West Houston Association Archive

November 18, 2010

Sunset Commission Staff TxDOT Recommendations (PDF)

September 27, 2010 Update

TPC Approves for Public Comment  Downward Revised RTP

The Transportation Policy Council approved for comment a sharply curtailed Regional Transportation Plan with an expected $23.3 billion future funding shortfall from the State of Texas.  Read the summary comparison of the original to the revised plan here (PDF).

August 23, 2010

Texas Can Meet the Challenge to Transportation Funding

Houston is in an unprecedented vacuum of state highway funding. At the current funding levels, Houston will receive only $60 million per year for next 10 years for new capacity improvements in the region. This compares with averages of $653 million per year beginning in 2001.

As a result, major highway improvements will have to be significantly delayed or cancelled and the public will continue to experience growing congestion on area freeways.

Against this backdrop, the West Houston Association Board of Directors calls upon the State Legislature to enact motor fuel tax and registration fee increases at the state and local levels in order to return Houston’s roadway construction and maintenance program to levels that will allow projects to move forward and not be cut from the regional plan as is being contemplated.  The West Houston Association position statement below outlines the issue, its history and options to help solve this crisis.  (Download PDF File)

Position Statement on Funding Increases

The West Houston Association supports action by the 82^nd Texas Legislature to increase transportation revenue in order to assure the Houston Metro Area a minimum of $1.2 billion per year in new roadway and maintenance contract letting authority, the annual amount of state and federal funds needed to assure funding of programmed projects in the 2011-2014 Houston Metro Area Regional Transportation Improvement Plan[i].  Although this plan does not sufficiently address all the roadway construction needs of the region, it is a minimal acceptable level given the current congestion levels and population and employment growth of the Houston area.

To achieve $1.2 billion for Houston area projects the West Houston Association endorses any sufficient combination of statewide and local option motor fuel tax increase with indexing and vehicle registration fee increase.

Rationale

The Houston Metro Area will have $867 million per year less funding for roadway expansion and maintenance projects between 2011-2014 according to the current draft of the region’s Transportation Improvement Plan (TIP).  This translates into removal of needed projects from the TIP.  If the current revenue forecast by TxDOT is not reversed, the Houston Metro area  is projected to lose $37 billion through 2035 in state and federal transportation funding.  . 

This West Houston Association position recommends closing the gap in the Houston Metro area transportation plan by implementing any one or combination of increased existing and additional fees.  These fees can be a mix on statewide and local option fees.  The Association believes all are acceptable individually or in some combination sufficient to achieve the goal of providing a minimum total of $1.2 billion per year to the Houston region.  This level of contract letting will be consistent with the currently approved regional transportation plan.

Following are potential measures for increasing Houston transportation funding[ii] (Houston allocations are set at 19% of the statewide totals):

1.        Increase State Motor Fuel Tax from 20¢ per gallon

a.        Each 1¢ increase statewide nets an additional $111 million annually in transportation funding with a potential gain to the Houston area of $21 to 23 million.  75% of gross revenue goes to transportation; 25% of gross to public education.

b.       A 5¢ per gallon increase statewide would result in an additional $560 million per year with a Houston area gain of $105 to 115 million per year.

c.        A 10¢ per gallon local option motor fuel tax would result in $245 million per year in revenue in the 8 county TxDOT Houston District area—this calculation is based upon the district’s share of state vehicle registrations.

d.       Motor fuel consumption is on the decline and will eventually need to be substituted with an alternate means of capturing equivalent revenue, such as with a vehicle mileage fee.  However this could take years and many legislative sessions to refine.

2.        Indexing the Motor Fuel Tax—inflation has and will continue to erode the value of the 20¢ state motor fuel tax.  Indexing the fuel sales to inflation of 3% would accrue $395 million more statewide annually.  Houston’s share would be approximately $79 million annually.

