Texas Conservative Coalition Research Institute
Comments to the Texas Transportation Commission and the Texas Department of Transportation on the 2020 Unified Transportation Program
April 23, 2020
The Unified Transportation Program (UTP) guides transportation project planning for the state of Texas. Central to the plan is transportation project financing, which has been an urgent concern for the state lawmakers for several years. The Texas Department of Transportation (TxDOT) Legislative Appropriations Request for the 2014-2015 biennium noted that “[t]here is no question that Texas has a transportation funding challenge. Our traditional sources of funding have proven no longer reliable, making it difficult to meet the mobility needs of our rapidly growing state.”
The 83rd Legislature (2013) responded to these financing challenges by passing Senate Joint Resolution 1 and House Bill 1 (83S3) to allow for the transfer of certain oil and gas severance tax revenues to the State Highway Fund (SHF). SJR 1 was approved by voters in November 2014. The 84th Legislature (2015) went even further, passing Senate Joint Resolution 5 to allow for the transfer of up to $2.5 billion of state sales tax revenues and a portion of the motor vehicle sales tax to the SHF each year. SJR 5 was approved by voters in November 2015 (Prop 7). As a result of these actions taken by legislators and approved by voters in 2013 and 2015, $5 billion in additional funding was available for transportation projects in the 2018-19 biennium.
The legislature should be applauded for taking these steps in order to provide additional and consistent funding for transportation infrastructure investments. It is an impressive funding increase, particularly when taking into consideration that it was achieved from existing revenue streams that would otherwise have flowed to different areas of the budget, or to different funds within the state treasury, but amid the revenue challenges that will surely be posed as a result of the current pandemic and economic lockdown, it is unclear how much of the additional revenue recently dedicated to the SHF will flow there this fiscal year and next. These revenue challenges will demand that the state continues to utilize innovative funding sources and transportation project financing methods that do not rely solely on tax collections.
Put simply, Texas is the fastest-growing state in the country. The latest projections from the Texas State Data Center indicate that Texas’s current population of 28 million will almost double to 55 million by 2050 (96 percent growth), assuming that net migration remains at similar levels to those seen over the previous ten years. Net migration at just half the rate seen over the last ten years will grow the state’s population to 41 million by 2050 (46 percent growth). Even with zero net migration, domestic population growth alone will total around 11.5 percent over the same period.
Population growth places greater burdens on the state’s road network, yet Texas is already one of only two states to have two cities listed among the top ten most congested in the country. Dallas is ranked as the fifth-most congested city in the nation, while Houston is ranked eighth. Only California has as many cities in the top ten (Los Angeles and San Francisco). The other Texas city in the top 25 is Austin, which ranks 18th. As the Texas Transportation Institute (TTI) explains:
[C]ongestion in Texas is bad, it is growing rapidly and will continue to increase. In our largest cities the rate of growth in congestion is in excess of 8% per year. In 2012, the total cost of congestion—delay time and wasted fuel—exceeded $10 billion in Texas. A typical auto commuter in Austin, Dallas-Fort Worth and Houston, wastes well over 40 hours per year stuck in traffic.
According to one estimate, the cost of congestion in Dallas, Houston, and Austin alone will have grown to more than $60 billion by 2026.
Keeping up with population growth in order to alleviate congestion (or at the least, ensure that it does not get worse) is of critical importance to the state, but there is an additional headwind: the rising cost of highway construction. Figures from the Federal Highway Administration (FHWA) show that costs associated with highway construction (raw materials etc.) have risen by more than 70 percent since 2003, while a recent piece from the Office of the Comptroller explains that:
[T]he cost of road construction has risen much faster than the general inflation rate, meaning our transportation dollars simply don’t go as far. In 2014, TxDOT reported that construction costs had risen by 80 percent since 2002, compared to a cumulative general inflation rate of about 32 percent.
This cost inflation is evident in some of the most prominent current and planned highway construction and improvement projects in Texas.
In total, the 2020 UTP details $77 billion worth of projects that are either ongoing, or that are being planned. These rates of population growth, associated traffic congestion, and transportation infrastructure cost increases all support the recent actions taken by the Legislature and the voters to dedicate additional funding for highway construction and maintenance. However, amid the revenue challenges posed by the current pandemic and economic lockdown, Texas must continue to keep all forms of investment in highway infrastructure on the table so that Texas can meet the needs of its growing population, economy, and businesses over the coming decades.
To that end, Texas must continue to utilize Public-Private Partnerships (P3s) to help finance transportation infrastructure projects. The 82nd Legislature (2011) passed the Public Private Facilities Infrastructure bill (SB 1048) allowing the use of P3s for infrastructure development projects at the state, county, city, and school-district levels. While transportation projects were not included in SB 1048, legislative action in 2007 (SB 792, 80R) had already authorized the limited use of private sector investment in transportation infrastructure projects, and Senate Bill 19 (82R, 2011) by Senator Robert Nichols established a streamlined process for local toll projects.
TxDOT uses a version of P3s called Comprehensive Development Agreements (CDAs) to partner with private companies to design, finance, and maintain tolled highways. A variety of CDA arrangements have been used throughout the state, including the construction, financing, and maintenance of the 17-mile LBJ-635 corridor expansion in Dallas and the North Tarrant Express Project in Tarrant County.
The benefits to the state from these projects are significant. For the LBJ-635 project, the state contributed $490 million, but ultimately received a $2.6 billion investment in new road capacity for one of the most congested areas of the DFW region. The improvement project was completed three months ahead of schedule and opened in September 2015. For the North Tarrant Project (NTE), which opened in November 2014, a 13.3-mile corridor along the north loop of I-820 and SH-121/183, from I-35W in north Fort Worth to FM 157 in eastern Tarrant County was substantially improved. During the construction phase, general-purpose lanes were rebuilt, frontage roads were rebuilt and expanded, and four managed toll lanes were added. The completed project handles 200,000 vehicles daily. Both the LBJ and NTE projects utilize “Texpress” lanes, which are able to dynamically manage traffic in real time through variable toll pricing. At the same time, pre-existing lanes were not tolled, but were, in fact, rebuilt and improved as part of the projects. These lanes remain free for all vehicles. Indeed, Texas has a very clear approach to these issues, as TxDOT elucidates:
No existing road will be converted into a toll road unless approved by local voters and there will always be a non-tolled alternative near by. An existing road may add new, tolled lanes, but the existing roadway will not change without voter approval.
P3s can also offer valuable improvements to the transportation system by bringing private sector expertise to the public arena. Private companies often have substantial expertise in financing and asset management, thereby successfully leveraging billions of dollars for investment into public infrastructure. P3s are able to accelerate and guarantee the completion of large and complex projects in ways often superior to the delivery model of state and local governments. As the U.S. Department of Transportation explains:
Early involvement of the private sector can bring creativity, efficiency, and capital to address complex transportation problems facing State and local governments … The Federal Government encourages the use of public-private partnerships through an array of innovative financing mechanisms and initiatives designed to provide flexibility in the ways projects are delivered.
Additionally, the option to include long-term maintenance of the project in addition to the design and construction can make P3s a very appealing solution to public infrastructure needs.
The Texas Transportation Code still authorizes CDAs as a method of developing transportation infrastructure projects, and ensuring that the statute is utilized should remain part of Texas’s approach to addressing the congestion challenges on Texas highways. All of which is to say that the 2020 UTP should continue to value the options available through public-private approaches to its transportation infrastructure challenges.