December 17 Transcript


Texas Department of Transportation Special Commission Meeting


Ric Williamson Hearing Room
Dewitt Greer Building
125 East 11th Street
Austin, Texas 78701-2483

Wednesday, December 17, 2008


COMMISSION MEMBERS:

Deirdre Delisi, Chair
Ted Houghton, Jr.
Ned S. Holmes
Fred Underwood William Meadows

STAFF:

Amadeo Saenz, Executive Director
Bob Jackson, General Counsel
Roger Polson, Executive Assistant to the
Deputy Executive Director

PROCEEDINGS

MS. DELISI: Good afternoon. It is 1:35 p.m., and I would like to call this special meeting of the Texas Transportation Commission to order. Note for the record that public notice of this meeting, containing all items on the agenda, was filed with the Office of the Secretary of State at 3:05 p.m. on December 9, 2008.

Before we begin today's meeting, let's all take a moment to place our cell phones and other communication devices on the silent mode, please.

Today's meeting will involve a series of discussions on various topics before the department and the commission. Meeting in an open forum gives us a chance to deliberate as a commission, gain greater understanding of these weighty subjects, and provide guidance as to the direction the commission would like to see the department take to best deal with these issues. We will accept public comment that is relevant to any of the posted agenda items but will not have an open comment period as we do during our regularly scheduled meetings.

To comment on an agenda item, we ask that you fill out a yellow speaker's card and identify the agenda item you wish to speak on. You can find these cards at the registration in the lobby. And we will limit each speaker to three minutes.

Before we begin, do any of the other commission members have any comments or questions?

MR. UNDERWOOD: Madame Chairman.

MS. DELISI: Mr. Underwood.

MR. UNDERWOOD: I want to take a moment to thank our employees for the last few days with all this bad weather and whatnot. We've had hundreds of miles of roads that were covered in ice, large numbers of bridges were frozen over in the northern part, and I want to thank all our employees for doing a great job. They're unsung heroes and we really appreciate them. I just want to say this from the dais or whatnot.

I have one other thought. After the Sunset hearing yesterday, I kind of sometimes feel like -- after the Sunset hearing, I feel like as a commissioner I've done more for TxDOT than the Titanic did for the cruise business and whatnot, the winter cruise lines. So thank you.

(General laughter.)

MS. DELISI: Thanks, Fred.

Okay, on that note, Amadeo, I'm going to turn it over to you to take us through the rest of today's agenda.

MR. SAENZ: Thank you, Madame Chair.

Commissioner Underwood, we know that you were working with the Ports to Plains and brought some people from Alberta here. You just forgot to tell them to shut the door when they left.

But thank you, Madame Chair. We'll begin today's meeting with a presentation from our 2030 Committee. This is an esteemed panel of experts that have volunteered to help us identify what the future transportation needs are in Texas all the way till the year 2030. I'm going to call on David Casteel, our assistant executive director for District Operations, to introduce the panel members and get this presentation underway, so David.

MR. CASTEEL: Thank you, Mr. Saenz. And again for the record, my name is David Casteel and I serve you as the assistant executive director for District Operations.

Last May, Chair Delisi asked a group of state business and academic leaders to independently assess the transportation needs of this great state for the next two decades. This group became known as the 2030 Committee. The department's role in this process was to provide funding for Texas A&M and the University of Texas and the University of Texas San Antonio to provide staff to the committee to develop the computational analyses required for an independent transportation needs assessment for Texas, for Texas to be an economic power, retain its vitality and competitiveness through a safe and efficient transportation system.

The 2030 Committee examined the needs for maintenance of bridges and pavements and for mobility additions. Their estimates do not include all the engineering, the mowing, the light bills we have to pay, the administrative costs, the collection fees that we have to expend in order to collect our resources, and other costs associated with the department. Again, their estimates are for pavement, bridge maintenance and for mobility additions.

At their first meeting, the committee elected Dr. Michael Walton as the chair of their effort. Dr. Walton is professor of Civil Engineering and holds the Ernest Cockrell Centennial Chair in Engineering at the University of Texas. He also holds a joint appointment at the Lyndon B. Johnson School of Public Affairs. With more than 35 years of worldwide experience in transportation policy and analysis, there is no one in the nation more qualified to lead this big effort than the very esteemed Dr. Walton.

Chair, I'd like to yield to Dr. Walton to introduce his committee and give you his brief report. Dr. Walton.

DR. WALTON: Thank you, David. Madame Chair, members of the commission, I'm delighted to be here to tell you about our effort over the last six months, to present our report, and recognize that it's a stage reports draft and there will be much work left to be done. I have a power point presentation I would like to go through which includes the introduction of the committee members.

But at the outset, let me say that it was a privilege to work with such a distinguished group. I can tell you not only of their dedication and their time and their resources to this effort, but the sincerity of the mission at hand, so I sincerely appreciate the opportunity to work with such a great group. And I think you'll see later on when we get into the discussion session that they'll be adding to our report.

These are the members of the committee. They're all here, save for Judge Emmett who, unfortunately, is chairing his own meeting at this particular time and extends his regrets and best wishes for a successful meeting.

As you know and understand the context and what we were asked to do, clearly looking at the population growth of the state, projections from 7- to 17 million over the period of 2030 is a substantial growth estimate, you can think, of course, and you know better than most about the policy issues that the state will face and understanding how we place the priority on the needed elements of our infrastructure and the needed elements to meet that demand.

Secondly, you recognized that there was a need for an independent, hopefully credible study, to come up with an estimate of the transportation needs to the year 2030. Hopefully, the report that we've prepared provides the basis for that.

At that particular point, I'd like to say that not only did we appreciate the diligent efforts of the universities involved and the project staff that committee, again, time and effort, it was outstanding, but also, as you know, we had several public hearings around the state and we had a reasonably good turnout. We had six public hearings, different places around the state, several hundred people showed up for the public hearings, they provided a great deal of input, and we factored that into our discussion so we'll pick that up as we go through.

And in essence, the TxDOT staff, upon request, provided information to us on a continual basis. It is our report, it is not TxDOT's report, it is not a report of the universities, it's our effort that we report to you. And then, of course, we did not discuss revenue sources or revenue levels because that was beyond the scope of our effort.

As I mentioned the scope, and as David mentioned in his introduction, we focused on maintenance and mobility, and for maintenance, pavements and bridges for the most part. As you'll see in just a moment, it was our belief that preservation of our investments of the past must be the top priority, number one priority, and then mobility after that. The overview of other transportation needs were made, we'll speak to that, but recognize that within the six-month time frame that we had, it was not possible for us to go into depth in the other modes, but we're prepared to discuss those with you.

Some of the key questions that were before us were: what are the infrastructure goals that are either articulated at the urban areas or in the rural areas or by the state agencies, what are those; what level investment is needed to protect our investment, either in bridges or in pavements, urban/rural areas; and then what are the effects of alternative investments strategies -- we'll show you some of that, we believe we'll provide some guidance; and then what about the strategic relationships with other modes, public transport, freight rail, intercity passenger, waterways, ports and airports, and we got a lot of input, I'd say, at the public hearings on the various modes as well.

So the committee goals: Number one, preserve the investment that we've made in our pavements and bridges, just as we maintain our own individual homes. Preserve and enhance the urban and rural mobility, their value to the economic competitiveness of Texas is significant, and we believe that throughout our discussion that it's important to maintain the competitive edge of Texas, and I'm sure you share that as well. Enhance the safety of traveling Texans -- we're killing 3,400 people or so on our highways in Texas, and so consequently, anything that we can do to make our roadways safer obviously is of critical importance to us. Initiate a discussion about strategic rebalancing of transportation investments; basically that means look at multimodal, intermodal integration, connectivity with other modes as we've been doing in the past, probably need more attention to that in the future.

So here are our recommendations, and I'll go through these quickly and then hopefully have time for discussion, at which time I'd like for the committee members to be engaged in that discussion.

On the pavements, number one, preserve the asset value of all pavements, maintain a 90 percent good or better pavement condition goal. Right now I understand that we're working at about 87 percent; 90 percent is not the highest level but good or better is our target. Establish a statewide system for pavement maintenance and priorities, we believe that's an important next step, if you will. All of that, come up with an estimate of $89 billion over to the year 2030 for an annual average investment of $4 billion. This gives an idea of how that levels out, and in essence, some initial major investments in the early years and then leveling off as we go through.

Under bridges, bridges have been highlighted throughout the U.S. with more recent events, and we'll see more attention given to bridges at the national level and individual state level perhaps with the stimulus package and other issues. In essence, the first recommendation is to replace or retrofit on-system bridges that are structurally deficient or substandard for load-only -- and this is to the year 2012. There are at least two definitions of bridges, as we point out here, the structurally deficient or functionally obsolete. Functionally obsolete means that perhaps the deck does not provide the geometry that we would like, maybe for the shoulder that we need to meet standards, perhaps it's the clearance under the bridge and the like, but the emphasis is on the structurally deficient bridge, and it's not suggesting that we have to replace every bridge but to investigate the bridge and see what can be done to retrofit it.

Anyway, focus on load-only bridges by the year 2012 -- in other words, hit those hard, get those fixed, that could be, perhaps, part of the stimulus package. Replace the remaining structurally deficient and substandard that are for load-only, and then for functionally obsolete bridges to the year 2030. During that period of time through 2012 there perhaps will be other bridges that will fall into that category, we pick those up and then as time moves forward, continue to bring our bridges into par. Increase the inspections, if you will, and the maintenance activities, and all of that suggests an investment of $36 billion total through the year 2030, 22 years, or $1.6 billion annually.

Now, perhaps one of the more interesting areas -- I'll skip the bridge pavement, I think you can see what the numbers suggest there for replacement, maintenance and inspection -- but the urban mobility area is an area of some interest. In essence, we took the approach of looking at some scenarios, some what-if conditions. We built four basic scenarios that I'll go through with you, and these are significant.

One was to think in terms of prevent worsening congestion, do not allow the urban mobility that we currently enjoy or are experiencing now to get below the average of peer cities, so we are using peer cities in groups throughout the U.S. not just Texas cities, and what we're saying then, on the average we don't want to be any worse than that group. That's one particular scenario.

Broaden the ability of the urban regions to raise additional revenue is always the case, and this is about the only place where we touched on revenue and quickly retreated from that because we know that you have another group focusing on that. But in essence, the investment needed is $171 billion or $7.8 billion annually, and I'll speak to that in more detail.

This particular slide suggests the delay hours per commuter annually in 2030 to the cost, if you will, associated with that. You'll notice the shaded yellow area suggests that that's the inadequate mobility investment. The four scenarios are the boxes: we have the current trend that we're experiencing now; and then we have maintain economic competitiveness which is important to us, that particular box represents the average of the peer cities, cities with whom our cities compete on an economic level, and we discuss that in more detail; the next box is prevent worsening congestion, in other words, maintain at least what we have now; and then the last would be to reduce the congestion altogether and address the experienced delay levels of less than 20 hours per year.

Notice that on the delay, the maintain economic competitiveness delay is 48 hours -- that's 48 hours for a given year; and then for the next box, the recommendation prevent worsening congestion, that corresponds to 36, I believe. Now, what about the historic state share, because not all of this is the state's responsibility, urban areas also, local governments participate through a variety of mechanisms. So what we attempted to show here is the state share in the green shading. It's a range, and recognize that that historically has been what the state has provided, and of course, it varies from area to area.

To elaborate even more about these four scenarios, you can see the current trend and the level of congestion on the far left -- my far left -- and in essence, we're talking about congestion that's extraordinarily high. Now, congestion is fuel, time lost and the like. Then you can see the red represents the scenario implementation cost, what it would take to keep us at that particular level. What we are recommending is prevent the worsening congestion the $171- investment with a $220 billion congestion cost level. You can see that those three come relatively close in the total share that we're suggesting that that $171 billion investment is our recommended target after looking at these four scenarios and considering the implications.

Now, if you look at the benefits and the cost associated with that in billions of dollars -- all these dollars, by the way, are in year 2008 -- but if you look at, again, prevent worsening congestion, the red is the investment level that we're suggesting and the blue are the benefits to be derived: time saving, economic competitiveness stimulation, jobs, so forth and so on. The next, and the last of these slides, I believe, represents the scenario implementation cost and that is what we touched on before.

So that is the urban mobility and we'll come back to that because that's a very interesting one.

Let me suggest that in computing the cost, we took the 25 plans from the metropolitan planning organizations, so we're using the plans that have been developed in the urban areas. They are financially constrained, as you know, they're all based on computer modeling. We're taking that as input and using that as the basis for the work that we're estimating. So it's their financially constrained, approved plans, it's not our creating plans outside of their involvement; we worked with them to establish those needs and relationships.

Now, the fourth category is the rural mobility and safety. Here we're talking about completing the Texas trunk system, finishing that off at a four-lane system, as I recall. It would facilitate the rural competitiveness, the connectivity between the rural areas market, stimulates economic development. We feel that this is an excellent opportunity. You can talk about an investment of about $17 billion total to complete that over the 22-year period, or about $0.8 billion annually. This suggests what the benefits would be associated with that investment so you get a sense of what the order of magnitude derived from that might be.