3.        End Non-Education State Highway Fund Diversions—non-education diversions of the state motor fuel tax total $766 million per year in 2008 and 2009.  For 2010 and 2011 the diversions amount to $575 million per year with DPS being by far the largest at $562 million per year.  If these diversions stop, funds would be returned to highway construction and maintenance.  For the Houston area this would mean approximately an additional $110 million per year.

4.       Increase Vehicle Registration Fees

a.        A $25 increase in the average vehicle registration fee would generate $600 million annually with the Houston area realizing an additional $114 million annually.

b.       A $25.00 local registration fee applied in the Houston District would yield approximately $111 million annually. (with registrations in district of 4.47 million in 2008)

Background

The TxDOT funding crisis has been building for years.  Major construction projects such as Interstate 10 West and the sale of general revenue and highway fund backed bonds only masked the underlying problem of an unsustainable funding model.  These factors are affecting funding at the state level:

• Greater demand from increasing population and travel—in 25 years, Texas population increased 53%; vehicle miles of travel 103%. Future projections are for 27% greater population and 67% increase in vehicle miles.  New roadway capacity over the last 10 years has increased only 10.6%.

• Falling revenue from traditional user fees as fuel efficiency increases—FY 2009 state motor fuel tax revenues declined 2.17% from FY 2008.  FY 2010 revenue through January is off 1.25%.  The prior two years showed 2% and 1.7% increase in fuel tax revenues.
  
  Future vehicle fleet fuel efficiency will yield greater miles per gallon of fuel.  New federal fuel standards require car-makers’ fleets to reach a 35.5 per gallon average by 2016, 14 years sooner than previously required.  This will contribute to accelerated deterioration of fixed rate motor fuel tax revenue.

• State Transportation Debt financing totals $11.5 billion—as project costs rose and with limited cash flow from tax revenue, the state has turned to debt financing.  In 2009 TxDOT bond revenue/interest amounted to 19% of its total revenue.
  
  $3.1 billion in highway fund revenue bonds (with debt retired by State Highway Fund 6 revenue) have been issued by TxDOT with another $1.5 billion issued in July, 2010 and $1.4 billion issued in late 2011.  The debt service on these bonds will reach nearly $500 million each year through 2026 and decline for 5 years until paid off.
  
  The Texas Mobility Fund (TMF), authorized by voters in 2001 has resulted in the issue of another $6.3 billion in bonds.  In 2003 the legislature identified revenue from certain transportation related fees to be used to pay the debt service on these bonds.  The Comptroller certifies the amount of bonding authority based upon the requirement that projected revenue from these fees be 110% of debt service.  Debt service for TMF is currently $300 million per year and will increase yearly before reaching $500 million in 2039.
  
  Another $5 billion in bonds were approved by voters in 2007.  These so-called Proposition 12 Bonds are general revenue obligations of the state.  They are not retired from revenue otherwise constitutionally dedicated to transportation.  The legislature subsequently authorized $2.1 million in bonds.  The proceeds allow $1.85 billion for construction in 2010 and 2011.  TxDOT has developed an alternate letting scenario forecast for 2012 and 2013 funded by an additional $1.6 billion in Prop 12 funds.

• Uncertainty of Federal Highway Trust Fund—the federal government, from whom Texas received $2.7 billion in 2009 or 39% of the State Highway Fund revenue, is increasingly rescinding previously approved funding appropriations and obligation authority.  In 2008 TxDOT was hit with a $258 million rescission.  In Sept 2009 TxDOT was hit with another $742 million rescission.  Each results in delayed contract letting and an inability to plan.
  
  In addition, the federal transportation authorization bill has expired.  To keep the funding pipeline open, the federal government has resorted to a series of “continuing resolutions” some lasting only 30 days.  The current one is an 8 month continuing resolution.
  
  Recent federal stimulus funding has allowed approximately $2 billion in projects to be scheduled for construction in 2009 and 2010.

