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On September 30, 2004, the Comptroller’s office was asked by state and local officials to conduct a review of the operations and management of the Central Texas Regional Mobility Authority (CTRMA) (Appendix 1). This report presents the results of that review.

Texas is on the brink of a significant change in the way it finances transportation. The state is moving from its traditional “pay-as-you-go” method of financing road construction, funded largely by motor fuels taxes, to an increasing reliance on bond debt and toll roads. In addition, new governing structures have been created to give local governments more authority over road construction and finance.

Laws enacted by the 2001 and 2003 Legislatures authorized the establishment of regional mobility authorities (RMAs) with significant powers over road creation. Essentially, these are county or multi-county toll-road authorities. Each RMA is a political subdivision formed by one or more counties, with the approval of the Texas Transportation Commission (TTC), entrusted with financing, designing, building, operating and maintaining toll roads and other transportation projects.[1]

In October 2002, the TTC approved the creation of the Central Texas Regional Mobility Authority (CTRMA), the state’s first RMA.[2] Its first project is US 183-A, an 11.6-mile toll road in Williamson County north of Austin.

Double Taxation without Accountability

Regional mobility authorites (RMAs) are not directly accountable to the people of Texas. No voter approval is required for their creation; no voter approval is required for the selection of their board members or staff; no voter approval is required for the selection and funding of their toll projects; nor is voter approval required for “conversion,” as it is called in transportation planner’s language. Comptroller Strayhorn has repeatedly said, “the redesignation as toll roads of roads already constructed, under construction or funded through traditional means, such as the gasoline tax, is double taxation.”

RMAs can issue revenue bonds, set toll rates and, in partnership with a taxing entity, establish a taxing district to assist with transportation financing.[3] Furthermore, the Legislature authorized TTC to convert parts of the state highway system to toll roads and transfer them to RMAs.[4] Most importantly, however, RMAs have the power of eminent domain—the right to take private property for transportation projects.[5] In effect, RMAs now have the same road-building powers as the Texas Department of Transportation (TxDOT), so long as their projects are consistent with local and state transportation plans.

Central Texas transportation projects are expected to receive revenue from the Texas Mobility Fund, which was created by the 2001 Legislature to support state revenue bond issues for transportation projects. Texas Mobility funds are allocated by TxDOT.

While TxDOT officials have stated in public hearings that regional mobility plans do not necessarily have to include tolls in order to receive money from the Texas Mobility Fund, other evidence, as documented on pages 11 and 12 of this report, demonstrates just the opposite.

Loose Management Practices

CTRMA is a unique entity in American government. Few, if any, jurisdictions have ever embarked on a project of the magnitude of US 183-A with so little in the way of public supervision and oversight.

CTRMA is managing a project involving hundreds of millions in public funds. Virtually all responsibility and accountability for this project lies in the hands of private contractors—some of whom have been politically active in promoting US 183-A and other toll projects in Central Texas. And the authority’s prime contractor, its general engineering consultant or GEC, has hired a number of subcontractors who have long-standing relationships with Travis and Williamson County officials responsible for regional transportation policies.

Furthermore, CTRMA functioned for two years before ever adopting an operating budget.

This review found that CTRMA is not exercising effective control over its contractors. The review team found that:

  • CTRMA is managing a project worth hundreds of millions of dollars, but had just one full-time employee until November 2004.
  • Despite handing out contracts worth millions of dollars, CTRMA does not employ a contract manager.

Favoritism and Self-Enrichment

One of the most intriguing aspects of CTRMA’s operations is the web of relationships among those responsible for its creation. To a surprising extent, this project—which will receive hundreds of millions of dollars in public funds—is the product of close collaboration among a handful of individuals, chosen without competition, resulting in the appearance of favoritism and self-enrichment.

E-mails released by the authority use terms such as the “circle”—and “outside the circle”—in reference to this close-knit group, which includes developers with substantial financial interests not far from CTRMA’s US 183-A highway project.