So the total investment needed is summarized in this chart: pavements at $89-, bridges $36-, urban mobility $171-, and rural mobility/safety $17-, for a total of $313 billion total through the 22-year period. You asked us to define what the needs for the state would be; this is what we have come up with.

Now, if you look at the next chart, this sort of suggests what the state investment might be. You can see that the state investment is the same as the total investment for all categories except for urban mobility, and historically about two-thirds of the urban mobility has been the state responsibility. So in essence, if you look at the historical trend, that's probably a typical figure you could use to get a handle on what we're talking about, and of course, that varies from urban area to urban area. I know that Michael Morris in Dallas-Fort Worth talks in terms of 60 percent of the funds that they're looking to coming from a variety of local sources. So it will vary a lot depending upon the size of the community and, of course, how their plans fare.

Now, you could ask what about other modes and options. We focused on those four since those four are the principal categories of responsibility for the Texas DOT, however, it's not to say that we have ignored public transportation or the other modes because in the local areas we have used an equivalent expansion number of lane miles, highway lane miles for whatever value of mobility the local government chooses. So therefore, you can take an increment of that, if you were allowed and if it was feasible, and invest it in other modes. We're not suggesting that the unit costs are the same, just saying that there is a particular amount that you would transfer and then you would have to assess what the impact of that might be.

So while it's not explicitly represented in our work, you'll find that there is some measure of flexibility. We've tried not to ignore the other modes, they're just not explicit, and you'll see that in the report when you go through it. So the other transportation modes were typically beyond the scope but we tried to introduce that where we could. We've made specific recommendations for some of the other modes. Public transport which, by the way, you can imagine got a lot of attention in the public hearings, a lot of emphasis on doing more for public transportation, all forms of public transportation, and so consequently, our recommendation talks about what you might be able to consider doing in that arena.

Freight rail -- which I think we'll talk about -- was well represented on the committee, as was public transport. You had representation from across the modes and we'll continue to look and make some recommendations to you for you to continue to consider other options and other efforts to expand the freight rail possibility.

Intercity passenger, including high speed rail, are on the table, we know there's a lot of activity now. Representative Mica was successful in Washington, and there are a lot of states now who are aggressively pursuing that. We're suggesting that there's opportunities there as well which you're already engaged in.

Ports and waterways, there's so much happening on the horizon in ports and waterways, and Texas is well suited to benefit from that, particularly if you consider changes that are taking place in the Panama Canal, how to shift some of the freight movement from the West Coast perhaps to the Gulf Coast states and the East Coast. All of that mix we were unable to investigate in a significant way but to recognize it in our report and we've tried to do that. Perhaps there's more that you could suggest that we do in that arena. And the same for airports. A lot of interest in general air and the airports and its connectivity, if you will, to the regions.

So all the other modes we've represented in some fashion and suggest that there may be efforts that you want to consider and pursue this further.

So in essence, that's a very quick overview of our work. There's a schedule that's been proposed and perhaps you're aware of that or David can talk about it later, but there will be an open period for review and comment, and then come back to you I think in your February meeting for final action if you so desire.

Let me close, again by saying what a personal privilege it was for me to be associated with such an outstanding group, and thank you for extending the invitation to me to participate in this exercise. It's truly an important effort, the scale is enormous, but all I ask is that you don't shoot the messenger. Thank you. And I think perhaps questions, and I'd ask all the committee members to participate.

MR. HOUGHTON: I have just a clarification, Dr. Walton, and thank you very much for chairing up the committee and to the members of the committee for serving. It was a heavy lift and a lot of work; the numbers are pretty staggering.

The question that I have is going back to your bridges. You talked about replacement on-system, structurally deficient, substandard for load-only bridges by 2012. What number was that, did you break it out?

DR. WALTON: The number of bridges?

MR. HOUGHTON: No, the dollar.

DR. WALTON: Yes, I think it is broken out.

MR. HOUGHTON: And then it says 2030. Is that rolled up in that $36 billion?

DR. WALTON: Yes, I think so.

MR. HOUGHTON: So if you broke it out, what are the current bridge replacements by 2012?

DR. WALTON: That's something I can't address. We have some of the bridge people here who performed that work. May I ask them?

MR. HOUGHTON: Absolutely.

DR. WALTON: I thought they were here. Jose Weissmann from UT San Antonio.

MR. WEISSMANN: Mike was kind enough to introduce me. I'd say the first path would be to take care of all the structurally deficient and substandard for load-only bridges. And I don't have the report in front of me, we have it broken down by year, so I'm not going to hold my feet to the fire for the exact number.

MR. HOUGHTON: In the ball park.

MR. WEISSMANN: In the ballpark, I think for the on-system about $700 million the initial year.

MR. HOUGHTON: Initial year, but I'm talking about to 2012, in that period of time.

MR. WEISSMAN: 2012, you have bridges that are getting in and out of the category, but we have a data set that discriminates all the bridges that are currently structurally deficient and substandard for load-only for both the on- and the off-system. Those we know where they are, we know what the deck area is, we can assign a cost for them. Through the year 2012, other bridges are going to come in that are subjected to deterioration modeling. We have a certain procedure that we use that is detailed in the report that shows which bridges are going to come in and what criteria we use for that, but the first year is completely reliable because we know who they are, where they are and how much the cost is going to be.

DR. WALTON: What would be the sum from '08 to '12?

MR. WEISSMANN: I don't have the number off the top of my head, I'd have to add it up.

MR. HOUGHTON: Ballpark.

MR. WEISSMANN: Ballpark I would say a billion a year.

MR. HOUGHTON: A billion a year?

MR. WEISSMANN: On replacements, yes.

MR. HOUGHTON: Okay.

MR. WEISSMANN: A billion a year. And again, as I said, approximate values, just to give an idea of the order of magnitude of what we're talking about.

MR. HOUGHTON: Thank you.

MR. WEISSMANN: Thank you.

MR. HOLMES: Dr. Walton, thank you, and thank you very much to the committee. I know you guys spent a lot of time on this and we appreciate your attention to it and your work on it.

Amadeo, how much do we spend a year on bridges, $200- or $300 million?

MR. SAENZ: $250-, average.

MR. HOLMES: $250 million, and so 4-X to just cover structurally deficient and obsolete.

MR. HOUGHTON: Between now and '12.

MR. HOLMES: Between now and '12.

Dr. Walton, you addressed the very big pieces of the charges that TxDOT has. The pieces that were left out that did not have dollar values assigned to them were the public transportation, ports and waterways, airports, overhead. Were there any other large pieces that you did not look at?

DR. WALTON: As I mentioned, some of the public transport and other modes would be picked up in the overall estimation of mobility for the urban areas. There's flexibility to move from one to the other because the plans that many of the local areas have include those other modes. But what other areas, Bill or Rob?

MR. HOLMES: And currently there's no money in freight rail.

DR. WALTON: Right.

MR. HOLMES: And so, Amadeo, what do we have another $3- or $4 billion a year that we're already spending in those other areas?

MR. SAENZ: Yes, sir. I think some of the areas that were not covered, the areas that were covered are the areas that deal with our infrastructure out in the field in this report. We still have within the department our administrative costs, monies that go to do diversions, monies that go to handle some of our current construction, monies that go to address our routine maintenance is not included in this number, both the contracted side and the other side -- that's about a billion dollars a year. So when you start adding those numbers, those numbers probably will add up to something like, I would say, maybe about $100 billion over that same time period.

That's not included in this, so when you look at the gap, the gap as to what we need to operate the department, to cover the lights, pay the bills, patch the potholes, stripe the roads plus all of this is going to be somewhere about $500 billion for that 22-year period. So it goes from -- what was your number, Dr. Walton?

DR. WALTON: $313-.

MR. SAENZ: $313- to about $500-.

MR. HOLMES: $500-, so it's something on the magnitude of $17- or $18 billion a year?

MR. SAENZ: Yes, sir.

DR. WALTON: Right.

MR. HOLMES: And the current budget is $8-.

MR. SAENZ: The current budget is $8-.

MR. HOUGHTON: Another question, Dr. Walton, is you talked about preservation of the asset, looking at 90 percent.

DR. WALTON: Right.

MR. HOUGHTON: Where did that number come from?

DR. WALTON: That's for good or better, all the pavements.

MR. HOUGHTON: I mean, how did you come up with that?

DR. WALTON: I think that goes back to Commissioner Nichols and the commission goal that was established.

MR. SAENZ: That goes back to 2000, I think. I think Chairman Laney was still on the commission or maybe Chairman Johnson had just come on the commission and he set up a blue ribbon group that looked at identifying some goals for the department, and one of the goals was, of course, preservation, and the goal that was established by the group and later adopted by the commission in 2001 was 90 percent of our bridges need to be in good or better condition -- that means that they have a pavement score of at least 70.

We've had some discussion items in the past about what our pavement scores were and what entails those numbers, and we look at distresses like cracking on the road, the rutting, and also ride, and we develop a pavement score and we want to have the score of at least 70 and we wanted at least 90 percent of our roads to have at least 90 percent, at least a score of 70. That goal was established and we had a 10-year goal to get to that, so by 2012 we wanted to get to 90. Currently we're at about 86.5 I think is where we're at right now.

DR. WALTON: Yes, we did a scenario testing at 80 percent, and Drew, do you want to speak to that? Drew Crutcher.

MR. CRUTCHER: Yes, sir, Dr. Walton. Basically what the department's goal had been was to try to get to 90 percent good or better by 2012. We asked some questions about that level, and of course, as the roads deteriorate, there's a greater cost to the traveling public over those deteriorating roads, so we looked at 90 percent, 87 percent and 80 percent, and I think our report indicates that there were 5,700 lane miles of pavement that would fall at 80 percent level, below fair conditions, and if we would reduce that again to 80 percent, that we would pick up another 19,000 lane miles of pavement in Texas that were worse than what we call fair and there's a cost to the traveling public for that deterioration in those roadways.

MR. HOUGHTON: So there's a criterion in there that you don't throw a dart and say it's 90 percent, it's safety.

MR. CRUTCHER: Yes, sir, and we built on some past levels of the department determining what is a good level and the discussions that we had and the testimony was that the 90 percent goal that the commission had established by 2012 was a good one, and then we tried to compare that to, well, okay, if we're trying to go for that level, what happens if we're at 90 percent, 87 percent or 80, and we showed how many miles that we're picking up at worse than fair conditions if we do not hold to that 90 percent.

MR. HOUGHTON: So good science and economic issues were inputted.

MR. CRUTCHER: Yes, sir, with an understanding of the deteriorating pavement cost to the traveling public. There's always a balance in there for that.

DR. WALTON: Ken, would you like to add something to that?

MR. ALLEN: I think our committee felt strongly that an ounce of prevention is worth a pound of cure, and that we certainly don't want to let the maintenance of our existing infrastructure deteriorate, and we feel like it has over the last few years, as we used to have 90 percent of our roads in good or better condition, we've fallen to 87. We think 90 percent is more in line with where the state ought to run their business. If you reduce maintenance, it will cost you dollars over the long run, and our group just felt like we have to keep our roads in good condition.

MS. DELISI: As many of you know, that 90 percent number has been an issue over the last year with the legislature, and just, in fact, yesterday the Sunset Commission voted to recommend an 85 percent level for good or better. So can you put into perspective what the difference would be -- is there an economic or monetary number that you can put to the difference between 90 versus 85? What does that mean to the traveling public?

MR. ALLEN: Well, to my business it means that our maintenance cost would go up per mile driven, so if the roads are not in good shape, we have higher maintenance costs. And as I've said several times in our committee meetings, I would rather spend my money on --

MR. HOUGHTON: Ken, when you say you, you mean your industry.

MR. ALLEN: Our industry, the trucking industry, and the ATA stands behind this thinking and has written about it in multiple occasions that we would rather pay taxes than pay maintenance costs on our vehicles, and so if we can pay taxes up front and maintain our roadway system, we think it's the better business deal for the trucking industry.

MR. CRUTCHER: Madame Chairman, we don't have it in this report because it is, of course, a summary and a broad-brush presentation of what we discussed, but I think those numbers are finite and they can be brought to you. What we really were looking at here is just how many additional miles we were picking up, and of course, we know what those miles are and I think the researchers can key that with the cost to the traveling public.

MR. HOUGHTON: So what you're talking about, Murray or Ken, either one, applies to the trucking industry, it also applies to me driving my automobile and hitting potholes and screwing up the front end or bending an axle or whatever.

MR. CRUTCHER: Going and getting your car realigned or whatever, it all relates.

DR. WALTON: Let me introduce Mike Murphy who did much for the pavement work.

