Below is the HillCo client report from the September 16 Senate Select Committee on Transportation Funding, Expenditures and Finance Committee hearing.

The committee met to discuss the future reliability of all current state transportation funding sources; alternatives that may increase available state funding for transportation, including an examination of increases to current transportation-related funding streams and possible dedication of non-transportation related funding streams toward transportation; and alternative transportation funding options used nationally and internationally.
 
 
Joe Weber, Executive Director, Texas Department of Transportation (TxDOT)

  • Have been working on determining allocations of funding from Prop 1 if it passes
  • Also working on identifying savings as required by HB 1
    • Have paid down debt by $64 million dollars
    • Have identified an additional $140 million through fleet management and real estate management

 
James Bass, CFO, TxDOT

  • Reaching the end of Prop 12 and 14 bonding capacity so the agency is seeing the overall appropriations request decline
  • MAP 21 funding is uncertain so that funding has been listed as an exceptional item
  • Chairman Robert Nichols asked about the $500 million request for rail funding
    • Represents the summary of about ten different projects that all have freight movement components; one of the projects has an element of passenger rail but that is a secondary benefit
  • Sen. Judith Zaffirini asked what priorities there are for spending the $1 billion requested for energy sector roads
    • John Barton, deputy executive director of TxDOT replied there will be a focus on counties in the Eagle Ford shale and in the Permian Basin; to take narrow FM roads and repair and widen them as well as some other primary routes taking trucks in and out of a region; safety is a big focus as well as truck volumes
  • Zaffirini asked what the impact of not funding that request would be
    • Directing already limited funds to those critical safety needs
  • Zaffirini asked what other efficiencies have been achieved
    • Bass replied that the overall size of the fleet has been reduced, some equipment has been auctioned off, switched the email service to Microsoft Outlook, consolidated the printers in facilities, adjusting the real estate portfolio
  • Zaffirini asked about the request being $1.2 billion less than last session; why is that
    • As Prop 12 and 14 bond money is spent, TxDOT is reaching the end of the bonds’ lives so less of those will be spent
  • Nichols asked about the truck discount toll program
    • It allows 18-wheelers to travel on SH 45 and 130 to travel at the same rate as passenger vehicles; will decrease truck traffic on I-35
  • Nichols believes this is a good expenditure because it pays down a debt quicker as well as decreasing congestion for a lower cost
  • Barton noted that if this item is approved it may be possible to target the discount to be greater at peak times
  • Nichols asked about the advanced county roadside signs; removing signs will require more people to brake when approaching signs; this may be a safety issue
    • The previous program was initiated when 911 was first talked about in the 1990s as a partnership for counties to have signs to help with emergency services; helped to not have to set as many posts and foundations; the program has grown so TxDOT is highlighting that the need is there and counties are asking for them
  • Sen. Donna Campbell asked why discretionary money was used by TxDOT for a $92 million swap for a streetcar program in San Antonio; the project was planned in tandem with VIA; project has been put on backburner and now VIA will use the funding for bus transportation; there isn’t room for flexibility for those dollars to be spent on a streetcar; the same thing has happened in El Paso
    • The project used a trading of existing allocation; the commission received a request from the local area to swap those funds; it was a net $0 swap so TxDOT did not have a problem with it
  • Campbell noted San Antonio residents voted against the streetcar but a loophole was used to make the swap
    • Weber noted that $92 million is VIA’s money and they are allowed to spend it on their own projects; for the El Paso project, the MPO voted overwhelmingly in favor of the streetcar
  • Campbell noted that because of the swap VIA was allowed to use the dollars for light rail; it should have been planned for roads
    • Weber noted they did not use it for a trolley car, they are using it on buses
    • Weber noted two years ago when the project was discussed people wanted the rail car
  • Campbell noted it may have been through closed door discussions
  • Sen. Juan Hinojosa asked if the swap decreased the amount of funds available to TxDOT for roads
    • No
  • Hinojosa asked if the rail car project was turned down by voters
    • Campbell replied that it was turned down twice by voters
  • Nichols asked about the balances left on debt
    • Bass replied that later this month another $1.25 billion will be taken from Prop 12  so the numbers do not add up right now
  • Eltife asked how much debt has been issued in the last ten years for TxDOT
    • Issued $13.7 billion to date across three programs in the last ten years
  • Eltife noted the state’s debt has more than doubled in the last ten years; the bulk is TxDOT; selling bonds is a tax on the future generations; how much interest will be paid on that debt
    • Another $10 billion
  • Eltife noted the state should have been on a pay-as-you-go system and should be going forward
  • Nichols asked about the pass through program
    • There has not been a project approved to be delivered in the last two years

 
Roland Tildan, Real Estate Manager, TxDOT

  • The division was started mid-2013 with the intent of looking at the land portfolio and opportunities to create efficiencies
  • TxDOT owns around 1.2 million acres of property across the state; a majority is the highway system
  • There are a lot of resources not being used
  • Looking at alternative ways to create revenues on an ongoing basis; longer term ground leases
  • Sen. Kelly Hancock asked what is being done to maximize the return when the land is sold to local areas for a discount
    • There is a priority period in which government entities and adjacent landowners are offered the sale for thirty days; the property receives a fair market value determination then a price is established to offer those entities

