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 We will: Reduce congestion • Enhance safety • Expand economic development • Improve air quality • Increase the value of transportation assets |
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November 20, 2006 |
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Gephardt Briefs the TTC Advisory Committee During its November meeting, the Trans-Texas Corridor Advisory Committee learned more about the significance of public-private partnerships to the transportation industry from former Congressman Dick Gephardt, now with the global investment banking, securities and investment management firm Goldman Sachs. Formed in March 2005 by the Texas Transportation Commission, this 22-member citizen committee conducts monthly public meetings to address key issues facing TxDOT in planning the Trans-Texas Corridor.
Gephardt, a member of Congress for 28 years, was joined by Transportation Commission Chair Ric Williamson, Advisory Committee Chair Judy Hawley, and Goldman Sachs Managing Director Greg Carey. Gephardt characterized public-private partnerships as part of the solution in completing transportation projects faster and more efficiently than traditional funding methods. He acknowledged that public officials might be reluctant to accept public-private partnerships, but stated that without solutions to current congestion issues, the negative effects on the economy would be felt sooner rather than later. Gephardt identified Texas as ahead of the curve compared to the rest of the nation when it comes to pursuing privatization financing options and solving transportation challenges. He noted that the Trans-Texas Corridor would be a momentous accomplishment not only for the state, but also for the nation and the continent. The panel shared its thoughts with the committee, discussing the role public-private partnerships can play in addressing issues such as congestion, safety, economic development, air quality and freight rail. They touted a partnership’s ability to achieve solutions in a timely manner, especially with public funding limited and not readily available for these purposes.
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80th Session of the Texas Legislature Before each state legislative session, the Texas Transportation Commission makes recommendations to the Texas Legislature about state transportation laws. The commission has been working on its recommendations since January 2006 and has prepared a draft report. You can read it and offer comments online here. In order for us to consider your comments, have them in by November 30.
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Ribbon-cutting Ceremony Opens 27 miles of the Central Texas Turnpike System
On Wednesday, November 1, local and state officials opened nearly 27 miles of the Central Texas Turnpike System in a ribbon-cutting ceremony. “I’ve been with the department for nearly 35 years and I’ve never seen this many miles of highway opened in one day,” said TxDOT Executive Director Mike Behrens. Several hundred people braved a cold north wind to attend the mid-morning event just west of the State Highway 45 North and Loop 1 Interchange. The $3.6 billion project—one of the largest toll-financed projects in the United States—is ahead of schedule and under budget. Construction on the SH 45N and Loop 1 elements began in February 2003. Work on SH 130 started in October that year. An additional 13 miles of SH 130 from U.S. 79 to Interstate 35 will open in December, and the segment from U.S. 290 to U.S. 183 is due to open in late 2007. “This is one step in about 100 steps this state will take in the next 25 years to do something no state in the U.S. has ever been able to do,” said Transportation Commission Chairman Ric Williamson. Motorists in and around the Austin area are already taking advantage of the improved commute. Just a week after opening, morning rush hour numbers were near 34,000 and evening numbers near 43,000, with a total of close to 160,000 for a 24-hour period. Austin District Engineer Bob Daigh said about the roadway: “Not only will this project improve safety and mobility, it will bring an improved quality of life.” TxDOT is also enrolling TxTag® customers via the internet or by telephone at 1-888-GoTxTag (1-888-468-9824).
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TxDOT’s Bond Market Efforts Recognized
TxDOT’s successful efforts on the bond market are being recognized by industry experts, resulting in the agency being named one of 10 finalists for The Bond Buyer newspaper’s 2006 Deal of the Year Awards. The awards recognize innovation from municipal bond issuers for major public infrastructure transactions completed during the 2006 federal fiscal year. To select its finalists, the newspaper chooses two issuers—one large and one small—from each region of the country within its coverage area. TxDOT was selected winner of the Southwest Large Issuer category for its $630 million state highway fund bond sale in April. TxDOT is not a newcomer to the bond market. Its first $1 billion sale of bonds came in 2002 for the Central Texas Turnpike System, which was also recognized as Southwest Region Deal of the Year for 2002. Then, in June 2005, TxDOT issued $1 billion in bonds backed by the Texas Mobility Fund. The Legislature created this fund in 2001 as a funding mechanism for transportation projects. Texas voters approved the fund as a constitutional amendment later that year. It is supported by a series of motorists’ fees, including revenue from drivers’ licenses, vehicle inspections, and other related fees. TxDOT also hit the market in October and November with two $1 billion offerings, one in highway fund revenue bonds and one backed by the Texas Mobility Fund. Since these bond sales were made in the 2007 federal fiscal year, they are ineligible for the 2006 awards. The Deal of the Year Award winner will be announced December 5 in New York.
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Invitation to the 2006 Freight Summit
The National Association of Regional Councils (NARC) and the Texas Department of Transportation (TxDOT) are pleased to be co-hosting our 2006 Freight Summit, titled From Design to Delivery: Gateways to Prosperity on December 4-6 in Corpus Christi, TX. This event will bring together freight and goods movement professionals from the public and private sectors to discuss the interaction between goods movement and economic development. Attendees at this event will be high-level professionals and policy-makers. Registation is available online at the summit website. A preliminary agenda and sponsorship information can also be found at this site.
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A major feature in the public debate about toll roads has been the issue of when or whether a road has been “paid for.” To better understand this discussion, it is helpful to ask two questions: 1. What is a traveler paying for when he or she pays state gas tax at the pump? State motor fuel tax is collected from all over the state and goes into a single pool of revenue—about one quarter of which goes to fund education, and about three-quarters of which goes to the state’s highway fund, where it is spent on transportation uses and some non-transportation functions of government. Then the state receives federal funds as the state’s share of the federal fuel tax; about 70 cents of every gas tax dollar Texans send to Washington comes back for road use. The significant point here is that historically the fuel tax paid in any locality of the state is unrelated to the road projects in that locality. Every fuel taxpayer in the state paid something for any given road—which leads to the next issue. 2. When is a given road actually “paid for?” Just like your car, it never is. You may have paid the note, but maintenance and fuel costs go on as long as you own the vehicle. Once a road is built, maintenance and rehabilitation costs last its entire life, generally about 40 years. The decision to build a road is a permanent commitment to the traveling public. Not only will a road be built, but it must also be routinely maintained and reconstructed when necessary, meaning no road is ever truly “paid for.” Until recently, when TxDOT built or expanded a road, no methodology existed to determine the extent to which this work would be paid off through revenues. The Asset Value Index, was developed to compare the full 40-year life-cycle costs to the revenues attributable to a given road corridor or section. The shorthand version calculates how much gasoline is consumed on a roadway and how much gas tax revenue that generates. The Asset Value Index is the ratio of the total expected revenues divided by the total expected costs. If the ratio is 0.60, the road will produce revenues to meet 60 percent of its costs; it would be “paid for” only if the ratio were 1.00, when the revenues met 100 percent of costs. Another way of describing this is to do a “tax gap” analysis, which shows how much the state fuel tax would have to be on that given corridor for the ratio for revenues to match costs. Applying this methodology, revealed that no road pays for itself in gas taxes and fees. For example, in Houston, the 15 miles of SH 99 from I-10 to US 290 will cost $1 billion to build and maintain over its lifetime, while only generating $162 million in gas taxes. That gives a tax gap ratio of .16, which means that the real gas tax rate people would need to pay on this segment of road to completely pay for it would be $2.22 per gallon. This is just one example, but there is not one road in Texas that pays for itself based on the tax system of today. Some roads pay for about half their true cost, but most roads we have analyzed pay for considerably less. To conclude, in the SH 99 example, since the traffic volume for that road doesn't generate enough fuel tax revenue to pay for it, revenues from other parts of the state must be used to build and maintain this corridor segment. The same is true across the state, meaning that, as revealed by the tax gap analysis, overall revenues are not sufficient to meet the state’s transportation needs. |
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