DR. MURPHY: Actually, Dr. Zhanmin Zhang and I worked on the pavement needs assessment, and the point that you just made about the impact on vehicle operating costs is a substantial one. Zhanmin has been working specifically on that issue and just giving ballpark figures, going from the 90 percent to 80 percent good or better, saves roughly $13 billion. The cost at 90 percent was about $77 billion, the $89 billion figure you saw was $77 billion to do the maintenance and rehab, $7 billion to do routine maintenance and $5 billion to do maintenance on the added capacity lane miles. But dropping from 90 percent down to 80 percent good or better saves you about $13 billion over that 22 years, but the increase in vehicle operating costs to the traveling public is about $33 billion. That's looking at both passenger car expenses, as you mentioned, shocks, tires, vehicle depreciation, but in the analysis that Zhanmin has done, he's looked at cars and he's also looked at trucks because the expense on trucks is higher than it is on cars, there's a higher expense.

So you may be saving money out of one hand but the Texas public is paying it out of another hand.

MR. HOLMES: All of these are '08 dollars. Correct? So there's no impact of inflation projected over this out to 2030.

DR. WALTON: That's right.

MR. HOLMES: And Amadeo, our total budget today on new capacity and maintenance is about $2-1/2 billion?

MR. SAENZ: Yes, sir.

MR. HOLMES: And about a billion one or two or so is maintenance?

MR. SAENZ: Yes, sir. Our letting capacity for this year for all construction is about $2.5 billion -- that's excluding the bonding programs -- and of that, about a billion of that is on the preservation side.

MR. HOLMES: You see the challenge if you need four just for maintenance.

MR. HOUGHTON: The input criteria, Dr. Walton, when you look at the urban mobility and the total dollars, the investment needed, and then based upon congestion, reducing that, where did that information come from?

DR. WALTON: Let me call on Tim. By the way, while Tim is coming forward, there was a comment earlier about routine maintenance on top of the $313-, we believe that that is included.

MR. SAENZ: Okay. So we saved a little bit then.

DR. WALTON: Yes. Every little bit helps.

DR. LOMAX: Tim Lomax with the Texas Transportation Institute. The data we used came from the metropolitan planning organizations. Each of them has a plan for how they're going to spend the money that they expect to receive over the next 25 or 30 years. We used those as the base for the urban mobility analysis, plus you may remember the Texas Urban Mobility Plan and the Texas Metropolitan Mobility Plan, in those they investigated this issue of eliminating serious congestion so that became another scenario that we pursued, and then we used some estimation techniques and some more computer modeling to fill in some other scenarios in the middle.

MR. HOUGHTON: The unconstrained plan. Correct? So whatever it needs to get your congestion number index down to this number.

DR. LOMAX: Yes, sir. It was a let's solve the problem kind of plan rather than how much money do we have and how much worse are things going to get.

MR. HOUGHTON: So this is local-driven input

DR. LOMAX: Yes, sir.

MR. HOUGHTON: Thanks.

MR. HOLMES: Doctor, may I address one or two for Tom Johnson?

DR. WALTON: Please.

MR. HOLMES: Tom, knowing the contractors as well as you do, is there capacity in our contracting community to deliver this level of work?

MR. JOHNSON: I guess the capacity could be available. We went from lettings of two seven to five two in one year without a hiccup, and that was during a period of time when the homebuilding and whatnot was very competitive for commodities. We're now earning out between $350- and $400 million, the industry is eating up all the backlog. We have virtually no backlog now, less than ten months, assuming you finished all your projects. When we looked at this before the department went in with their LAR, we came in with an easy step up to about $11-1/2 billion. So we don't have a problem with the contractor capacity, we don't have a problem with equipment and now we don't have a problem with materials.

But if we continue on the downward spiral that the department has been over the last 18 months, we'll probably lay off another 5,000 this month, we're going to lay off another 5,000 in January, and so it just depends on how long we go before we begin to fund the department as to how long it's going to take us to rebuild the personnel and to get them back in the industry. But we still think to get up to the $11- to $12 billion is an easy mark and go on beyond under the current atmosphere because there is a total availability of materials, transportation, and it's just a matter of gearing the people back in.

MR. HOLMES: The 5,000 employee reduction this month and next month, what is the cumulative total over the last year or so of reduction in staffing and off of what base do you think that is?

MR. JOHNSON: We figure normally it hasn't been as bad as it's getting right now, and the reason is because 16 months ago you had roughly $16 billion under contract and we were probably 55 percent earned out, so in addition to the reduction in lettings, during that period of time we maintained a pretty good $350 million, $400 million earn-out. So we weren't laying people off, what we were doing, particularly in the metropolitan areas, was working 24-7, we were really expediting and finishing projects. That carried us through this last summer session but you have no replacement work, and like I say, when you take an overall under contract and you reduce it from $16- to $12 billion and you were roughly 55 percent earned out and now you're 66.6 percent earned out, so in real numbers you've got something less than $4 billion on the books, and for a department and a state this size, for all practical purposes, you're out of business right now.

That's the reason we had like 5,000 layoffs. One company alone in Houston that you're familiar with that will lay 1,500 people off this month. It's not a really pleasant sight. Now, we'll ramp back up, we'll get a lot of those, there's a tremendous number of homebuilder type employees that are walking the streets now that are available. It's a great time to move forward, and hopefully, if the stimulus package that -- Madame Chairman, you have done a great job in submitting real projects and whatnot -- if that comes to fruition, that could give us, as you know, $6 billion over the next five or six months. So the question is can we go to contract, if we bill $6 billion, could we bid and put that to work. The answer is, without a skip, we have no problem whatsoever. Forecast that out, that would tell you that we wouldn't have a problem going at least to the $11-1/2 to $12 billion. Whether we get on up to $14 billion, it will be a little bit more difficult, but the first $11- or $12- is kind of a walk in the park.

MR. CRUTCHER: Commissioner Holmes, I'd like to just add that this area of urban mobility was one that the committee discussed in great detail about what was an appropriate funding level to attain what Texas ought to have. And of course, all of us can't do this without thinking about what money is available or what contractor capacity is out there, and we recognized a lot of that, but we went back to saying: Okay, for our communities that have plans onboard right now and they have a certain level of spending that they're counting on, if we go forward with that and that spending alone, what impact does that have on Texas. And then we looked at: Okay, what happens if we prevent congestion from getting any worse and what level of funding would it take to get there.

And from those two I think we built on saying that would be an improvement and then there ought to be a floor on what Texas ought to try to address, and that floor for us was economic competitiveness from our state for other states. Now, that's somewhat subjective when we start talking about comparing Houston to Boston or Dallas to Atlanta, or whatever, but as best we could, we looked at saying what would we think would be a floor to what we ought to invest in Texas to remain economically competitive. So not prejudging what the commission and the legislature thinks that we ought to spend but trying to lay out here what we think that impact is on Texas at those spending levels is what we have for this one key chart in that mobility range, I think.

DR. WALTON: Madame Chair, if I might, I'd like for the members of the committee to have a chance to say something, if they'd like. David Marcus served as vice chair of our committee.

MR. MARCUS: Thank you, Madame Chair and commissioners. One of the things that you need to keep in mind, I think, in this report is these numbers are all going to be affected by the alternative forms of transportation that we really didn't discuss. If in the next 20 years we build a huge mass public transit system in all of our urban areas, then the dollar amounts to build new assets in those areas for highways and everything else will be changed, they actually could go down.

And we didn't do this in a vacuum, we wanted to make sure that we heard the concerns of people across the state, and as our chair mentioned at the onset, we held six public hearings across the state, in El Paso, Amarillo, Dallas, Corpus Christi, Houston and Austin, and almost without fail there were people there that were very concerned about a lack of alternative forms of transportation and the impact it has on our Texas economy is huge because people consistently brought up the fact that corporations when making decisions where to locate are going to look at a lot of things, not only libraries and parks and things of that nature, but can their employees get to work without driving their car. So that is going to have a major impact as well. And that's going to affect intercity rail and, of course, it's going to affect freight rail, so as my friend Roger Nober will be happy to tell you about.

DR. WALTON: Roger.

MR. NOBER: Well, thank you, and I appreciate the opportunity to be on the committee and representing a freight rail company here in Texas to try to bring the perspective of a company that actually is in the business of providing transportation and the kinds of issues that we face, and I'd just like to make two points about the report.

The first is that it discusses some of the freight rail needs in the state and those sections are more on a project basis, looking at particular bottlenecks like Tower 55 or some other places in the state, and we encourage you, as you think about mobility in general in the state, to think about the need for those kinds of projects as well. And particularly in the Houston area and in the Dallas area, when you want to improve urban and regional mobility, you have to do something with improving freight rail mobility and through put to improve grade crossings and the fluidity of service roads. I don't know that that directly translates to a dollar figure in the report but it certainly was something that was on our minds.

The second issue, I think, that I'd just like to highlight is something along the lines of what Dave suggested which is a lot of us were very uncomfortable with the unit of measure we used in urban areas which is lane mile equivalents because even if you wanted to build all the lane miles that it would take to move people, for environmental and social reasons you couldn't even if you wanted to. But that was used as a unit of measure and as a kind of measure of need but that's not necessarily a guide as to what anybody would actually build to improve mobility. And I stand with David that we need to look at more broadly and different modes to try to help mobility in the state.

So with that, I enjoyed my time on the committee and I hope you all will continue to look at the needs of freight rail in Texas which is probably the most freight rail dependent state in the country overall for its economy.

DR. WALTON: Tom.

MR. JOHNSON: I want to thank the commission and Chairman for putting this committee together. In all the years that the department has had varying numbers and whatnot on costs, politics invariably come in the middle of it because they say well, you don't have that much money so no need coming up with a report if you're not going to have that much money. It's not that kind of report, it's very objective, it's straight up, it's honest, and the legislature will have the opportunity to decide how much of it they can fund or want to fund.

One of the things I learned is from businessmen, like Mr. McLane and Ken from H.E.B., these guys in business are willing to stand up and see their industries pay and they're tired of watching their trucks sit in traffic. And you've heard Ken say it time and time again, one of the things that they've done in here is show the economic impact of doing nothing. Mr. McLane is the one that brought that out very early in these discussions, and I think it's important to say sure, $10-, $11-, $12-, $15 billion is a lot of money, but gee, what does it cost if we do nothing.

So with that, I'd like to thank the commission for providing the staff from both A&M and University of Texas and San Antonio that I think did a good job and were very responsive.

DR. WALTON: Thank you. Drayton.

MR. McLANE: Chairman Delisi and commissioners, I congratulate you for having the vision to do this. This is something I don't think the total view reaching out this far has possibly been done in the past or we wouldn't be so scared when we saw what all these numbers amounted to, or you might not have commissioned this if you'd have known what it is. But you know, you have to have a vision of where you want to be and you have to have a plan to get there, and I think this is just a beginning of a plan.

And as Tom just said, I'd like to congratulate TxDOT, their engineers and their leadership, they worked really, really effectively with us. And I certainly was an amateur when I got on this and learned a great deal about our highway system and mobility in Texas, and so that has been a great educational and enjoyable experience, and I enjoyed the professionalism. And then particularly the two research groups from University of Texas and Texas A&M, they have a wealth of knowledge and I hope you will continue to pursue that.

There are just several parts that I quickly felt was important here. If you look at these numbers and the only time I've ever seen numbers like this is when we're trying to sign a baseball pitcher, and they're in this category.

(General laughter.)

MR. McLANE: But seriously, these numbers are astronomical, but all of us want to get a return on investment and I have never seen anything where you make this investment and this is the return.

The second idea is Texas is what it is today, part of it is economic development. We've been way out in the forefront for 50 years. If we're not careful, we're not going to be able to continue to drive this economic development because as people look places to create employment, they want to know about mobility and we're hitting a problem in that area.

The second, I think all of us see this is in the urban areas, particularly the central business districts of Houston, Austin, Dallas, San Antonio and others. If we don't improve the mobility, we're going to stifle them and they can't continue to grow and they're to decline, and I think if we're going to preserve the center cities, around our state that are so important to us, this is really going to be an important issue right there, and so I think we certainly need to look at that.

The cost of doing business, Ken talked about it, I've been in the trucking-transportation business all over the United States and Texas has always been one of the best models there is, but we can testify that it has really become very, very congested as you move on the major highways in Texas, and it relates in the cost of logistics. Logistics is a big, big factor in what the consumer ultimately pays for the products that they take, and I think we need to look at the logistics factor in our state and the public pays dearly for that.

The last one, I know you all are well aware of, is the emotional factor of sitting in traffic, congestion, saying is the leadership of Texas ever going to do anything about this. And that's hard to put in dollars and cents but it's an important part of viewing for the future. Texas has always, I've felt, been in the leadership in every category and our highway system has been one of the two or three best in the states, but if we're not careful, we're going to slip back.

DR. WALTON: Ken.

MR. ALLEN: I would also like to thank the commission for being a member of this committee. I grew through this experience and I enjoyed this experience.

Texas is a great state, and you'll think Drayton and I may have worked our talks together, but this is a great state and it's always been a great state. It's a growing state, the population increases are staggering, the amount of freight that's going through our state but also just the sheer population growth in the state of Texas. It's a time for vision for Texas leaders to make sure that we continue to have the great transportation infrastructure, the mobility we need to have a good quality of life, and the business environment so that trucks can move and businesses can grow and be productive.

So I congratulate the entire committee and thank you for your hard work and also the support of the institutions that were standing behind this work. Thank you.

DR. WALTON: Cullen.

MR. LOONEY: I'd like to thank Chairman Delisi for appointing me on this committee and providing the opportunity to serve. I've learned more from being on the committee than I contributed to the committee and it's been a great experience for me.

I think as we look at it, the numbers are big, but the way I look at it is that's a number to beat, that's the number that we traditionally move forward what it's going to cost us to meet the needs of transportation for the state. And I think the challenge for the commission and for the legislature is to figure out how you can do it through improved technology, thinking out of the stovepipe, coming up with new ideas -- and heaven forbid, I don't know what those are but I'm sure there are people around that might be able to come up, and I think that's the biggest challenge you are faced with. And thank you again.

DR. WALTON: David.

MR. LANEY: Madame Chairman and members of the commission, first of all, I never thought I'd be on this side of that dais, and I'm delighted to be, particularly under the circumstances.

Actually, the one recommendation or one action I expect to see you all take, after hearing us and after hearing the TeMPO presentation that follows us, is you will seat another committee that will advise you on how to convert the commission to a bank holding company and ask for a bailout. Then the number might be a little smaller.

(General laughter.)

MR. LANEY: First of all, my compliments to a number of folks on the 2030 Committee that weren't as familiar as some of us with transportation and how quickly they came up to speed and how much they contributed to the overall effort. It was a very interactive and very valuable exercise for all of us, I think, and I hope for you as well. And I will recommend for you some pretty laborious reading, and that is not simply the executive summary but the full report when you get a copy of it. It is educational, it is informative, and I think it will help you think through a number of issues from a strategic standpoint.

There are three areas that we really covered: one is how to protect the state's assets that you have in place right now; number two, how to protect the competitive position of the state relative to mobility of other parts of the country and maybe other parts of the world as well; and three, the various other modes that might become and probably should become part of the mix and certainly ought to be understood in terms of its interrelationship with the current infrastructure in place, whether it's freight rail or ports or other modes of passenger transportation.

The numbers are staggering but there are no darts, Commissioner Houghton. We tried to eliminate anything that would be suggestive of a wish list, and I think we have tied everything as tightly as we can to very hard data, including -- even though there's a little softness in it -- tying the mobility question to a sort of bottom line number, and that is to the extent you go less than what we consider competitive mobility, that number, then you risk losing the advantage that the state of Texas has had for decades -- let me put it that way -- relative to other parts of the country and parts of the world more and more. That is a dangerous number to go below and yet it is an incredibly difficult number to reach. Our recommendation is actually higher than that.

But in any case, I would commend our report. I think it's very valuable and lot of very intelligent thought has gone into that report, I think for your benefit. Thank you for the opportunity to appear on this side of the dais.

DR. WALTON: Drew.

MR. CRUTCHER: Well, I would just like to echo the fact that I appreciate serving and I really appreciate the vision of the commission to engage an effort like this, and then the way you engaged it, I think what we have in here is defensible numbers, and as David said, I think they're something that tie to very real goals.

We haven't talked much about rural recommendations; I'd like to say something about that. It's only a tenth of the urban situation, it's $17 billion, and it does recommend that we finish out our Texas trunk system by 2030 which I think is a very good thing for Texas. I think our rural areas are going to need, especially in West Texas, some of this trunk system so that we can begin to build on our alternative energy sources, and I believe that there's companies that are moving into areas of our state that are going to need this trunk system in order to locate in some of these locales. So I think completing the trunk system is a real good goal for Texas, and I appreciate you having the vision to engage us. Thank you.

DR. WALTON: Gary.

MR. THOMAS: Madame Chairman and commissioners, I certainly appreciate the opportunity to serve on the committee. You know, when I started on the committee, some people found it ironic since I'm the executive director of Dallas Area Rapid Transit to be on the TxDOT 2030 Committee, but I think we all understand that it's absolutely imperative that all modes work together, certainly as we look forward. It's not necessarily public transit or highways or toll roads or the city infrastructure, it's all the different modes working together to create that seamless opportunity for people to move from point A to point B, however they choose to do it. It's about giving people choices to do that.

And so I would encourage you, certainly in the urban mobility part of this, as you look forward, it's very easy to think about because we've talked about pavement, we've talked about bridges, and certainly they're important to make sure we maintain the infrastructure that the state already has, but as we look to the future, I think it's also imperative to not think about lane miles necessarily as you think about mobility, but think about all the different modes of transportation, certainly public transportation.

You know, one of the little known facts: DART is constructing the longest light rail project in North America today. It's ahead of schedule, it's under budget, we don't hear about it a lot as a result, but it's putting 2,200 people out working on that project on a daily basis and the economic impact that it's going to have to our region and to the state and future is unbelievable.

So I would just encourage you to consider all the different modes of transportation. Thank you very much.

DR. WALTON: And thank you. As I close comments, let me say again what a privilege it was to serve with the individuals that you've just heard speak. You did a superb job in appointing them, and I appreciate the opportunity to work with them.

The schedule calls for continued review, input, and then the final draft, so we'll still be engaged for a period of time. If we can be of service or assistance, please do call on us. Thank you.

MR. HOUGHTON: Don't leave, Dr. Walton. I want to again thank you and the members of the committee, but I'd like to know where in the heck were you yesterday during Sunset when we needed you.

DR. WALTON: I was hiding out, didn't have to be there.

MR. HOUGHTON: Can I ask Chairman Laney a question? Chairman Laney, in your tenure on this commission, did you have any inkling or see this kind of -- no pun intended -- freight train coming into the tunnel at transportation?

MR. LANEY: Yes, we all had an inkling but we didn't think it would come this fast or hit this hard. But it's an enormous challenge and you all know and you probably heard it yesterday -- I don't know what went on yesterday -- but to the extent you can open every conceivable door that can provide resources for support of this challenge from an economic standpoint, that's your challenge, and I wish you the best.

MR. HOUGHTON: Oh, you may not be getting away. I think there may be a suggestion. My suggestion -- and I'm not here to suggest to the Chair what to do -- but if there's still a final report due, I'd sure like to see this commission look at the financing opportunities personally.

MR. HOLMES: Was that a motion?

MR. HOUGHTON: A motion personally but it's not on the agenda.

(General laughter.)

MS. DELISI: I want to echo Commissioner Houghton's comments and thank you all for your service in this effort. It was very significant, very important, and I do hope that you all do stay engaged in this process, and I think we should probably have a further discussion about the next steps because there is a tremendous education role out there for this group. This is an important report and it's a report that the legislature needs to know about and they need to understand what went into this report, and the public as a whole, the larger public must understand the consequences, as you mentioned, of the focus will inevitably on this cost, this big number, but I would like to see the focus be on what's the cost to the state of not doing it. And that's the discussion that we need to have not only in this agency but across the street and all across the state.

So again, it's my hope that this panel can stay engaged and active as we go forward, perhaps on the financing side, but also on the education side as well.

DR. WALTON: Thank you very much.

MS. DELISI: At this time, we'll take a short break so that the 2030 Committee can exit, and come back in about five minutes.

(Whereupon, a brief recess was taken.)

MS. DELISI: At this time I'd like to restart the meeting, please.

MR. SAENZ: Thank you, Madame Chair. Our next item is a report from a joint committee that was made up of the metropolitan planning organization members from across the state and TxDOT that was working on identifying some funding options, and of course, David will also present this agenda item, and then we'll hear the report from the committee. David.

MR. CASTEEL: Thank you, Mr. Saenz. Again for the record, my name is David Casteel and I serve you as the assistant executive director for District Operations.

The metropolitan planning organizations of this state are charged with developing long range plans for transportation projects and programs that are financial constrained by reasonable expectations of revenue. That expected reasonable revenue is a combination of state and federal funds, local tax funds, local toll funds and other public and private funds. As you can imagine, this is a very difficult task for MPOs as the long range plans are looking out 25 years into the future.

In recent years, the department has supplied limited support for the MPOs in developing their reasonable expectations of revenue forecasts. An audit last spring and recommendations from the Sunset Review both acknowledge that a more consistent method for reasonable revenue forecasting for state and federal funding would benefit both the MPOs and the public as plans are developed for the 25-year period.

To support an improved method, Mr. Simmons, our deputy executive director, asked a work group of MPO leaders and TxDOT knowledgeable persons to convene and jointly research and arrive at common assumptions for the development of improved forecasting methodology. Dan Kessler, who serves as the president of the Association of Texas Metropolitan Organizations and is deputy director for the North Texas Regional Transportation Council, agreed to serve as chairman for this work group. They'll present to you today and hope to engage with you a discussion of their assumptions and their forecasts. As we go through this, please note that their forecasts are in nominal dollars where the 2030 forecasts were in 2008 constant dollars, so simple math will not get you there at this point, we'll have to have a further discussion on that.

So with that, I'd like to turn it over to Mr. Kessler to introduce his group and present his findings.

MR. KESSLER: Thank you, David, I appreciate it. Chair Delisi, members of the commission, Executive Director Saenz, thank you for the opportunity to be here.

As you've seen over the past six months, I think, with your regular presentations by your CFO, Mr. Bass, we've seen the volatility of revenue estimates just in the last six months period as we've seen fuel prices go up and consumption go down, that certainly, I think, showed us a scenario in the short time frame of how sensitive many of these variables are to both the TxDOT revenue stream and ultimately the MPO revenue stream as we move forward with implementing our metropolitan transportation plans.

I think in the spirit of the holidays, we all like to get tools for Christmas, and I'm happy to tell you I think we're giving you a tool for Christmas that you're going to be able to use as policy officials at the TxDOT state level. I would hope that this is a tool that can be used by our legislature as they look at revenue strategies in the spring legislative session. We're optimistic that they're going to hear our needs summary and focus on revenue strategies. And ultimately, I hope our local elected officials and MPOs across the state, as well as the public, will have access to this tool to really better understand the revenue streams within the state for transportation funding and how those are impacted by various assumptions that we make and, of course, economic changes.

Let me just spend a brief moment with you to talk about TeMPO. I do serve, as David said, as executive director of that group at the discretion of our 25 MPO directors. It's an organization that functions at the staff level; we meet generally on a quarterly basis; we really try to function at the technical level. We were formed actually in the early '90s in response to the Intermodal Surface Transportation Efficiency Act. New MPOs were being formed in Texas, we had a lot of new staff, Michael and I saying about this is we're only as strong as our weakest link, and so we spent a lot of time working together as MPOs across the state to advance technical information. So I do serve in that dual capacity with that.

What I'd like to also share with you is that collaboration between the MPO staffs and TxDOT staff is alive and well. I think last Monday I celebrated my 27 years with Michael Morris at our MPO; Michael has been there now nearly 30. I think we can say in that time period we've never had a better working relationship, not only in our region with our two districts and at the staff level and our policy officials. In our quarterly meeting in San Antonio last Friday, we had as many TxDOT staff there with our MPO staff as we did MPO folks, and that was very rewarding to see as we're getting all our districts involved.

And then I want to compliment Executive Director Saenz. We've established a series of quarterly meetings with TxDOT senior management and administration and the MPO directors across the state to talk about issues like this that affect all of us as well as other things that we're involved in. So from the TeMPO perspective, I think things are going really well.

Well, as David highlighted for you, we did put together a work group last spring. Steve Simmons, Michael Morris, David Casteel got together and talked about this process. David highlighted a state audit that highlighted the need for a consistent methodology across MPOs. I think TxDOT recognized, as well, that largely you have historically done financial planning in your 10-year UTP planning cycle, but for the most part not gone past that cycle, so I think there was an opportunity for TxDOT to look at an improved process.

We had a good balance of MPOs across the state. As you can see, we have MPO directors and assistant directors from Houston-Galveston, Chris is here today from Waco, and then we also had TxDOT staff. I want to particularly focus on two TxDOT staff, Ron Hagquist, who is here, and Jessica Castiglione. They did a tremendous amount of work. Ron is with your Government and Public Affairs Division, Jessica is with your San Antonio District. They've done really the lion's share of the technical analysis to build this model and they've really done an outstanding job, and I do want to compliment them for their efforts. Really, we had it easy, our job was to come in on a weekly or monthly basis and critique their work and provide constructive comments, but they really have done an outstanding job with this.

You've heard the term fiscal constraint mentioned. Of course, we became part of fiscal constraint in the early 1990s; the Intermodal Surface Transportation Efficiency Act really brought that into the MPO planning process. Since that time, we've had a revenue forecasting model. For example, at our metropolitan planning organization in Dallas-Fort Worth, we did actually attempt to estimate revenue on a statewide basis and then disaggregate that back to our region, so we really looked at this as an opportunity to improve our model which we needed to do.

A process that I want to flag for you that we've been working on in North Texas that's parallel to this is our Rail North Texas initiative. Over the past year, our staff has been working with our policy officials in North Texas to develop a local option revenue model, and I can tell you it has been very, I think, strategic and successful to have a tool that we can provide to our local elected officials about what revenue strategies will generate what levels of revenue.

Of course, that particular proposal we're looking at trying to build nearly a $10 billion rail system. We need to generate $470 million locally to pay for that system, and of course, we're going to try to get before the legislature this spring with a legislative package to do that. But similarly, we've built a model at the local level that also estimates local revenues. So I think these efforts will work in tandem.

You heard earlier Dr. Walton talk about the relationship between state and federal funds in Austin and local revenues being generated within our metropolitan areas, so I think those two need to work together.

Our work group charge. Basically we had four primary charges. The first was to develop a model for forecasting revenue. I think we've done that, we're very excited to be at a point now where we can share that model with you all. There's going to always be improvements to it and I think we're all dedicated to make it an ongoing process, but we're comfortable that we have a model in place now that will do that. One of the really difficult parts about this modeling is all the assumptions and input parameters that you put into it, and we've spent most of the last six months doing that, and I'll just highlight a few of those for you.

We want to forecast the amount of future state and federal funding available, and again, I would focus this is a state and federal funding revenue model, local funds would obviously be generated outside this process. And the other thing I would stress is that there's a lot of math that went into this, there's a lot of importance in precision in this, and that's why our committee suggested and TxDOT followed up on bringing TTI and CTR to the table to review all the math, all the equations, a lot of our assumptions, and I think it goes on this point. I don't think there's any pride in ownership in this model. I think if the State Comptroller's Office wants to get into it and go through it, we'd be happy to provide it. Whoever is out there that wants to look at this model, look at our assumptions and our math and make sure that it's correct, we would certainly welcome that.

We had a work group approach, obviously much more complicated, but we thought we'd boil it down to a few basic steps. We developed a baseline revenue forecast. This was critical. There are so many different moving parts in this analysis that we had to get our arms around what we call a baseline revenue forecast, and we'll show you what that is. I would emphasize that it is a status quo, it is a projection of what our state and federal revenues will be out through 2030 based on existing revenue streams. We felt like we needed that for several reasons.

And one thing we did do is we spent a lot of time -- and this was very important to me personally because looking back at our model in Dallas-Fort Worth and comparing results, we had to make sure the model was working and working correctly, so there were a lot of checks we did to look at traditional representation of funding versus revenues. The classic example is we all know that one cent in state gasoline tax will generate about $100- to $110 million of revenue for TxDOT. So we built those kinds of assessments into our model to make sure that the model was replicated past conditions, current conditions, and able to project into the future.

As we went through all of the assumptions -- and we won't go through all those today at all -- there are three or four that are critical to this analysis. You'll see population growth is one of those and what assumptions you make about population growth in the state over the next 30 years dramatically affect the revenue stream. One of the ones that I think people are starting to realize but probably in the past we have not realized is the impact of fuel efficiency on revenues. It can be very dramatic, and I think we'll show you some results of that that are probably as startling as the needs assessment you just saw, what the impact of fuel efficiency is going to have on future revenues.

The rate of federal return to Texas, that's an input to this model. This is something that we've built into the model that we can alter and provide you input about if we're able to alter that rate of return, what kinds of level of funding you can expect back in the future. We want to model the sensitive inflation, even thought inflation is traditionally thought of as a cost element, as we've introduced costs into this model which we can do, it has the capacity to account for that.

I think what we realized too, when you start to look at all these different assumptions and scenarios -- and literally, we generated hundreds as we went through this process -- that reasonable people can make largely reasonably different assumptions about what's going to happen in the future, and so one of the exercises we went through -- and you'll see documented in our report -- is we tried to bracket our baseline or our midrange forecast with a high growth revenue model and a low growth revenue model that shows you what we can expect in the high and low range based on those.

Quickly, just to cover some of the key variables -- and again, we're not going to try to go through a lot of those today but we want to show you some of the key assumptions. Population forecasts, we looked to the Texas State Data Center. Those are used widely across the state, including at the metropolitan planning organizations. They provide a large range of available forecasts and scenarios.

We picked a forecast that we call our midrange forecast that shows us that we're approximately 21 million folks in Texas today, by 2030, 36 million. This reflects a 2 percent annual growth rate, 74 percent over growth conditions today. In fact, this scenario which is our midrange forecast really represents the growth rate that we experienced compatible from 2000 to 2004 in Texas. We looked at other scenarios and we'll show you those and the impact that those have on revenue, but there is a high growth rate model that looks at basically the trend that would expand how we grew from 1990 to 2000 in which Texas really grew very rapidly. We didn't expect that we're going to grow at that rate out the next 20 years as we did in that time frame. And there's a low growth rate which basically would assume that we would grow at half of that rate over the next 20 years, but again, we bracketed those numbers, we have a midrange forecast, but we can show you a low and high growth scenario.

I think, of course, the use of population forecasts is a very good indicator in our model of some of the other elements that are key to your revenue stream. For example, in Dallas-Fort Worth, we historically tried to use a vehicle registration model which, quite frankly, was very difficult to try to estimate vehicle registrations. We've found that population growth is, in fact, a very key parameter in estimating vehicle registrations, and in fact, if you can do a good job estimating population, you're probably going to do a good job estimating vehicles. And of course, with vehicle registration being a key component of your revenue stream, that's also important.

I talked about fuel efficiency. We spent a lot of time on this and I think this is one of the issues that's certainly going to get the most debate in our analysis. We welcome it, I think it's healthy debate to be had, it's a relatively new discussion on the horizon. Sort of the ironic part about this issue of fuel efficiency is that in the best interest of our national energy policy certainly, and economic and air quality issues, higher fuel efficiency is better off for the country and the state, but the reality is the higher our fuel efficiencies, the less revenue that we're going to have which obviously leads us down to discussion about how our revenue models currently work and do we need to look at a different alternative model.

But we looked at a wide range of forecasts. This work was largely done by a firm, Cambridge Systematics, that was commissioned by your staff. They are a very reputable, well known group of scientists and engineers, we use them in Dallas-Fort Worth in our travel models, initially developed these fuel efficiency scenarios. We asked TTI to review this information and they did. We're pretty comfortable that based on what we've come up with that we have a range that's expected.

I think it is realistic to assume, given both energy supply and the volatility of energy costs which we've seen over the last six months that fuel efficiencies are likely to increase in the future. And we can show you the impact of those and how sensitive that revenue stream is, but we also looked at scenarios of what if it didn't, so this model has the capability to look at the full range of revenue streams, and certainly I think this fuel efficiency thing can be debated, but again, we're providing you a tool to look at that.

I won't spend a lot of time on this. It does have an impact in your financial revenue stream. Some work that was done by Tonia Ramirez on your federal financing, we called Tonia in and cited a lot of her work, but basically we have this as an input into the model. Remember, we're calculating federal fuel tax receipts from Texas, and so as part of this model we need to estimate what percentage of those will come back to the state. We all hope that over time this will get better, but for the purposes of the work we were doing for our baseline forecast, we assumed today's conditions, but the model is robust enough that we can change that as well. So as a policy direction you want us to look at what levels we can expect to get back, what would that translate into your revenue, we can do that.

You heard the discussion about inflation. Again, it does not necessarily come into play in the revenue models, but as we started to do additional work on this process, we started to bring some cost numbers into this. One of our initial charges, for example, was to look at the amount of capacity funds that would be available, so we needed to make some early assumptions abut the maintenance levels. And we did this in parallel and in advance of your 2030 Committee, so we did not have the benefit of the recommendations of your 2030 Committee, but we did have some numbers that we built in inflation-wise into the model. Again, the model has got the ability to look at adjustments in that.

Earlier I know Executive Director Saenz has presented you this graphic, we've even updated this in the last few weeks. It suggests that inflation is even maybe higher in the last five years than we thought, it's creeping up to 11 percent annually, and obviously this is going to come into play when we start to look at some of these costs.

So I'll give you some idea of baseline revenue assumptions: I highlighted population growth at about 2 percent annually; our midrange fuel efficiency from 17 miles per gallon to 34 miles per gallon in 2030; basically unchanged on our federal rate of return; inflation rate we hope levels off, we don't think it will stay anywhere near the 11 percent that it's at -- if you look at a 20- to 30-year period, it certainly is closer to the 4 to 5 percent range; and then, of course, Proposition 14 and bond proceeds, we made some assumptions about what you're doing with Proposition 14 in the revenue stream, but again, the model has the ability to look at other revenue streams.

This table basically summarizes for you our low, medium and high scenarios with each of those data that I've talked about. So when we get to our baseline revenue forecast, again, based on our 34 miles per gallon by 2030, we've estimated that -- in nominal dollars so this is not current year -- $158 billion between now and 2030 would be generated by our current revenue stream. Jessica has actually broken this out for you. You can see the amount of revenue that comes from your state motor fuel tax, federal motor fuel tax, vehicle registration fees and other fees. Again, we think the model is operating as close to correct as we can, we're within 99 percent accuracy when we look historically where we're at, but there are assumptions we can change.

To give you some idea, we talked about this conversion back to current year dollars, but if you put this in 2008 dollars, our work group did a little calculation before we started, and roughly that's about $104 billion in 2008 dollars so you can compare that with your needs guys -- which, by the way, I've noticed all these needs guys have left the room, so I wondered how I got stuck here without them. So that gives you some idea of where we think we are on our baseline forecast.

Just to give you some idea of what you can expect when you alter some of your assumptions. This is an analysis that we did where we looked at the high, medium and low miles per gallon or fuel economy. Obviously at the higher MPG we generate more revenue so if miles per gallon gets into our low scenario of 25 miles per gallon, you can see $169 billion; if you go all the way over on 44 miles per gallon, it's reduced to $150 billion. Anticipating the question what would your revenue stream be if we kept the 17 miles per gallon that we have today, we're estimating it's $196 billion. So that gives you some idea of the range, anywhere from $150 billion to $196 billion, depending on your fuel economy assumptions.

And I'll even talk about more so in the context of population. Again, here's an example of what your revenue stream would be depending on population growth scenarios, ranging from in the low growth, 145- to 173-, but you start to see the same level of numbers, whether we're looking at alternative population scenarios or alternative fuel scenarios, you're seeing a range.

I think one of the things that we're learning in this process -- and you'll hear in our recommendations -- the real importance of this process in being an ongoing assessment. This is not something that you want to look at every five or ten years, I think this is something that we need to tie very closely into our state data center to use annual population estimates if they're available, the latest numbers we can get on fuel economy, and so on.

One of the things that we wanted to ensure that the model was able to do as a tool -- it's one thing to simply just estimate current year revenue but we've got to have a tool for policy officials that allows us to evaluate alternative revenue strategies. All of these, increasing state vehicle registration fees, reducing diversions, indexing -- which is something that we think will get a lot of interest in the next legislative session -- increasing the motor fuel taxes, state or federal, additional bond financing, we've run a lot of different scenarios of how much revenue each of these types of revenue strategies would generate. Again, we're confident that it's accurately representing those numbers, but again, I would really assess for you that this is a tool that we think is available to you for us to evaluate that.

Wrapping up quickly -- I know you've got a lot of things on your agenda today -- I think our overall conclusions, certainly the two factors we see in this model is population growth and fuel efficiency are by and away the determining factors in our revenue stream. The challenge is that the growth that we're going to see in population over the next 15 to 20 years and the revenue stream you would likely expect to see from that is largely going to be negated by increases in fuel efficiency, so therein lies our challenge.

Obviously, the next step of that is do we ultimately as a state -- and I think probably as a nation -- look at an alternative revenue model in terms of transportation. A VMT- based tax, I know it's being looked at around the country; Oregon and other states have done some exploratory models on the technology to do it. We looked at it and quite frankly, we were disappointed that there has not been as much progress on this as we would like. We also looked at what's the likelihood that this would be put in place, given our current technologies. Generally, we think it's still probably anywhere from 10 to 15, maybe 20 years out before we get to that point, but of course, the revenue versus needs issues may expedite that we consider it sooner.

But with that thought in mind, David Ellis, who is here with us, is providing Jessica a lot of the technical analysis. We are working on the model now to be able to generate numbers for you; if you would like to see a VMT-based tax scenario, that's something that the model should be able to do. Obviously, we can look at revenue enhancements, that will change our baseline forecasts.

We have the flexibility, one thing that I think is terrific about the model's development is that we can look at alternative growth scenarios and different assumptions and simultaneously we can look at alternative revenue enhancements. Of course, the challenge of that is you can end up with dozens and dozens of scenarios but the beauty of it is the model allows us to do it.

And then what I'd leave you with, I think this is the start of a process, it's I think been an excellent collaboration between the MPOs and TxDOT, but it's the start of the process. I think the easy part was building this model, I think the challenge in front of us is how we use this model, working with the legislature and our public and our elected officials as we move forward over the next four to six months, but basically, I think all the TxDOT staff and certainly the MPO folks that have worked on this stand ready and willing to help you in any way we can in that endeavor.

And so with that, I'd be happy to answer questions and comments, and again, we have our panel here. I would consider many of them experts on some of these topics way beyond my expertise, so any of these questions that you would like to ask on our technical assumptions, I know they'd be willing to answer as well. So with that, I'd be happy to answer questions.

MR. HOLMES: Did I understand you to say at the beginning of your presentation that you would be happy to share this model with the Comptroller's Office? The presumption is that it has not yet been shared.

MR. KESSLER: No, I don't believe it has.

MR. HOLMES: But I think that's probably a good idea. Has it been shared with anyone across the street? No.

Let me shift gears. On the VMT modeling, did you look at what VMT charge would need to be imposed with whatever appropriate collection rate would be required to replicate the revenue from the state motor fuels tax?

MR. KESSLER: No, sir, we haven't gotten to that point. We are building the algorithms to be able to calculate the VMT-based model, but as of to date, we haven't run that forecast. David, in terms of timing, do you want to speak to that?

MR. CASTEEL: David Ellis is here from TTI. He and his staff have been working on that for us because we figured that question would be coming, what would be a replacement rate, and I think we could be prepared within a couple of weeks to share that with you, sir.

MR. HOLMES: David, it doesn't necessarily have to be done off of GPS readings and all that. I mean, you can do it off of an odometer on an annual basis on vehicle registration renewal. I mean, wouldn't that be kind of the straightforward simple way to do it?

MR. CASTEEL: It would, sir. The work that we've engaged TTI, actually Ginger Goodin at TTI to do, and Mary Meyland is kind of working with her on that from our side, also examines the policy issues associated with moving to this type of tax as well as the revenue side of it, and one of the policy issues would be on what you just said. I know in my household if you hit me with a once a year gas tax bill, I probably wouldn't budget wisely for it, so it would need to be incremental in order to actually collect the funds from folks. So those policy issues are being studied as well and we can have those available for you.

MR. HOUGHTON: Isn't there a prototype for one being conducted right now in the state of Oregon?

MR. CASTEEL: I believe they've almost concluded that study.

MR. HOUGHTON: How are they doing it, GPS?

MR. CASTEEL: I think they did GPS, yes, sir.

MR. SAENZ: Oregon had a GPS system where they put a transponder in a car and they had certain service stations that were participating and one unit would read the other unit -- it would read the miles, calculate a tax, and the tax rate was based on the current miles per gallon that the vehicle did so that it would wind up breaking even, and then they would deduct the state gas tax. You did it every time you filled up.

MR. CASTEEL: And we did have at the forum last year an individual from Oregon give an in-depth presentation and we can dig that presentation up for you.

MR. SAENZ: That report has been submitted and we have sent that report across the street, and I think we've sent it out to all the commission aides also.

MR. HOUGHTON: What were the conclusions? Was it revenue neutral, was it revenue positive?

MR. CASTEEL: They were testing technology at that point.

MR. SAENZ: The Oregon model was designed to be revenue neutral. In fact, if the people could save money, they were able to keep the money. But it was revenue neutral and it was really geared to determine what technology would be needed to be able to address the issue.

MR. HOUGHTON: They've determined the technology works.

MR. KESSLER: That was the disappointing part about that from, I think, our group's perspective. Technology is not the challenge, it's the behavioral issues and the issues related to how much revenue we can generate through the system that we're all really interested in. That's why I think one of the concerns we have is maybe this isn't as advanced as we all had hoped.

MR. HOUGHTON: I think James Bass would like to speak.

MR. SAENZ: James wants to say something.

MR. HOUGHTON: Marched down here.

MR. BASS: I apologize. For the record, I'm James Bass, CFO, and I may have missed some of the conversation coming down the stairs. The Oregon pilot looked at it two ways: one was a GPS unit; and then the other method I think was closer to what you were thinking of, Commissioner Holmes, they had a transmitter installed in the vehicle that was tied to the odometer and then when they pulled up, rather than doing it annually, every time they pulled up to a service station, there was a reader on the pump and the transmitter in the vehicle would transmit the mileage information to the reader at the gas pump, the database would be they now have 10,000 miles, used to be they had 9,500, I need to charge them for 500 miles, and they would charge them at the same time -- at the gas pump when they purchased their gas, they would deduct the gas taxes but add the vehicle miles traveled at the time.

So they piloted two different methods: one was the GPS and then one was a transmitter tied to the odometer in the vehicle so the information of which road, time of day it was traveled on was never captured, it was just a pure number of miles.

MR. UNDERWOOD: James, question. How did they differentiate when they left the state?

MR. BASS: That was one of the issues and they did not differentiate that, and that's a limitation, that's also a limitation of the current system. It's where I purchase my fuel, not which state I drive in today, and so yes, that would be a continuation of a current limitation. The GPS would solve that or address that issue but it might also raise some additional concerns for other people, and I won't necessarily broadcast them here, but there were some issues of how one could alter the GPS unit so it wouldn't be able to be read quite as easily as that installed transmitter in the vehicle.

MR. SAENZ: But James, that Oregon system, because they had a different rate or different charge rate, vehicle miles traveled, when they were in say the Portland area so they could address some congestion problems, so that was the GPS portion.

MR. BASS: That was the GPS portion, I believe.

MR. SAENZ: I'll go back and find that report and send it back around. We did send that report across the street to all the legislators and I verified afterward they did get it -- I don't know if they read it but they did get it.

MS. DELISI: Are there any other questions?

(No response.)

MS. DELISI: Thank you very much, thanks for your work.

MR. KESSLER: And I certainly want to leave you with the fact that we're talking about a VMT tax, but there are other revenue strategies that we have available to us that are dramatic and powerful. Indexing is one that we've run the math on that and indexing the state gas tax can generate significant revenues, as well as obviously registration and fuel tax increases. So sort of our bottom line here is don't completely despair. I think we can make up a lot of the gap in even the revenue strategies that our legislature is talking about, but to the degree that we can help you and policy officials evaluate those alternatives, we stand ready to do it.

MR. HOLMES: I'd be interested for you to expand on that a little bit. The group we heard from just before you suggested that we were $8- to $9 billion a year short, and that didn't include everything. And so what do we get, David, from the state motor fuels tax, $2.2 - or $2.3 billion?

MR. CASTEEL: Yes, sir.

MR. HOLMES: And so to make up $8- or $9 billion a year, how do you do that?

MR. KESSLER: Well, I don't want to leave you with the impression that we think we can make up that entire gap. I mean, our analysis and we want to be able to do more analysis for you, but I think it's going to take all the revenue strategies we have available to us and probably more painful than we can stand politically or publicly, but I also think we can make up a large part of that gap from the revenue strategies we have available, and I think that's what this work will help us quantify.

MR. HOLMES: You mentioned indexing, indexing to what?

MR. KESSLER: There's a lot of different models. We started out in our mathematics looking at a 3 percent annual index, something close to some form of CPI growth associated with an inflation index. Obviously, the highway construction index is way beyond something we consider. But that's the other area we spent some time looking at. There are three or four states that have gone to indexing. There's literature now being generated about the revenue that's generated. I think in the states that we've looked at it's been very successful, and so I think that's something that certainly we want to try to look at. We'll try to have all that data obviously available in our report.

Thank you, appreciate it.

MR. SAENZ: I guess, commissioners, one thing today, we heard about the need, and then we heard from Dan's group that's come up with, based on certain assumptions, what our revenues would be. We also had some work that was done by Cambridge Systematics and Dye Management that identified some potential additional funding tools that could be used out there, and maybe what I'll do is I'm going to volunteer David -- since he did such a good job -- to, in essence, take maybe the three reports and for our January discussion meeting kind of combine them and show here's the needs that were identified, here's the resources, and then these are the additional tools that could be used and how they could generate how much money.

MR. CASTEEL: We'll be glad to do that, Mr. Saenz. I think one of the important things to leave here with today is just a caveat that -- I said it a couple of times but I don't want any of the press that's still here to get the wrong impression -- the 2030 Committee report was in 2008 constant dollars, the revenue report that Dan talked about is in nominal dollars through 2030, and that is not simple math. And then not included in the cost projections were the internal cost of mowing, keeping the lights on and some of the routine maintenance costs that were not included, and ferry operations and all those other things that we do.

MR. SAENZ: But I think, David, for the January meeting we could kind of run through the calculations, try to get everything on the same database.

MR. CASTEEL: Absolutely, sir, we can do that -- Mr. Bass will help me. Thank you.

MR. SAENZ: Thank you, David.

Commission, moving on, agenda item number 3 is a report on the department's Sunset Review process. We had a Sunset hearing yesterday, and Jefferson Grimes is going to make the presentation. I almost said Coby because it said Coby on my script here.

MR. HOUGHTON: Where's Coby?

MR. SAENZ: He's hiding.

MR. GRIMES: He's here.

MR. HOUGHTON: I'm sorry, Coby, pardon me.

MR. GRIMES: Good afternoon, Madame Chair, commissioners, Mr. Saenz. For the record, my name is Jefferson Grimes and I am the deputy director of the agency's Government and Public Affairs Division.

We did have a little hearing yesterday, and prior to yesterday when I was getting my thoughts together on how to get started on this, I was thinking of an analogy to start with, and that is we've reached halftime, and with all of the associated fanfare that comes with that. Well, as of what happened yesterday, we're not quite to halftime yet. I guess we're working in towards the two minute warning of the first half, as we will need to be back before Sunset in January, and I'll get to that in just a moment.

The hearing yesterday was interesting, it was lively, it was a discussion that evolved over time from when we started in the early afternoon until the end. Clearly, as with any open deliberative process, discussion was very focused at some point in time and then at other times it was somewhat unstructured and perhaps going in circles, but the legislature and the members of the legislature and the Sunset Commission worked very hard to get to the recommendations that they've got thus far.

A couple of things before I talk about specific recommendations that they've focused on or settled on thus far. I would like to say that a lot of the discussion yesterday certainly we could all get caught up in negative statements or connotations about what was said by specific members, but I would want everyone to understand also that there were some very, very positive statements made about this commission and the efforts that you all have made and the administration as far as openness, transparency, and moving the agency in a direction that I think the governor and you as the commission and the legislature would want us to be in. So there were some positive statements made as well.

In general, the original six issues, governance of the agency, transportation planning, public involvement, contracting, the motor vehicle related functions, and then the billboard related functions, the bulk of those were adopted yesterday. I'm going to talk about a couple of exceptions, but the bulk of them were.

Another positive thing, in my mind, anyway, is that the work that the agency has undertaken already, through your direction, Chair, and then Mr. Saenz's guidance, none of that was undone yesterday. So what we are implementing now as far as administrative recommendations go, management recommendations go, if you choose to look at it that way, that was a statement by the Sunset saying that they appreciate what we're doing so far -- as a couple of members mentioned appreciating getting your letter on the status of that.

So with that, I want to go ahead and talk about a few of the items. I spoke with Sunset staff last night, I communicated via e-mail with them this morning; they are also, just so you know, busy determining exactly what happened yesterday as well. So they are going to be putting their decision materials out on the web, possibly by the end of this week, as I've been told, so we can look forward to that.

I want to just start with a couple of the structural related issues. Obviously in today's paper there was a lot of discussion about governance structure and we can leave that as it is or talk about it specifically. Issue 1.1 which is the governing structure of the agency, that was adopted with some modifications. But there were other structural changes recommended also or adopted also. One to create a new agency pulling the Vehicle Titles and Registration, the Motor Vehicle Division, our Motor Carrier Division, and then the Automobile Theft Prevention Authority out of the agency and establishing a separate stand-alone agency, that was adopted yesterday.

Structural changes also, they recommended a Rail Transportation Division be established within the agency, so that's out there. A third structural change, to have the chief financial officer report directly to the commission, or going along with their recommendations, to the commissioner of transportation. So there were organizational changes made along those lines.

And I'll move on to issue 2. They adopted basically issue 2 on transportation planning and public involvement as far as planning goes. They took that pretty much intact. They did add a provision that requires us by rule to adopt a funding allocation formula by rule, the commission adopt by rule, produce a 10-year cash forecast which is published and made available publicly, and then also to allocate funds among the districts based on the criteria that you all come up with. So that was one change to issue 2.

The public involvement recommendations remained intact, the contracting recommendations remained intact except for one, and there was the issue regarding the contract advisory team, the review of our CDAs, issue 4.9 of the report. The way it's currently written now would have our CDAs go through the contract advisory team which is comprised of the Comptroller, the Governor, DIR and the Attorney General. They added a provision to that that says that the Comptroller would have to certify the CDA and the Attorney General would have to approve it. So on top of the CAT review, we've got those two certification approvals of CDAs and then added to that is a provision on the CDA where the Comptroller and the Attorney General must sign the contract as well.

A couple of the Motor Vehicle related proposals were removed and then also the billboard recommendations were taken in whole.

A couple of other items in addition to this and then I'll open it up for any comments. We do have one more management related directive that did come that we've got a short time frame on, and that has to do with the South Orient Railroad. By February 28 of '09 we are to determine the market value and the feasibility of selling the South Orient Railroad and report that to the legislature by February 28. So that's a management directive that certainly we need to undertake as well.

Other things real quick: require TxDOT to evaluate the performance of administrative and decision-making staff to determine if employees should be retained, that was adopted; require the commission -- or again, continuing with their thoughts, the single commissioner and the chief financial officer to certify compliance with all measures to the legislature; require a code of ethics for the agency which I think we're well on our way to.

And then also as far as the Legislative Oversight Committee goes, there was a recommendation adopted to have the Legislative Oversight Committee contract for what they refer to as a Deloitte type DPS audit of TxDOT and then report back to the Legislative Oversight Committee on the findings. And then there were several specific pieces of guidance given to the auditor that was there as well.

In addition, like I said earlier as I began, we have been asked or we will be back up on the January 14 Sunset agenda. They deferred a couple of items. One of them was a recommendation on pulling the Turnpike Authority back out of the agency which was merged with the agency 12 years ago in our 1997 Sunset -- of which David Laney was Chair at that time -- to see TTA brought in, so that will be discussed on January 14. In addition, the proposal on a Public-Private Partnerships Division within the agency, that will be back up in January. The issue of an inspector general is still floating out there, and that may be brought back up in January as well. And then also the answering of some questions on landscaping and then changeable message signs will also be discussed at that time, so we'll be back up there with them.

Now, I guess my point in starting this off as heading towards halftime, again, I think everyone knows this is a Sunset process that is far from being finalized and it will play out, of course, during the legislative session and what we see today certainly the legislature, with their will and initiative, will make modifications as we go along here, but what we're doing is we're establishing a starting point for this upcoming legislative session. And with that, I'll throw it open.

MR. UNDERWOOD: I don't have any questions, but using the football analogy, I feel like the football player that's not in favor with the coach and the coach says, The bus leaves at four o'clock be under it.

(General laughter.)

MS. DELISI: Are there any other questions or comments?

MR. HOUGHTON: Not a question, but let me ask you something, my first round in Sunset, is when do we get to respond, or do we?

MR. GRIMES: Well, you have an opportunity to respond really at different places along the process. Certainly, you as an individual commissioner, have the right, if not the responsibility to communicate your individual thoughts on this. There will be public hearings on this through the process. Historically, in the Senate, anyway, these Sunset bills have been referred to Senator Ellis's Government Reform Committee, but there are exceptions to that, so that's very possible in the Senate that's where that hearing will take place. In the House, generally speaking, history shows that they are directed to the significant committee, so I would assume we would be in Transportation if past is prologue on that. So there will be also very public, obviously, opportunities to comment as well.

MR. HOUGHTON: So setting the record straight, where do we get to do that, those committees that you just described or forums that you described?

MR. GRIMES: Well, certainly if there were things that you wanted to comment on and communicate, there are a number of ways we could do that.

MS. DELISI: Well, let me build on that. There was a comment that was made, I think twice during the course of the hearing, that we're not doing any new construction in Texas. And to me, Jefferson, the reason why I bring that up, that seems to be such a fundamental piece of information that we need to communicate with the legislature.

MR. GRIMES: And I don't even know how to necessarily respond to that. Every single month -- and you all are set tomorrow to approve another $200- to $250 million worth of work, roughly -- that's what it is on average.

MS. DELISI: Run me through the math here. So we're doing this year $2.5 billion in lettings, that doesn't include any of our bond programs, including the $1.4 billion in Prop 14 that we announced in Dallas just two months ago. Correct?

MR. SAENZ: Yes, that will get us to $4- or $3.9-.

MR. HOUGHTON: Do we need to paint the orange cones some other color to get their attention?

MR. SAENZ: No, that orange cone needs to stay -- or different cone. I thought you were talking about my flagpole that I just painted burnt orange and white.

MR. HOUGHTON: I saw that when I walked up yesterday.

MR. SAENZ: Sorry. It took us two years to do it.

(General laughter.)

MR. HOUGHTON: How do you respond to that misinformation?

MR. GRIMES: Certainly I think we can direct someone to the work that we do, either through a written communique or verbal communication on it. I think the member or members -- I don't recall -- that mentioned that, they know full well.

MR. HOUGHTON: I'm not sure we have enough time. But I heard one that we spent $99 million on the CDA process and we only have one project to show for it. And I'm listening to this back and forth, and I'm going wait a minute, that $99 million, if you just talk about that one project, got us $1.2 billion in a transportation asset that we didn't have to pay for. And it also included 121 in the Metroplex that generated $3.2 billion of new dollars, $458 million in 161, a transportation agreement between NTTA and TxDOT that will build the Southwest Parkway and Chisholm Trail together. Am I missing something?

MR. GRIMES: No, I think you're right on.

MR. HOUGHTON: We didn't get to respond. When do I get to respond?

MR. GRIMES: I'll write it up for you, I will.

The information that I think was quoted there was cumulative costs over time for all outside counsel, bond counsel.

MR. HOUGHTON: $99 million got me $1.2 billion. You're going to give me $99 million, I'm going to give you back $1.2 billion. Do you want that deal?

MR. GRIMES: Yes, I'll take it.

MR. HOUGHTON: Thank you. Well, and we've got three procurements going on in the Metroplex, I haven't counted those either, they're not done yet, I can't put them in the bag. So I'm kind of wondering.

MR. HOLMES: And Jefferson, on the notion that we haven't awarded any contracts, that's pretty straightforward, we could simply provide a list of the ones that have been awarded over this fiscal year -- which is quite a significant list. It comes right out of the commission reports and we could at least dispel that.

MR. HOUGHTON: Well, Commissioner Holmes, I think it's pretty significant we invested $99 million and got $1.2- and $3.2 billion and a lot of other things, but it was we spent $99 million and that was it.

MR. GRIMES: Got nothing -- that is the way it came across.

MR. HOLMES: I think it's extremely significant.

MR. HOUGHTON: And so we're sitting there and not being able to correct this record, and there's numerous of these things.

MR. UNDERWOOD: And the fact that they're talking about the $99-, don't forget part of the cost of that $99- was that we had to pull back the CDA, remember. That's where we ended up with the $3.2-. That was the legislature that caused that -- caused, that's the wrong adjective -- involved.

MR. HOUGHTON: But we got $3.2 billion of new dollars into the Metroplex. We'll call Michael Morris and ask him if that's significant, was it worth it.

MS. DELISI: Well, I think particularly on those CDA issues we'll have plenty of opportunities, particularly in the 792 report -- when do we expect that to come out?

MR. GRIMES: I would think at any time. I've been told by Chairman Carona's staff that it's being circulated.

MR. HOUGHTON: And I get to listen to and I had two of the largest truckers right here in Mr. McLane and Ken Allen from H.E.B, and one member of the commission talking about how these silly trucks are rutting our roads and we need to charge them more and we need to prohibit them, and they're close to a vote on it. And you're wondering: Wait just a second, that's commerce. We need to maybe bring the industry in and talk about how we get there.

MR. GRIMES: May be worthwhile.

MS. DELISI: I think some of my frustration personally, Jefferson, in the process was a lot of these issues that were brought up that were not in the initial report, I wasn't aware of a lot of these issues that were brought up yesterday. How far in advance were we given about some of these additional issues, like the truck issue?

MR. GRIMES: Well, on some of them we heard for the first time. Now, in their, quote, consensus document that they circulated, all of those issues came right out of their report, so they were all there.

MS. DELISI: Sure.

MR. GRIMES: I think most of those in the additional list were there as well, but it was clear to me that Sunset staff themselves were seeing some of these for the first time -- that was abundantly clear. So several of them were developed, I would assume, very close to the time they were rolled out yesterday.

MR. HOUGHTON: I stand corrected, I was corrected by Phillip Russell. It's not $1.2 billion on 5 and 6, it's $1.35 billion. So I undersold by a mere plus $130 million.

MR. GRIMES: I'll still take it.

MS. DELISI: Any other questions or comments?

Well, Jefferson, I would like just to say I don't even know if we're at halftime or even in the two minute warning, I kind of think we're really still in the first quarter, to tell you the truth, of this process. I've been around this process a long time to know that the Sunset report, at the end of the day when it hits the governor's desk for signature, looks a lot different, and so I suspect, Commissioner Houghton, you'll have plenty of opportunities to testify on these issues.

MR. HOUGHTON: Well, I think it's kind of patently unfair when one member of the commission asked for our new CFO to be fired for the $1.1 billion double count, when that person at the time didn't have responsibility over that issue. So I think that's unfair.

MS. DELISI: Well, like I said, we're going to have lots of opportunities going forward because we are just at the very beginning of this process. This bill is going to look one way filed, and at the end of the day is going to look something -- probably won't even resemble it at the end of the day.

MR. HOUGHTON: Well, it's like we accept it by acclamation, and I just want to make sure we'll have a chance to respond.

MR. GRIMES: Right.

MS. DELISI: Well, and it's just like I told the 2030 Committee, it's an education process and it's obviously a process we need to engage even more vigorously in with the legislature.

I do want to say one more thing to staff. I know it's not always the easiest process to go through, and I appreciate the work that you all are putting into this process and how you are working with the commission to move this agency forward. I still stand by every statement I've ever said about the Sunset process: it is a great opportunity for this agency and this state to enact some important transportation reform that will actually lead to more infrastructure being built in the state in a better, more efficient manner, and I think at the end of the day we're going to see that. And so I, for one, am very grateful for staff for the hard work that you're putting into working with us as we move the agency forward.

MR. UNDERWOOD: And I want to second that with also the thought that we have the staff capable of being able to make these changes that are going to be the recommendations from Sunset, we have the people in place.

MR. GRIMES: Thank you.

MR. SAENZ: Thank you, Jefferson; thank you, commission.

Agenda item number 4 is a presentation on a Urban Thoroughfare Team report dealing with the development of standards for projects that are in the urbanized areas of the state. Back in October of 2007, the commission appointed a committee to look into this and they're coming in and making this presentation. Mark Marek will lead us in this presentation today.

MR. MAREK: Thank you, Mr. Saenz. For the record, my name is Mark Marek; I'm the director of the Design Division for TxDOT.

Minute Order 111107, dated October 25, 2007, created the Urban Thoroughfare Team. While not an advisory committee, this informal group, made up of private sector academia and department staff, is to make recommendations to the administration concerning the use of context-sensitive design and sustainable growth considerations in urban development or redevelopment projects with a transportation component.

It was obvious to the working group early in the process that the main focus of these projects needed to be on the development of cooperative partnerships with respect to moving projects forward, including any value capture opportunities. These partnerships can and should include any needed combination of cities, counties, metropolitan planning organizations, private developers and community organizers. Transportation is often only one component of bringing these projects to successful fruition.

Secondarily, the group realized that there is a need to institutionalize this approach through an educational effort. Sufficient design flexibility exists in bringing context- sensitive solutions and sustainable solutions to the transportation component of these projects, but the entities involved often do not think of this cooperative approach early enough in the project development process.

My co-chair on the Urban Thoroughfare Team is Scott Polikoff with Gateway Planning in Fort Worth. Scott is very familiar with the process of context-sensitive design and bringing together these cooperative partnerships. Scott has been very involved with the 121 project in Fort Worth, working with city and department staff to fit an urban high capacity roadway section from Interstate 30 past the Railyard and threaded the Hewin and Bryan Irvin Road area, continuing south beyond Interstate 20. Fitting such a section through community areas, both old and new, is no small task.

Scott is also involved in the Verano Development in San Antonio which includes a campus for Texas A&M University, and Scott is currently working with the city of Charlotte, North Carolina on a major redevelopment effort including transportation components.

We're not asking the commission for any action today, this is simply a presentation on: one, the concept of context-sensitive solutions and sustainable growth in transportation scenarios; two, what the team and the work group has done in its first year; and three, how the team will complete its work in calendar year 2009. Scott Polikoff will make that presentation.

MR. POLIKOFF: Thank you, Mark, I appreciate it.

Madame Chairwoman, members of the commission, Mr. Saenz and others, it's a pleasure to be here. We've worked now for about a year and I think the good news is that this fourth agenda item has the potential to have tremendous positive impact on your first three agenda items. We're talking about -- to boil it down -- the ability, through the proper connection of the design of transportation facilities as areas redevelop and grow in this region, to capture billions and billions of dollars of additional value, and there are examples of this throughout the country and the world.

I want to thank Mark Marek and other staff members, including Brian Barth and Clay Smith before he took David's role on this committee, Barry Cogburn, Roy Mays and others, and the other members on the outside that participated -- we had some national experts and some local experts.

You see the image in front of you which is Seoul, South Korea in downtown Seoul, and the reason I'm showing this to you, some of you were on the commission when we first started talking about this, this is the image that Mayor John Norquist from Milwaukee brought the day that Chairman Mike Krusee had him come over, at the late Ric Williamson's invitation, to talk about these issues because these two or three slides really, I think, capture the issue as well as any.

This is a corridor in downtown Seoul, South Korea, and you can see this is the same corridor after a corridor planning process and a re-invention of the transportation corridor better linking the design of that roadway and the network with development in downtown Seoul. That's an ephemeral stream that was uncovered. That highway is now a boulevard with a major linear park, and not only does it have the benefits of creating tremendous value outside of the right of way line, also increasing potentially the efficiency of the mobility component, it actually makes for heroes, and the then mayor is now the president of Korea, so there's some good news in this.

