TxDOT's New Motto: Open for Business

By Joseph Dirik, Esq.

Dirik gives a report on what he learned as an attendee of TxDOT's first annual Texas Transportation Forum.

In June I attended the first annual Texas Transportation Forum in Austin, hosted by the Texas Department of Transportation, Texas Good Roads / Transportation Association, the Associated General Contractors of Texas and the Texas Transportation Institute. The two-day event brought more than 1,000 people together to explore Texas' approach for solving the transportation challenges facing the state and its citizens.

Simply put, growth of the Texas transportation system has not kept pace with the state's population growth. Over the next 25 years, TxDOT expects the population to increase by 64 percent, road use to increase by 214 percent, and an $86 billion funding gap to meet transportation needs using traditional funding methods.

In 2003 the legislature provided a broad range of tools to change the way transportation projects are implemented and funded. The state's goal is to partner with local communities and the private sector to build more projects faster.

At the heart of the legislative solution, is the Comprehensive Development Agreement. In addition to learning more about CDAs, the Forum's break-out sessions provided insight into the other transportation solution tools available: Regional Mobility Authorities, or RMAs, toll roads, and pass-through toll financing. A panel discussion on the Future of Road Building was particularly illuminating because the panel provided perspectives from large and small contractors.

Led by the Trans-Texas Corridor project, CDAs have received much of the publicity surrounding the new TxDOT initiatives. As I learned at the Forum, RMAs also have much to offer. One or more counties form an RMA to manage and finance local transportation projects. A successful RMA permits local authorities to identify and solve their own regional transportation needs. An RMA can sell bonds to develop a toll road, use the tolls to pay off the bonds and use the toll revenue after the bonds are paid off for other local transportation needs.

TxDOT identified the following benefits of RMAs:

• An RMA brings decision-making authority regarding transportation project development to the local level.
• An RMA can reduce the time it takes to implement much-needed transportation projects in a local community.
• An RMA can build toll roads, which reduce congestion, enhance safe driving conditions and do not require additional tax dollars.
• Accelerating transportation projects means expanding economic development opportunities sooner rather than later.
• An RMA can seek a private sector partner to speed up transportation expansion without raising taxes.
• An RMA keeps locally generated funds in an area.

The majority of Texans have driven on toll roads at some point. Choosing to employ a toll strategy for a new road is usually driven by the need to accelerate implementation. Communities can work directly with TxDOT or through an RMA to develop toll roads and realize some of the following advantages identified by TxDOT:

• Toll roads are paid for by only the drivers who use the road and not by all Texas taxpayers. However, in some cases, some projects may use toll equity funding.
• Choosing to build a toll road allows the project to be built immediately rather than waiting years for additional tax dollars.
• Toll roads reduce congestion and enhance safe conditions on all roads for family and business travelers.
• Travelers will not have to use toll roads; there will always be tax-supported or non-tolled highway options.
• Toll roads will bring in revenues to help maintain existing highways and fund more transportation projects within the local area without additional taxes.
• Pass-through tolling is a new financing tool that Texas communities use to fund up front costs for a state highway project. Rather than charge the users, the state pays a fee for each vehicle that uses the new highway. The state's payments are designed to partially reimburse the community over time, with the community assuming the risk that traffic is lower than projected.

I was particularly interested in the panel's discussion over the future of small- to medium-sized contractors who have slim chance of participating directly in major CDA-type projects. One panelist warned that such contractors will be forced to work as subcontractors on more projects. What appears certain, however, is that many contractors will experience a change if they contract with a private developer consortium instead of their local TxDOT office. Some contractors may be unwilling to accept contract terms, risks and administrative burdens that differ from those commonly available to a TxDOT prime contractor. The large contractor representatives on the panel believed there would be enough work to go around. While some concerns may be valid, CDAs require that private developers comply with many key provisions governing public contracts, such as furnishing payment bonds, prompt payment provisions and advertising bids.

TxDOT's new motto, Open for Business, is appropriate because TxDOT is serious about accelerating Texas' transportation growth.