• Long term construction cost increases—Texas construction inflation increased 65% from 2002 to 2008 while decreasing 12% since the national economic downturn. [iii]

IMPACT ON THE HOUSTON AREA

The result of TxDOT funding crisis is hitting Houston and other areas of the state.  The multi-year regional transportation plan for the Houston area is a compendium of street, highway and transit projects planned by each local, state and federal agency.  It is predicated on available funding through 2035.  TxDOT recently reduced its estimates of available funds and resulting contract lettings in the Houston area through 2020 by 62% from $11.7 billion to $4.4 billion, a shortfall of $7.3 billion.

The regional plan cannot contain any projects for which there is not a reasonable chance of funds being available.  Because of this uncertainty, the following chart shows the restrictions in available funds for Houston areas projects compared to the previous 3 year period.

June 15, 2010

Texas Transportation Funding Crisis: A Summary of Presentations to WHA's Issues Forum Panel on Transportation Funding

Transportation funding is in crisis—congestion is on the rise; revenue shortfalls are relegating TxDOT to a highway maintenance organization; and badly needed transportation projects are being eliminated from Houston long range plans.
To help focus the community on possible solutions to this crisis, the West Houston Association hosted a timely Transportation Issues Forum featuring a panel of:

• State Senator Glenn Hegar,
• Harris County Judge Ed Emmett and
• Texas Transportation Commissioner Ned Holmes.

Association Board member Joe B. Allen of Allen Boone Humphries Robinson LLP acted as moderator.

Senator Hegar said he believed the Texas Legislature would not act to increase the motor fuels tax or other related fees in the next legislative session. He cited the shortfall in the state budget, projected to be as much as $18 billion, and other legislative priorities such as redistricting and public education. On the matter of local option fees it will be a hard sell to members. He mentioned that in previous sessions that addressed local options, legislators have been asked to vote for taxing authority without getting of the benefit because their districts lay outside metropolitan areas.

Overall, the Trans-Texas Corridor project “poisoned the well” among the public and the Legislature. Although attitudes are improving, TxDOT has a long way to go to restore confidence. As a result of the soured attitude, further public-private partnerships, a hallmark of the Trans-Texas Corridor effort, will be allowed only on a “case by case” basis

On TxDOT Sunset, the Senator discussed the current management audit and its recommendations which if implemented would affect many of the items cited by the Sunset Commission in its last evaluation of Transportation Department. Because of this the Senator as chairman of the Sunset Advisory Committee will wait until late 2010 to schedule additional Sunset hearings on TxDOT.

Judge Ed Emmett discussed Harris County’s toll road projects—completing Beltway 8 East and the Hardy Toll Road Connector to the CBD—which are state highway projects over which the county exercised primacy with the intent of completing expansion via toll financing. He also said the county was progressing on design of Grand Parkway Segments F1 & F2. However other projects—SH 288, Hempstead Toll Road—are advancing more slowly. Judge Emmett said that progress on these projects would require a form of public-private partnership.

The Judge said the US 290/Hempstead Tollroad is a very complex project. The Hempstead Tollroad is an extremely costly project and the reduced congestion benefit for the corridor would be more inexpensively achieved by providing relievers to US 290 such as Segment E of the Grand Parkway and the 290 Commuter Rail.  Judge Emmett added that the county was willing to consider giving up primacy on the Hempstead Toll Road (and possibly others) particularly if there is a commitment to use local engineers and contractors.

Transportation Commissioner Ned Holmes acknowledged the problems caused by the Trans-Texas Corridor program. He said that project was devised as a new way of developing transportation projects for the future of Texas. It did have problems and poisoned the relationship between TxDOT, the public and the Legislature. However, he said that program was initiated by the Transportation Commission and that they deserved the blame for its failures, not TxDOT staff.

Commissioner Holmes stated that the current TxDOT funding forecasts and state allocations result in the Houston District scheduled to receive new capacity project funding of only $589 million for 10 years, or about $60 million per year. This contrasts sharply with the recent years when the Houston District had annual funding well over $800 million for ‘03, ‘04 and ‘05 and averaged $653 million from 2001 to 2010.

