the continued operation and maintenance of the Gulf Intracoastal Waterway.
We Propose To:
• Work with Congress to ensure a more stable source of funding for the continued operation and maintenance of the Gulf Intracoastal Waterway.
With the passage of SAFETEA-LU, public transportation received an increase in federal funding. However, even with the increase, the gap between available funding and the operating and capital needs of the state’s transit providers continues to grow. Operators have found themselves in a position of having to trade off critical investments for short- term operating expenditures. We must continue to work with Members of Congress and the Federal Transit Administration (FTA) to explore alternative funding methods to bridge this ever-growing gap.
Earlier in this document, we stated that earmarks do not help the highway funding big picture. Transit can be a different story. With limited budgets that often cannot cover routine maintenance, much less new vehicles, Texas’ rural and small urban transit providers are searching for ways to fund their programmatic needs. As individual units, these small providers simply do not have the ability to actively pursue discretionary funding for much needed capital equipment; however, as a collected group they are much more powerful. We believe the pursuit of a “statewide” earmark for transit vehicles is both worthy and important, and will continue to work with our state’s transit providers and the Texas Transit Association to achieve this goal.
To further expand the impact of a statewide earmark, we are researching the possibility of creating “Regional Maintenance Facilities” throughout the state. Regional maintenance facilities would relieve local providers of many of their maintenance and training costs and focus funding in a manner that could provide the maximum benefit possible.
The FTA is now in the process of proposing and promulgating new administrative rules based on actions from SAFETEA-LU. Just recently, TxDOT submitted comments expressing our concerns and suggestions to the FTA regarding their proposals for the new Job Access and Reverse Commute, New Freedom and Elderly Individuals and Individuals with Disabilities Programs. We will continue to do the same as the FTA works through their post-SAFETEA-LU rulemaking processes.
We Propose To:
• Work with the Texas Congressional Delegation to pursue a statewide transit earmark during the annual appropriations process.
• Research the concept of Regional Maintenance Facilities to focus limited funds and relieve local providers of budget-draining maintenance costs.
• Continue to monitor FTA’s post-SAFETEA-LU rulemaking and work to ensure TxDOT’s policy positions/comments are taken into consideration in these processes.
RAIL RELOCATION AND IMPROVEMENTS
In order to mitigate the adverse effects of rail traffic on safety, motor vehicle flow or community quality of life, SAFETEA-LU established a grant program to authorize $350 million per year for local rail relocation and improvement projects. Although the program has not yet been funded, TxDOT will strongly encourage Congress on the need to fund not only the existing SAFETEA-LU authorization, but also to expand innovative financing options to include giving states the ability to use surface transportation funds for the acquisition or relocation of rail lines and facilities. Federal support is critical to meet the state’s approximately $15 billion in rail relocation and improvement needs.
We Propose To:
• Work with members of Congress to ensure a maximum level of funding is appropriated to the state to assist with meeting its rail relocation and improvement needs.
• Amend Chapter 3 of Title 23 to allow states to use surface transportation funds for the acquisition and/or relocation of passenger or freight rail lines and facilities.
TxDOT is committed to working with our state and federal partners to expedite commercial and private vehicle flow through our ports while still doing our part to ensure safe and secure borders. TxDOT does not view those goals as mutually exclusive. The Corridor/Border Program was restructured in SAFETEA-LU by dividing it and making the border portion a formula program. This restructuring has greatly benefited the State of Texas. The new formula program directs funding to U.S. border states for the promotion and facilitation of trade across U.S. borders, as was originally intended.
Texas has the most ports of entry and the longest contiguous U.S.-international border. As such, there is a great need for these funds in Texas and the new formula program acknowledges this need.
Unfortunately, funding alone will not solve all the mobility problems along the Texas/Mexico border. TxDOT will continue work with its federal partners, including Federal Motor Carrier Administration and Homeland Security’s Customs and Border Patrol to develop safe and efficient border crossing facilities for the movement of people and freight across our international border.
We Propose To:
• Work with federal partners to identify and employ best methods for expediting commercial and private vehicle flow through our ports of entry while ensuring a maximum level of safety and security.
© 2007 Texas Department of Transportation: