West Houston Association Issues Brief

State Highway Funding

Highway Expenditures in Houston vs. Dallas

Houston and the Fair Share highway funding

The Texas Mobility Fund Constitutional Amendment, 2001

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.

User Fee or Tax	FY 2003 Receipts	Amount Going to Highway Fund	Percentage
State Motor Fuel Tax	$2.838 billion	$2.087 billion	74%
Motor Vehicle Sales & Use Tax	2.531 billion	0	0%
Motor Vehicle Registration Fee	803 million	789 million	98%
Motor Vehicle Rental Tax	149 million	0	0%
Motor Vehicle Certificates	50.3 million	18.1 million	36%
Special Vehicle Registration Fee	31.59 million	13.4 million	42%
Motor Fuel Lubricant Sales Tax	30.9 million	30.9 million	100%
Commercial Transportation Fees	17.7 million	8.8 million	50%
Total	$6.453 billion	$2.947 billion	46%

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.

Highway Expenditures Houston vs Dallas 1992 to 2001 In Dollars
Year	Houston		Dallas		State Total
Year	Construction & Maintenance	Percent of State	Construction & Maintenance	Percent of State	State Total
1992	579,105,675	25.9%	316,162,086	14.2%	2,233,791,718
1993	745,549,634	26.5%	366,136,765	13.0%	2,815,585,610
1994	626,003,484	23.4%	338,954,983	12.6%	2,679,488,181
1995	563,291,780	20.6%	352,628,725	12.9%	2,728,044,420
1996	727,501,314	21.6%	375,708,809	11.2%	3,367,087,656
1997	592,159,081	19.9%	401,125,492	13.4%	2,982,382,141
1998	513,373,696	15.6%	442,143,297	13.5%	3,286,046,399
1999	600,570,407	16.2%	468,308,714	12.6%	3,712,581,554
2000	632,079,061	14.4%	608,892,001	13.9%	4,395,644,655
2001	576,160,939	13.3%	550,106,353	12.7%	4,332,557,317
*Total*	6,155,795,071	18.9%	4,220,167,225	13.0%	32,533,209,651
*Average*	615,579,507	18.9%	422,016,723	13.0%	3,253,320,965

Source: Texas Department of Transportation DISCOS

THE FAIR SHARE ARGUMENT

The State of Texas & the federal government fund about 36% of the transportation system in the Houston Galveston Region. Local funding of transportation systems by Houstonians ($27.3 billion over the next 20 years or 63% of total transportation spending) is one of the highest if not the highest in the state of Texas. This high level of local "self help" results from having two aggressive transportation agencies, Metro and the Harris County Toll Road Authority. Metro has a local transit 1% sales tax. The Harris County Toll Road Authority that has been responsible for constructing 16% or 448 lane miles of the total limited access roadways in Houston since 1982. Recent proposals call for Harris County Toll Road Authority to participate in the construction of Interstate 10.

While formulas for allocation of funds to roadways is a very complicated matter, it can be generally summed up by referencing the so-called "fair share" approach. This is a rule of thumb used by the Texas Transportation Department to compare its spending around the state.

The chart above shows Houston's historical "fair share" of total state programmed highway projects and spending. The 22% target fair share equates with the Houston region's portion of the state's population and vehicle miles of travel, general surrogates for the percent of motor fuel and registration fees generated by the state in the Houston region.

Except for a few years, mostly when Bob Lanier chaired the Transportation Commission when Houston's share averaged above 22%, our share has been well below the fair share level. In fact, the percentage is 16%, well below the fair share target.

Houston has been in a constant battle with the Commission to increase the portion of projects scheduled by them for this region.

THE TEXAS MOBILITY FUND AMENDMENT

The creation of the fund was authorized by a wide margin in November 2001. TxDOT is now in the formative stages of creating the structure to carry out this program. Here is a description of how it will work.

In an effort to compensate for a sharp decrease in traditional sources of funding available to build roadways in the state, the Legislature passed and the Governor signed a bill calling for a constitutional amendment to create a special fund allowing TxDOT to participate with local toll authorities to build roadways. Presumably, in Harris and other counties with an agreement with Harris County such as Ft. Bend County, TxDOT would work through the Harris County Toll Authority.

The Mobility Amendment, if passed by the voters in November, will allow TxDOT to advance the construction of highway projects. In addition, it puts local entities in a position to better provide for future transportation.

The Constitutional Amendment has several components:

First, it creates a Texas Mobility Fund that allows the Texas Department of Transportation (TxDOT) to issue bonds for the accelerated construction of major highway projects when future legislatures appropriate or dedicate

resources to the fund.

Second, it allows TxDOT to use its resources to help in the development and construction of tolled highway facilities.

Third, it provides the Texas Transportation Commission (The Commission) with the authority to create new Regional Mobility Authorities outside the boundaries of existing regional authorities which will be controlled by

local boards. The new authorities can build, operate and maintain newly created tolled projects, as well as issue bonds supported by future toll revenues. As revenues increase and surplus revenue becomes available, the

local authorities have the option to:

(1) Reduce or remove tolls,

(2) Use the revenue for other transportation projects inside their region, or

(3) Send the excess revenues to the Texas Mobility Fund.

Incentives

TxDOT, utilizing tools provided by the Mobility Amendment, intends to create a strong incentive program to accelerate planned major highway projects.

Each TxDOT district will identify currently programmed projects that, from an engineering standpoint, could be developed as tolled facilities. This will be limited to new location or major capacity expansions.

For each project selected with local support, any funds released from Priority 1 or 2 programmed dollars through the issuance of toll bonds will be replaced by an equal amount of project funding in that District. Funds

released from Priority 1 will be replaced in Priority 1; funds released from Priority 2 will be replaced in Priority 2.

Replacement projects will be selected by the District with concurrence of local authorities and approved by the Commission.

For those toll projects selected within an existing toll authority, the projects will be offered to that Authority. If those projects selected are outside an existing authority, the Commission will give consideration to creating a new Regional Mobility Authority to operate the new projects.

In most cases, projects selected to be developed as toll projects will be accelerated due to the issuance of toll bonds as opposed to waiting for programmed dollars. In addition, major projects will be developed as one project instead of being segmented for the same reason.

Money granted by TxDOT each federal fiscal year for cost participation in toll facilities may not exceed 30% of the obligation authority under the federal-aid highway program that is distributed to the State in that year.