The Commissioner added that to overcome this crisis will require a new funding formula and new, stable sources of revenue. We will overcome the challenge but “when” is the question? We are in real trouble and the business community will need to help give the Legislature “political cover” to step up and make the votes needed to overcome the funding problems.

March 2, 2010

"The Landscape Has Changed; Revenue is in Freefall"

Summary of Comments of Delvin Dennis, TxDOT Houston District Engineer

October 28, 2009 marked the first anniversary of the ribbon cutting of Interstate 10 West, a unique urban freeway reconstruction project:  21 urban miles, $2.6 billion total cost and a record-breaking 6 years of construction.  It has positively affected commute times and development in West Houston. 

However, the financial landscape for TxDOT has changed for the worse and revenue is in freefall.  The independent panel assembled by the Transportation Commission assessed annual statewide needs at $14 billion per year while only $2 to $3 billion is available for construction and design lettings.  (The Executive Summary & Full Report of the 2030 Committee is available at this link to the committee's website. (pdf))  The summary of needs is on a nearby chart.  In 2010, TxDOT is planning a construction letting of about $2.1 billion statewide (2010 obligation limit).  Houston's share is $266.9 million plus $145.3 million in stimulus funds and $31.4 million in Proposition 14 funds.

Report Shows Reduced Funding for Houston

A recent report from the Houston Transportation Policy Council focuses on the projected decrease in Houston lettings that will result from lower taxes and fees.  This report is the precursor of formal action by the TPC to be submitted to TxDOT in June 2010.  The bottom line is that we will need to pull $7 billion of highway projects out of the 2011-2020 period to reflect the lower state and federal funding.  Read the report at this link.  The following chart illustrates historical and forecasted lettings for the Houston region.

Dennis pointed out that Dallas Fort Worth, unlike Houston, has and will continue to have a massive roadway construction program partly because of their aggressive use of  tolls and public/private partnerships.  This level of activity is not imminent in Houston.

US 290 Corridor

US 290 Corridor environmental impact statement record of decision is expected in May of this year.  At that time work could commence if funds were available.  $350 million of Proposition 12 funds (supported by general revenue of the State of Texas) were allocated to design and build approximately one half of the US 290 Interstate 610 interchange.  Bids will be taken in May 2011.  This is a "down payment" on the total estimated cost of $2.4 billion for US 290 from I-610 to FM 2920.  An additional $2.2 billion is the estimated cost of the Corridor's Hempstead Managed Use Lanes from I-610 to the Grand Parkway.  The total cost of the Corridor is double that spent on Interstate 10 West. 

The outlook for overcoming the revenue decline is uncertain as the Texas Legislature will face a general budget deficit when it meets in January 2011.

Startling Results from the Texas 2030 Committee

"Texas eliminates private sector participation at our peril."--Transportation Commissioner Ned Holmes

Never have the demands on the roadway system in Texas been greater than they are today.   Continued growth in demand and continued erosion of the fundamental user fee based motor fuel tax have combined to heighten the frustrations of the citizens of Texas.  This transportation funding crisis threatens to turn TxDOT in to "maintenance only" and the motor fuels tax into a "maintenance fee." 

If the citizen's of Texas wish to have an expanded system to meet the needs of this growing state, they must provide the revenue to make it happen.

Basic funding requirements of maintenance--system preservation--represent a significant challenge.  In addition, the demands of growth and expansion of the statewide system are going unmet.  This current crisis is set against a backdrop of growing fiscal demands on Texas citizens and the current national economic crisis.

The independent 2030 Committee recently release a report stating that total project needs between 2009 and 2030 are $315 billion, or $14.3 billion annually.  Only $2 to $3 billion is available annually leaving a gap of $11 billion per year.

In this context, Ned Holmes, a member of the Texas Transportation Commission, addressed the West Houston Association Issues Forum in March.  Ned Holmes calls for utilizes all resources available to address this challenge.  In particular, he champions the use of leveraging available resources through the use of private sector investments. 

Ned Holmes full presentation is available at this link (pdf).