But seriously, the committee recognized quickly that the need here is to link several policy issues that are both federal, state and local in nature. But fundamentally, you see in the green triangle it's the issue of design and engineering and the context, but most importantly, the blue triangle at the top, value capture. And the question became for us quickly: Is the design standards in your roadway manuals disconnected from the land use goals in most of the communities in which you're looking. Now, we're talking about all different kinds of situations: you've got state highways and FMs going through small downtowns, you've got new construction that are state or federally funded, and there's a limitation of the design standards in your design manuals.

The Institute for Transportation Engineers and the Congress of the New Urbanism has partnered in developing a new set of standards, so we quickly determined there's no need to reinvent the wheel in terms of urban standards for urban thoroughfares. One of the recommendations will be that this is adopted by reference to provide additional design flexibility.

But fundamentally, what we also determined is that the project development process may be asking questions too narrowly on the front end. This is a flow chart of your project development process, and as you know, you have a stand-alone manual and this is the overview, I'm not going to go into the details of this. But essentially what happens in a process engaged for transportation planning involving state-funded or state-owned facilities, the question is what's the future mobility needed for a particular corridor. Then the question is what's the functional classification to accommodate that need, and then typically is there any money to pay for it, and then you go through the linear process called for by NEPA. What happens is basically the question is answered: We don't have enough capacity in the particular corridor and we need to build more capacity.

What we're looking at now is to ask a more broad question, and working with staff we've come up with recommended draft language to broaden out the project development process. So now the first question when asked what's the compliance with planning requirements, it's not just planning the transportation corridor, it's does a community plan exist. And we are leaving that language broad because it may be that there are organic plans, it may be that there's just a developer project, it may be that there's a neighborhood preservation issue. But the question is what's going on around the corridor or even at the network level, and then the question is how do we engage the stakeholders.

And we're, again, encouraging this to be fairly organic so that the local staff, the local officials, TxDOT leadership, professionals, developers and others interested in the particular issue can organize this question as needed as opposed to the state prescribing that process. And then, ultimately what we call for in the new recommended project development process is the creation of a partnership. It could be as simple as sitting around a conference room table or as formal as creating an interlocal agreement.

And we've undertaken some case studies already looking at projects, for example, in San Antonio and the Windcrest Mall, the redevelopment involving the City of San Antonio, the Windcrest Mall, VIA, and the MPO. We've recommended that an interlocal agreement be developed so that the analysis of the traffic impacts and the development opportunities could be rationalized so that more value could be captured to pay for the needed transportation infrastructure.

Why is it important? Well, look at the Fort Sam BRAC realignment. You're looking at another 50- to 60,000 people, potentially, with 15,000 new jobs moving to that part of San Antonio. And so pulling the partners together then creates the opportunity for that value capture, and I think in terms from the TxDOT perspective, more potential local match.

And ultimately this creates an opportunity to continue to calibrate back to the question of what is the project, and then and only then, I think, are you set for more meaningful public process to ask the question under the National Environmental Policy Act, regardless of what level of analysis is needed, in terms of what should be done and how should it be paid for.

To summarize, we're really delivering three things to you: one, I've talked about the new project development process; two, it is expanding the type of tools available from a design standpoint for the design development of new projects as they relate to urban context, whether it's redevelopment of a downtown or a green field project, and with 10 million people moving into the essential urbanized area of this area, this question is being asked every day.

I'll give you an example: today if you wanted to reinvent Congress Avenue, you'd have to go through a design exception process. State-owned facility, that's a major arterial; do you really need a design exception to determine that it's okay to have parking on an arterial there? Of course not. This recommendation, working with staff, will allow the local government, TxDOT and the developer to go straight into the appropriate design without having to go through the delay.

The most important, I think, upshot of this is that that means more private money will be attracted because time is money, and I think as we streamline the process by re-questioning on the front end what the real project is and then doing the hard work in terms of analysis on the front end. As Chairman Meadows and I know working together on the Southwest Parkway project in Fort Worth, there were a lot of delays because there was a mismatch, and we worked in partnership with TxDOT on behalf of the City of Fort Worth and NTTA to come to that question, and we've been analyzing those projects now and looking at them from the rearview mirror saying what could we have done differently.

And I think staff's progressiveness on this issue has been very, very impressive and we appreciate their work. We have drafts now for the manual revisions.

And then finally, probably as important as anything, we're working with Brian Bochner of TTI, professor Eric Dumbaugh of Texas A&M, and several other folks in the private sector to develop a training program, not just for public staff but for the development community, the real estate community and others that we can go out and district by district actually begin to train people with the expanded tools that are available.

This is truly revolutionary. Again, we appreciate the opportunity and the progressiveness with which your staff has worked with us, giving us an opportunity to weigh in on this. And in closing, I'd like to hand this off to Chairman Krusee who started this little cabal, and I think it's really significant that once again TxDOT -- and I know you'll reinforce this -- but once again TxDOT can become a bellwether state in terms of reforms to make a real difference. And I appreciate the opportunity to be here.

MR. KRUSEE: Thanks, Scott.

Madame Chair, commissioners, Director Saenz. For the record, I'll identify myself perhaps for the last time publicly as the chairman of Transportation of the Texas House.

There's a quote that's been attributed to Winston Churchill, he was trying to explain the importance of architecture, and he said that architects and construction companies are the ones who shape our buildings, but from then on our buildings shape us. And he was saying that a building is more than just shelter and that its design has a profound impact on those who live in them and in their daily lives.

And so when Scott Polikoff and I scheduled a 15-minute meeting with Ric Williamson about a year and a half ago -- and Ric was known as this person who was strictly a numbers guy and had this targeted laser-like mission to discipline the expenditure of public funds towards certain specific goals and measures, but those of us who knew Ric knew that he was a fascinating person who was really interested in the human condition and in sociology -- and we told him this, we ended up spending an hour and a half, and basically we were saying that you can say the same thing about roads as Churchill said about buildings and architecture, and that is that roads are about more than just mobility, they're about economic development, they're about the social impact of those roads and that they, in fact, shape our communities for generations to come.

And so Ric agreed to create this committee and to look at our process at TxDOT for designing roads. And so you've heard our findings and the recommendations and what they want to do for the next year. I just wanted to add real quickly my perspective -- it was interesting sitting here today -- my perspective as a commission member on the National Surface Transportation Infrastructure Finance Commission. We've been meeting for the last year and a half to two years every month in Washington, D.C. Our charge from Congress is to figure out how to finance roads for the next 30 to 50 years; our findings should come out in the next 30 to 60 days. So I want to give my perspective on this as a commission member.

The next reauthorization I think is going to be different than any other, and by the way, I think you're going to hear the recommendations from that Finance Commission say that the shift to a VMT system is not 20 years away, it's less than 10, and it's critical that we do so and we should move toward that as fast as humanly possible.

By the way, they didn't mention the Netherlands came and testified before our commission; they're shifting to a VMT system right now and in less than five years they'll be fully over to a VMT system. It is possible, there's no technology needed, you can do it right away, and it is going to be critical for the United States to do that.

But I think what you're going to look at in the next reauthorization is that you're going to find that the federal government and you too, as a state agency, are going to be allocating very limited resources, getting more limited all the time, and so there's going to be a very competitive process for those federal funds.

Secondly, there's going to be a new emphasis, I think, to giving priority to projects that lead to sustainable communities and cities, and whether you agree with global warming and the carbon footprint or not, that type of impact is coming, they're going to look at that when they hand out funds.

And the last thing is I think you're going to see a new emphasis on rail, both intra- and intercity rail, and the policy that Texas has had, basically as a state, staying out of the transit business and separating those is going to have to end and there's going to have to be a collaborative process for planning, for the integration of roads and rail.

And the last point I want to make, you know, we spent all day learning how bad the financial picture is for our state, this is one answer to that, and it's one reason why last session the legislature passed the TRZ bill, the Transportation Reinvestment Zones, and it's what Scott was talking about: value capture. If you properly design a road and work collaboratively with local governments and with local property owners, you can increase the value capture by billions of dollars and have them be a partner with us in raising the is $12- to $14 billion a year that we need.

Lastly, I just want to thank the staff. I assumed that it was going to be a tough sell, that there would be resistance for changing the process and that there would be worry about adding another layer of process to everything we already go through, but I was pleasantly surprised, not only was there no resistance, they were deeply enthusiastic which has been my experience for six years as Transportation chairman.

So again, thank to the staff and thank you to the commission for allowing this committee to do its work.

MR. UNDERWOOD: Chairman Krusee, I want to thank you for all your help and your dedication to the State of Texas over these last few years, as well as your serving as chair on Transportation. We really appreciate all your efforts. Thank you, sir.

MR. KRUSEE: It's been a pleasure, although, as you know, it may not always seem that way but it is a pleasure to work on something this important, and it's been somewhat gratifying to see this kind of focus put on transportation finally. And I just gave a quote -- I think the media has all left because this is not as sexy as the other issues -- do we have one left? But Ben was talking to me and Peggy and they said, Well, what did you think of the 2030 recommendations? And I said, Well, the good news is Ric was wrong, the bad news is he was low.

(General laughter.)

MR. SAENZ: Thank you, Mark. And I know Mark and Carlos had staff that was part of that on the part of TxDOT and thanks for all you did on that. And Scott, we look to continuing to work with you and Chairman Krusee.

Okay, last item on the agenda today is an update on the status of the implementations of the recommendations made by the State Auditor on our cash finance forecast audit, and Brian Ragland will make this presentation.

MR. RAGLAND: Thank you. For the record, my name is Brian Ragland and I'm director of the Finance Division. As Amadeo said, I'm here to update you on the status of our implementing the recommendations of the State Auditor in their Financial Forecasting and Fund Allocation Report. As part of that response, we talked about presenting an update to you every month during this workshop, so that's why you're going to see me every month until this thing is finished which may be another six months to nine months.

Within the report there were 18 recommendations; I'm happy to say that we've completed 12 of those. What I'm going to do today, as I will in the future, is just discuss the ones that have changed since I last reported to you in November, and today that's going to be four of them.

Number 4(b) was a recommendation to modify our reports and coordinate with the LBB on complying with Rider Number 39 in the General Appropriations Act. That rider required us to reconcile our expenditures and encumbrances to the 12 categories in the Unified Transportation Program. That wasn't exactly doable but we did agree that we would do our best to meet the spirit of that rider. We've met with LBB a couple of times, we've put together a spreadsheet and an executive summary, and we think we have accomplished the task of meeting the spirit of the intent of that rider. We're calling the implementation substantially complete only because we have not yet heard back from LBB with their sign-off that we've completed this.

Number 5 recommended developing, adopting and implementing a formal process for the Finance Division to follow in reviewing and approving amounts to develop contract awards. The process is to include the individuals who are authorized, the method of documenting the approvals, and compliance with the department's record retention schedule. Basically, the process is that the chief financial officer approves the aggregate monthly dollar volume amounts and then the assistant executive director for Engineering Operations approves the actual projects that are within that dollar amount.

So the recommendation was to put this process in writing, and we have done that. We're going to include that in a current manual called the Transportation Programming and Scheduling Manual until the Finance Division can develop their own manual for these new activities that have been transferred to the division.

Number 8 was to update and implement the cash forecast approval process and time lines documented in the Texas Transportation Institute's Cash Forecast System Manual. Again, they wanted individuals authorized, they wanted the method for documenting that approval, they wanted time lines, and they wanted, again, for that to comply with the department's record retention schedule. I'm happy to say that this particular recommendation has been completed, we have documented that process, and we now have a formal policy on how that works.

Finally, number 9 is to complete an annual reconciliation of the cash forecast with the Comptroller's Office Cash Report in a timely manner and resolve any discrepancies. The annual reconciliation process is going to be included in the Cash Forecast Policies and Procedures Manual and the reconciliations are going to be completed in a greater detail than they were in the past. So far we've done a preliminary reconciliation with the Comptroller's information system called USAS; we received the cash reports just a couple of weeks ago, so we're working towards reconciling individual line items. A lot of those don't line up and don't correlate so we're having to work with the Comptroller's staff on reconciling those.

And that's all I have today. Any questions?

MS. DELISI: Thanks. There don't appear to be any questions.

MR. SAENZ: Thank you, Brian. That's all we have.

MS. DELISI: Is there any other business to come before the commission? There being none, I will entertain a motion to adjourn.

MR. UNDERWOOD: So moved.

MS. DELISI: Is there a second?

MR. HOUGHTON: No, I want to stay for a while and talk about Sunset.

MS. DELISI: Give me a second.

MR. HOLMES: Second.

MS. DELISI: All in favor?

(A chorus of ayes.)

MS. DELISI: The motion passes. Please note for the record that it is 4:18, and this meeting stands adjourned.

(Whereupon, at 4:18 p.m., the meeting was concluded.)

C E R T I F I C A T E

MEETING OF: Texas Transportation Commission
Special Meeting
LOCATION: Austin, Texas
DATE: December 17, 2008
I do hereby certify that the foregoing pages, numbers 1 through 113 inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Nancy King before the Texas Transportation Commission.





12/22/2008
(Transcriber) (Date)

On the Record Reporting, Inc.
3307 Northland, Suite 315
Austin, Texas 78731





 

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