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April/May 2010 – Web Exclusive

Bumpy Road Ahead

TxDOT is spending about $3 billion annually for construction – $11 billion less than the 2030 Committee’s recommendation.

Funding Tight as 
				Road Congestion Grows

by Gerard MacCrossan

Managing Texas traffic is a never-ending game of “catch up.” The state’s highway engineers are continually modifying and expanding our road infrastructure with new lanes and new routes – but our population keeps on growing, and many of our roads stay clogged.

There’s no end in sight to Texas’ growth, or the challenges facing our highway planners. And their tasks will be made even more difficult by a funding crisis facing the next session of the state’s Legislature.

Deirdre Delisi
Texas Transportation
Commission Chair

In February, Texas Transportation Commission Chair Deirdre Delisi told a joint state House and Senate hearing that without additional funding streams, the Texas Department of Transportation (TxDOT) may have no money at all available for expanding our road capacity in 2012 and beyond.

Roads on Loan…

TxDOT’s current operations are funded by a combination of the state motor fuels tax, vehicle registration fees, bonds, federal revenue and public-private partnerships on toll-road projects. Its total budget is $8.07 billion in fiscal 2010 and $8.85 billion in 2011.

Where Our Road
Dollars Come From

Texas highway funding comes from a variety of sources, including:

Motor Fuels Tax

A flat 20 cents – unchanged since 1991 – is levied on every gallon of motor fuel sold in Texas. Twenty-five percent of the net collection is used to fund public education, with the remainder going to the State Highway Fund.

Vehicle Registration Fees

Counties collect a three-tiered annual registration fee for passenger vehicles ($58.50, $50.80 and $40.80), based on the vehicle’s age. Counties retain a portion of the fees collected and the remainder is deposited in the Highway Fund.

Federal Funds

According to TxDOT, Texas typically receives about 70 cents for highways from each dollar remitted to Washington in federal motor fuel taxes. The federal tax is 18.4 cents per gallon of gasoline and 24.4 cents on diesel. In each of the past five years, however, Congress has cancelled some of the previously authorized funds owed to Texas.

Bonds

Recent legislation has authorized TxDOT to raise up to $11 billion for highway projects from revenue and general-obligation bonds. In addition, the Texas Mobility Fund – a revolving fund that collects bond proceeds and some transportation-related fees – is currently backing about $6.4 billion in bonds.

Public-Private Partnerships

TxDOT has partnered with private entities to design and build, and in some cases finance and operate, transportation infrastructure. Tolls are used to repay the investment. TxDOT’s authority to enter into such agreements expired in 2009 with the exception of a few projects, mostly in North Texas.

Before 2002, TxDOT’s road projects were funded entirely with state and federal revenues. Since then, however, the agency has supplemented these allocations with private partners and borrowed funds generated by various bond issues.

TxDOT must service this existing debt before spending any funds on new projects.

…And Funding Shortfalls

Texas will need to invest $315 billion by 2030 – an average of $14.3 billion annually – to build the new highways and bridges needed to accommodate our population growth with adequate mobility. More than half that amount, $171 billion, will be needed just to keep traffic moving in our urban areas.

That’s the estimate produced by an independent “2030 Committee” of 12 Texas business leaders who spent six months gathering public input and analyzing research on TxDOT’s behalf.

At the February legislative hearing, TxDOT Executive Director Amadeo Saenz said the agency is spending about $3 billion annually for construction – $11 billion less than the 2030 Committee’s recommendation.

TxDOT’s capacity to borrow money is limited by legislation and its existing debt-service responsibilities. And increased fuel efficiency is hurting tax revenue, Delisi told lawmakers. That message appears to have gotten through to the committees charged with leading transportation policy and legislation.

Sen. John Carona
Chairman of the Senate
Transportation and
Homeland Security Committee

Taxes vs. Tolls

“For many years, state gas tax revenue has increased as the state population has increased and miles driven have increased,” Delisi told legislators. “Since the downturn in the economy in 2008, revenue has actually declined. In fiscal 2009, state motor fuel tax deposited to Fund 6 [the State Highway Fund] declined 2.17 percent from fiscal 2008.”

Attempts to raise the state gas tax during the 2009 legislative session didn’t even make it out of committee, much to the consternation of some lawmakers.

At the hearing, Sen. John Carona, chairman of the Senate Transportation and Homeland Security Committee, argued that not raising the gas tax has made road building more expensive for Texas taxpayers. The state has partnered with private developers to build some major roads and bridges, and levy tolls on drivers to pay for them.