Some of the relationships and potential conflicts of interest involved in this circle include the following:

  • The chairman of the CTRMA board has a substantial interest in more than 254 acres of real estate within two miles of the proposed US 183-A right of way. He began making land acquisitions in the vicinity of US 183-A less than a month after the Capital Area Metropolitan Planning Organization (CAMPO) adopted plans for the road.
  • One of the Williamson County commissioners who voted to create CTRMA—and to appoint four of its seven board members—now serves as its executive director.
  • The executive director also serves as treasurer of Team Texas, a nonprofit forum for Texas toll authorities and contractors that appears to be a trade association, an apparent violation of state law.
  • The executive director’s former campaign manager, active in Williamson County politics and a convicted felon, is now a GEC subcontractor. He has also billed the authority directly for thousands of dollars in various services.
  • CTRMA’s general engineering consultant, which is responsible for much of the authority’s day-to-day operations, contracted with individuals and entities connected to CTRMA board members and staff, CAMPO members and elected officials in Williamson and Travis Counties.
  • CTRMA’s GEC hosted an event for area public officials at the Four Seasons in Austin, at a cost of more than $7,000. CTRMA was listed as a co-host for this event; this appears to violate the “no gifts” provision of the Transportation Code.
  • The “media relations” coordinator for Texans for Mobility, a private group formed to campaign for toll projects, is also a CTRMA subcontractor for public relations. A subsidiary of this subcontractor also answers queries from the public for CTRMA.
  • Another private organization, the Capital Area Transportation Coalition, has been strongly supportive of CTRMA’s road plans. Among its members are several CTRMA contractors, including the consulting firm that served as the authority’s initial staff.

This web of relationships is troubling, given the major expenditures of taxpayer dollars that are involved.

These and other relationships are discussed in greater detail in this report.

Lax Expenditure Controls

This review uncovered a number of troubling instances of lax expenditure controls. Some examples may represent common practice for executives of private businesses, but not public entities. These incidents, however, point to a significant lack of accountability for taxpayer dollars—accountability that is particularly vital for a project whose decision-makers never have to face voters.

Some of the incidents identified in this review include the following:

  • CTRMA has authorized, as of this writing, more than $2 million for public relations, marketing and “outreach” services, much of it expended in areas miles away from any impact US 183-A may have and before any construction has started. At least 12 firms are providing public relations work for this single project.
  • CTRMA hired and contracted to pay an independent consultant $4,000 at $250 per hour to help develop a job description for the authority’s chief financial officer (CFO) position.
  • CTRMA has reimbursed employees and contractors for meals, alcoholic beverages, first-class airfare, professional memberships and events that would be considered impermissable by both state and local government agencies. For example, CTRMA’s executive director was reimbursed for alcoholic beverages purchased in Monterey, California; the executive director approved his own expense statement.

Holding RMAs Accountable

This report contains 27 recommendations that would build public confidence in CTRMA and help all RMAs fulfill their mission of providing transportation resources quickly and efficiently, with maximum accountability to the public. Many of these recommendations identify needed changes in state law to ensure that all RMAs are accountable to taxpayers. Others identify improvements that CTRMA should make to its business practices and that should be implemented by other RMAs at the appropriate time.

Some of the Comptroller’s recommendations to amend state law include the following:

  • To prevent double taxation, prohibit the conversion to toll-road status of any road on which construction begins without tolls identified as a funding source.
  • Prohibit the Texas Department of Transportation from making allocations from the Texas Mobility Fund contingent upon the inclusion of toll roads in regional road plans.
  • Make RMAs more accountable to taxpayers by giving elected officials more oversight of RMA operations.
    • Require commissioners court approval of any toll road project that will be built or operated by an RMA in the court’s jurisdiction.
    • Require the commissioners courts of each RMA’s constituent counties to appoint all RMA board members, including the board’s chair.
    • Allow the commissioners courts of counties establishing RMAs to remove any board member, including the board’s chair.
  • Require RMAs to follow provisions in the Statewide Contract Management Guide.
  • Require RMAs to perform criminal background checks for contractors and subcontractors and prohibit them from contracting with convicted felons.
  • Require RMAs to follow state guidelines concerning the reimbursement of staff and board member expenses.
  • Prohibit RMAs from contracting for public relations or public involvement services with any entity engaged in transportation-related advocacy efforts.
  • Limit RMA board member terms to four years.

The Comptroller also recommends that CTRMA and any other RMA:

  • Employ a professional contract management officer to ensure that its contractors and subcontractors comply fully with the terms and conditions of their contracts.
  • Adopt contract procedures to ensure that its contractors and subcontractors receive contracts based entirely on published specifications.
  • Employ an in-house general counsel to ensure that the authority’s best interests are represented.
  • Require board members to disclose all real estate holdings.

And finally, the Comptroller recommends that:

  • CTRMA Chairman Robert Tesch and board member Johanna Zmud resign immediately, Tesch because of the potential for self-enrichment and Zmud because she is precluded from serving by TxDOT regulations.