 
Breanne Glover, Texas A&M Transportation Institute

  • Indexing the motors fuels tax will allow the tax rate to keep pace with the rate of inflation
  • The current estimated revenue for the next biennium is $5 billion for transportation and $1 billion for education
  • Indexing the tax could bring an additional $50-$300 million for transportation
  • Increasing the registration fee could bring in around an additional $120 million
  • Using the state sales tax in lieu of the motor fuels tax could bring in additional revenue if the price of gas is higher than $3.59 per gallon

 
Ginger Gooden, Texas A&M Transportation Institute

  • Performed a transportation survey which shows
    • 64% of respondents support an increase in transportation funding but do not want it to come out of their pockets
    • 40% have adjusted their behavior in response to congestion
    • Better traffic signal timing and faster accident removal were the most popular ideas for congestion improvement
    • There is a low level of knowledge about the fuels tax
  • Hancock asked how respondents would prioritize transportation funding over other potential issues to fund
    • Did not ask that question in the survey
  • Hancock noted that would be a very important question to ask
  • Zaffirini asked what population was polled
    • It was a statewide poll split geographically; used standard methods for recruiting respondents; worked with a firm that specializes in these surveys; used registered voters and a weighted demographic sample

Robert Harrison, University of Texas Center for Transportation Research

  • Trucking is critical to the Texas economy
  • Demand is high for trucking in the state and the industry remains fragmented; smaller companies are under financial stress because the industry has high equipment costs, high regulation and a need for drivers
  • New tractor trailers are safer, cleaner and have a higher MPG rating
  • When these trucks are brought into the fleet there will be a tremendous decrease in fuels tax revenues from trucking
  • Zaffirini asked how big the decrease will be
    • If the average MPG goes from 5 to 7 there could be a 30% decrease
  • Diesel will be the predominant truck over the next decade; LNG and CNG will grow market share

 
Bill Hammond, Texas Association of Business

  • Will be supportive of numerous transportation funding measures to benefit the Texas transportation system
  • In support of Prop 1
  • Would like the non-constitutional diversion of the gas tax ended
  • Would like to see at least half of the motor vehicle sales tax to be dedicated to the construction and maintenance of highways
  • Would like registration fees doubled
  • Would like increased use of design-build contracts
  • All of these things would add up to more than the needed $5 billion to improve the transportation system

 
Javier Rodriguez, Miami-Dade Expressway Authority

  • Florida has created growth management fees where growth in population is tied directly to transportation funding
  • Toll financing is not appropriate everywhere and is not the solution to all issues but in Florida managed lanes are being implemented with much success
  • Zaffirini asked what the top priority of Texas should be
    • Indexing the gas tax to keep up with purchasing power
    • Being flexible and capitalizing on investments is very important as well
  • Nichols asked about annually adjusting the fuels tax; does the legislature do this or the agency
    • It is automatically indexed to the consumer price index
  • Nichols asked who pays growth management fees
    • It is a portion of taxes on land transfers and purchases directly deposited to the state transportation trust fund

 
Thomas Galvan, Legislative Budget Board

  • Options for using existing revenue to increase appropriations to the highway fund
    • Diverting all drivers responsibility program (DRP) fees and state highway traffic fines to the state highway fund; could bring around $125 million per year
      • Nichols noted some of the DRP money is used for certification of the budget and not trauma centers
    • Allocating the full motor vehicle sales tax to the highway fund; currently sends over $3 billion to the GR fund and about $36 million to other programs such as the property tax relief fund
      • There are many options for how this funding could be gradually shifted from GR to the highway fund

 
Tom Lambert, Legislative Budget Board

  • Clean Air account was created in 1991 to safeguard air resources of the state
  • Multiple motor vehicle related fees are collected and deposited into this account; other fees come from air permit fees and other similar fees
  • Majority of funds are appropriated to TCEQ and are generally used for activities related to protecting air quality; permitting, inspections, enforcement, monitoring, LIRAP
  • Hinojosa asked if clean air account fees are applied across the state
    • Some of them are but some, such as the motor vehicle inspection fees, are assessed in or near non-attainment areas
  • Hinojosa noted the counties do not receive back all the money they collect
    • Collin County is in the process of trying to remove themselves from the program for this reason
  • Texas Emissions Reduction Plan account (TERP) was established in 2001 and is a grant program available in non-attainment or near non-attainment counties to reduce emissions from equipment in those counties
  • Fees come from motor vehicles sales fees, title fees, etc.
  • Uses for fees are prescribed in statutes including Texas Engineering Experiment Station, TCEQ
  • Zaffirini asked if TERP funds can be used for transportation infrastructure and maintenance
    • TxDOT has testified that they believe projects related to air quality and roads are allowable uses; the statute isn’t very specific
  • Nichols noted there is almost $1 billion in the TERP account that isn’t being used

 
Liz Day, CFO, Texas Commission on Environmental Quality (TCEQ)

  • Most fees that support the TERP program are supported by the commercial sector not the general public
  • Most of the fees are set to expire in 2019
  • Hinojosa asked if there is a certain amount of money that has to be spent by TERP to stay in compliance
    • There is not a stipulated amount it is just intended to make more of the state in attainment status
  • Hancock asked if there is any information that shows the dollars spent on TERP equated to emission reductions
    • TERP is far more cost effective for reducing emissions than other open market methods
  • Zaffirini asked which TERP program has the most demand for funding
    • The diesel emissions reduction incentive program is the bulk of the funds
  • Currently doing rulemaking to accommodate Collin County’s request to opt out of the LIRAP program
  • Counties are upset about the amount being generated versus the smaller amount being disbursed back to counties