“[We’ve] chosen not to raise the gas tax – instead, we give it over to the pri- vate sector,” Carona said. “Private equity demands double-digit returns on their investment. All of that gets passed on.”

Rep. Joe Pickett
House Transportation
Committee Chair

A Revenue “Toolbox”

To solve the problem, some say lawmakers should provide transportation leaders with a “toolbox” of funding mechanisms.

House Transportation Committee Chairman Rep. Joe Pickett of El Paso said that any change to the gas tax should be only part of an overhaul the whole transportation funding system needs – an overhaul that should include ending the diversion of fuels tax revenue to other state operations.

For fiscal 2010 and 2011, appropriations from the Highway Fund for non-transportation activities were equal to about 20 percent of TxDOT’s own appropriations from the fund.

Pickett also said that TxDOT should find alternatives to debt service for road revenue, such as local government transportation reinvestment zones; changes to the state’s vehicle registration fees; and rebates to encourage the use of toll roads and mass transit.

Jacksonville Sen. Robert Nichols suggested shifting the state’s automobile sales tax from general revenue to the Highway Fund. The vehicle sales tax raised $3 billion in 2008 from an industry that depends on a functioning road system.

Trucks Increase Road Maintenance Challenges

TxDOT estimates that a fully loaded tractor-trailer truck can cause almost 10,000 times as much damage to highway surfaces as a passenger vehicle. According to the Federal Highway Administration, large truck traffic in the U.S. may increase by almost 40 percent by 2020, while passenger-vehicle traffic increases by 30 percent.

Ken Allen
H-E-B’s Senior
Vice President of
Supply Chain and
Logistics

“I think that should be on the table,” Nichols said. “I think that should certainly go to transportation.”

Doing Nothing: a “Hidden Tax”?

2030 Committee Member Ken Allen of San Antonio, H-E-B’s senior vice president of supply chain and logistics, said doing nothing to change our funding system isn’t an option.

“Mobility is a big, big deal to H-E-B,” he told the hearing. “All across Texas, we’re finding the arterial roads to be inadequate.”

Congestion can hurt the Texas economy and the environment as well as our quality of life. According to Allen, the American Trucking Association predicts the number of trucks on the road will double by 2025.

“When we sit immobilized in congestion, we’re burning expensive diesel fuel,” he said. “If the trucks and cars are rolling, it reduces fuel usage, it lowers the cost of transport and it means lower prices. We’re already paying millions of dollars of hidden taxes costing us time [and] fuel. We are prepared and we support paying more taxes into the Highway Fund so we can stop paying these hidden taxes that no one sees.”

Texas lawmakers are facing the undeniable truth that our road congestion is growing and will continue to grow.

“During the past 25 years, Texas’ population increased 53 percent. The use of our roads grew 103 percent,” said Delisi. “The trend is continuing, with some projecting an additional 27 percent in population growth and 67 percent in road usage over the next 25 years.” FN

Falling Behind

Texas has experienced years of fast growth – and increasing highway congestion. In the state’s five largest metropolitan areas, highway construction has lagged behind population growth and vehicle miles traveled for the past 15 years.



1990-2005 Increases in:
City Population Vehicle Miles Traveled Lane Miles of Highway *
Austin 55% 77% 36%
Dallas/Fort Worth 37% 61% 22%
El Paso 25% 72% 60%
Houston 31% 60% 27%
San Antonio 16% 84% 21%

* Lane miles equal the distance of all lanes of highway combined. For example, 10 miles of four-lane highway equals 40 lane miles.

Source: 2030 Committee

Investing in Urban Mobility

The 2030 Committee estimates Texas will need to spend $171 billion by 2030 in our in urban areas just to maintain present-day mobility. Actually reducing traffic congestion in our cities would require $213 billion. The cost of congestion will rise from $570 per urban commuter today to as much as $2,100 (in 2008 dollars) in 2030, if additional funding sources are not found.

2030 Urban Mobility Outcomes
Costs Current Funding Trend Prevent Worsening Congestion Reduce Congestion
Scenario Cost $70 Billion $171 Billion $213 Billion
Annual Delay per Commuter in 2030 90 hours 32 hours 19 hours
Congestion Cost Per Commuter* $2,100 $740 $430

* Amounts are in 2008 dollars.

Source: 2030 Committee

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