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.

By Angelle Bergeron

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.

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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 anticipated growth.

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," Bass added.

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 simultaneously.

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 2007.

"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 direction.

"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 costs.

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."