TxDOT is Red-Hot
State Paving the Way to the Future with
Innovative Financing and Speedy Project Delivery Methods
While many other state transportation
departments struggle with funding, the Texas Department of
Transportation has several huge, ambitious projects on the
table due to the department's creative approach to financing
and its current-year budget of $5.35 billion, the lion's share
of which is designated to construction and maintenance.
The federal government announced March 16 that the Texas
Department of Transportation had been granted a Special Exception
Permit to expedite the construction of the Trans-Texas Corridor,
a multiuse, statewide transportation corridor.
The SEP, only the second ever granted, allows TxDOT to use
federal funds for project planning and design of the corridor
before environmental studies are completed. Much like the
planned corridor itself, the state's ability to garner such
unique contract terms illustrates TxDOT's creativity and resourcefulness.
"We were granted the SEP because we've got a hell of
a plan as well as vendors and private-sector partners that
are willing to move forward," said Ric Williamson, the
recently appointed chair of the Texas Transportation Commission,
the governing body that oversees the policy and rules necessary
to carry out the duties and functions of TxDOT, including
the planning, design, construction, maintenance and operation
of the state transportation system.
Three large, private consortiums have made a short list to
submit detailed proposals on how to develop and finance the
south leg of the Trans-Texas Corridor that will run from the
Oklahoma border near Sherman, around the east side of Dallas
parallel to Interstate 35 and to the Port of Brownsville.
The permit allows the project to be expedited in a much shorter
time frame than if the agency had to wait until after the
studies are complete, which is standard procedure.
"The governor's philosophy is 'build for tomorrow as
well as today'," said Williamson, who shares Gov. Rick
Perry's progressive, optimistic outlook for Texas. "We're
not afraid to reach out to the private sector for financing
or equity ownership in toll roads. We also feel that high-speed
rail is every bit as important as high-speed roads. And wherever
possible, we build away from the existing footprint to minimize
disruption of our citizens."
The futuristic, 4,000-mi. corridor will be the physical embodiment
of those concepts, utilizing innovative financing and project
delivery methods to create a system that will accommodate
TxDOT's budget for 2004 is $5.35 billion, with the lion's
share dedicated to construction and maintenance, said James
Bass, director of TxDOT's finance division. Those areas fall
under the headings "Build It" and "Maintain
It" in the appropriations bill, he said.
And construction continues around the state on huge projects
such as the Central Texas Turnpike, the Dallas High Five and
Houston's Katy Freeway Reconstruction.
Although TxDOT's budget has grown during the past 10 years,
due in large part to increased federal funding, $5.35 billion
today is not worth what it was 10 years ago, Bass said. The
common belief is that, given TxDOT's current budget, the department
is able to satisfy little more than a third of the state's
identified needs. "The definition of those needs varies
from year to year as does the economy and inflation,"
As the state's population continues to increase so will vehicle
miles traveled and ever-taxing demands on the existing transportation
system. "We want to be as flexible as we can with the
tools we have, whether those are cash, traditional funding
or new sources such as HB3588 to leverage or stretch the possibilities,"
Bass said. HB 3588 authorizes certain transportation-related
fees, such as motor vehicle inspection fees and driver's license
fees to be moved from the state's general revenue fund to
the Texas Mobility Fund.
Several years ago, TxDOT started utilizing a tapered-match
approach to financing. For example, if the department has
a $10 million project with $8 million in federal participation,
the tapered match allows the state to receive 100 percent
reimbursement of cost on the first $8 million. The final $2
million is then fully reimbursed with state money.
"That allows us to get the federal money sooner and
to receive more revenue than we would expect and gain in interest
from that money," Bass said. "In turn, that allows
us to accelerate and move projects faster."
Without this tapered-match tool, many projects would have
been delayed, Bass added. "Tapering is just one example
of something new or innovative we are trying to do with federal
monies while we continue to look at all of our revenue streams
to see how we can maximize those," he added.
Several projects are currently under construction that exhibit
the department's commitment to innovative financing for speedier
delivery at a reduced cost.
One is the $1.5 billion Central Texas Turnpike Project, the
first phase of which is currently under construction and includes
49 mi. of State Highway 130, Texas' first highway to be developed
under a Comprehensive Development Agreement. The CDA allows
property acquisition, design and construction to be undertaken
The new tollway will extend from Interstate 35 north of Georgetown
southward to U. S. Highway 183 southeast of Austin, passing
through Williamson and Travis Counties.
The CDA was awarded to the Lone Star Infrastructure, a consortium
of engineering and construction firms specifically organized
to deliver the project, scheduled for completion December
"The contract is proving quite effective," Bass
said. "They are able to do design and construction at
the same time."
The hard-dollar cost and the impact on citizens during construction
are considered in the formula for choosing project delivery,
Williamson said. "The CDA allows us to move faster, which
inevitably means we can build cheaper while disrupting our
citizens' lives for a smaller period of time," he added.
"The CDA approach that we used on SH 130 is pretty much
the template we will use on all major projects in the future."
The Katy Freeway Reconstruction Program is an example of
a successful public/private partnership, Bass said. The $1.4
million reconstruction of 23 mi. of the Katy Freeway and approximately
2 mi. of Interstate 610, including the Interstate 10/IH-610
interchange, is the first project in the nation to convert
a portion of an interstate highway into toll lanes.
TxDOT is designing and constructing a corridor with flexibility
that will initially operate with four general-purpose lanes,
two toll/managed lanes and three frontage road lanes in each
"Through agreements with the Harris County Toll Road
Authority, we are able to help build the toll lane while the
project is under way," Bass said. Planners predict that
the project will be completed in five to six years, half the
time it would have taken under traditional financing methods.
In addition, acceleration of the project will generate an
estimated $65 million in savings to taxpayers for construction
Williamson agreed that some people will balk at the introduction
of toll roads. "We've got a favorite saying at the department:
'Nobody wants a toll road and fewer people want no road.'
We'll never build a toll road where there is not a tax-road
alternative," he added.
Texas has the advantage of a good tax-road system that effectively
connects the population and industrial centers, Williamson
said. "Toll roads will be parallel, adjacent or complementary
to an existing tax-road system," he said.
"We will have private-sector partners taking risks,
so we will be providing mechanisms to ensure a road to nowhere
will not be built. The state makes sure that what is being
built can be described as being attractive to the marketplace."
For example, if commercial trucks are allowed to carry a
heavier load and travel a little faster in a lane free of
auto-traffic congestion, companies may opt to pay a toll for
that privilege, Williamson said.
He lauded the governor for "turning the whole process
upside down" and laying the groundwork for creative solutions
to the state's transportation challenges.
"We'd love to have the Sierra Club as our financial
partner in the Trans-Texas Corridor," Williamson added.
"From the single individual in Houston and the privately
owned statewide company in San Antonio to the national company
in Nebraska and the international company in Madrid, Spain,
we say, 'If you've got in idea, bring it to us'. If it's transparent,
legal and accomplishes the goal of completing our transportation
structure, we welcome it."