The Executive Summary & Full Report of the 2030 Committee is available at this link to the committee's website. (pdf)

Can Texas Urban Transportation Needs Be Met?

Are Recent Houston District Letting "Home Runs" the Norm?

TxDOT's Houston District headed by Gary Trietsch, is having a very successful 3 year period beginning with 2003's record $1 billion in contract lettings; following that in fiscal year 2004 with a $900 million plus letting and over $1 billion in lettings scheduled for the current fiscal year, 2005. 

These these record lettings are driven by several key projects like Interstate 10 and the new I-45 Galveston Causeway.  They mask, for now, a very real threat in Texas--a transportation funding gap.  In the 79th Legislative Session, several initiatives will be in play to try, at a minimum, to hold the line on diversions of funds and added unfunded responsibilities for TxDOT and at best add some more flexibility in funding highways.  The following outlines the overall needs and what happened to highway funding as a result of the 78th Legislature.

Governor's Business Council Reports Large Funding Need for Metropolitan Areas

The Governor's Business Council (link) reports that to just maintain present congestion levels in Houston, Dallas-Fort Worth, Austin and San Antonio for the next 25 years we need $179 billion or $38 billion more than currently programmed.  If we wish to reduce urban congestion to 1.15 on the Travel Time Index (see Texas Transportation Institute's 2004 Urban Mobility Study (Link) for a description of the Travel Time Index) we will need to spend $218 billion or $78 billion more than programmed.

State Funding for Transportation & Diversions to Other Activities

In fiscal year 2003, state levied fees and taxes on transportation related activities generated $6.4 billion. Of that amount only 46% or $2.9 billion found its way to the State Highway Fund for use by TxDOT. 

Source: Texas Urban Transportation Alliance

Many consider the difference in total receipts and net to the Highway Fund revenue diversions, charges for the use of the transportation system which do not benefit that system.  In addition to revenue diversions, there are "expense diversions", obligations of the Highway Fund for other than highway transportation purposes.  Examples of expense diversions are the maintenance of roads and parking lots at state prisons, parks and university grounds.  The largest expense diversion is the funding of the Department of Public Safety.  DPS diversions from the Highway Fund have grown from $109.6 million in 1987 to $445.6 million in FY 2004.  This growth is despite years of effort by numerous organizations promoting better transportation in the state.

The 78th Legislature did make significant changes to the state transportation funding structure, allowing greater flexibility to TxDOT allowing them to address growing demand in the state within a tight budget.  Specifically:

• HB588 added new tools and flexibility--For a summary of this bill click to the Texas Good Roads Association site    

• Funding for the Texas Mobility Fund--$230 million per year beginning in FY 2006

• $3 billion bond issue with debt financing from highway fund sources

• Point of motor fuel tax collection changes to reduce losses--an estimated $56 million in FY 04 and $113 million in FY 05

• The total additional resources added by the 78th is $519 million

However, the 78th Legislature also added obligations that siphon off $427 million.  These include:

• Various riders and method of finance changes--$69 million

• Increased funding from the Highway Fund to various agencies--$246 million

• Impacts of HB2292 and HB2847--$110 million

The net positive for Highway Fund from the 78th Legislature on an annualized basis: +$46 million. 

Whether or not we buy fully into the Business Council's estimate to maintain congestion levels for an additional $38 billion over 25 years, we should all agree that business as usual--a net annual increase of $46 million--will not get Texas or Texas cities where we all would like them to be.

Roger H. Hord, President, West Houston Association

HIGHWAY EXPENDITURES IN HOUSTON VS. DALLAS, 1992 to 2001

Houston averaged $615.58 million per year in state and federal highway construction and maintenance expenditures between 1992 and 2001 according to TxDOT.  This is 18.9% of total statewide expenditures.  By contrast, Dallas averaged $422.02 million or 13% during the same period.  Over this 10 year period, state and federal highway construction and maintenance expenditures totaled $32.53 billion.  Together, Dallas and Houston 32% of the statewide total.