Texas Department of Transportation Commission Meeting

Dewitt C. Greer Building
125 East 11th Street
Austin, Texas

Thursday, March 31, 2005

COMMISSION MEMBERS:

RIC WILLIAMSON, CHAIRMAN
JOHN W. JOHNSON
ROBERT L. NICHOLS
HOPE ANDRADE
TED HOUGHTON, JR.

STAFF:

MICHAEL W. BEHRENS, P.E., Executive Director
STEVE SIMMONS, Deputy Executive Director
RICHARD MONROE, General Counsel
ROGER POLSON, Executive Assistant to the Deputy Executive Director
DEE HERNANDEZ, Chief Minute Clerk

PROCEEDINGS

MR. WILLIAMSON: Good morning. It is 9:09 a.m. and I call the March meeting of the Texas Transportation Commission to order.

It's a pleasure to have everyone here with us this morning, and I want to especially welcome all the folks from my home area of the state, the Dallas/Fort Worth area, and their Partners in Mobility. We appreciate you making the long journey down the congested and sometimes dangerous main boulevard of the state of Texas called Interstate 35 to be here with us in Austin.

We're going to be hearing from you later on in the morning and we look forward to the information that you will provide us.

Please note for the record that public notice of this meeting, containing all the items on the agenda, was filed with the Office of the Secretary of State at 10:38 a.m. on March 23, 2005.

We characteristically begin our meetings by taking a moment to reach into our pockets, purses and suit coats to remove our cell phones, Blackberries and personal devices and put them on the silent or vibrate mode before they might disrespectfully disrupt one of our guests while they're testifying before the commission.

So if you will join with me, we will all do that together and thus avoid embarrassment.

They don't have cell service in Jacksonville so he doesn't have a cell phone.

(General laughter.)

MR. WILLIAMSON: Thank you very much.

As is our other custom, we will open the meeting with comments from the commissioners, and we will begin with our youngest member Mr. Houghton.

MR. HOUGHTON: I'm glad you finally recognized that distinction.

Good morning and welcome, and I'm looking forward to the presentation of the Dallas/Fort Worth Metroplex, and I want to thank specifically one group from the Dallas/Fort Worth area -- I don't see any here, I'm not quite sure they're here yet. The people from McKinney who captured me last night on my way to my room and drew this detailed map of their issues on the back of a cocktail napkin on what roads needed to be taken care of, and I'll submit this for evidence when we vote on it, Mr. Chairman.

Thank you.

MS. ANDRADE: Good morning. I'd also like to welcome everyone to our commission meeting. Thank you for your interest in transportation.

I know that I'm looking forward to hearing the presentation from the Dallas/Fort Worth area, and I know that we also have friends from my hometown San Antonio, former Mayor Will Thornton and Tom Griebel.

So thank you all, look forward to hearing from you all. Thank you very much.

MR. JOHNSON: I would like to reiterate the greetings of my colleagues. I would also like to thank the people from the Metroplex for their hospitality last night.

For those of you who weren't there, I mentioned that yesterday I stopped in Round Top on my way to Austin from Houston, and if you're not familiar with Round Top and you are familiar with Canton, it's probably a similar event that's held, I believe, twice a year, once in the spring and once in the fall. But it's unique, I think, in many ways and it's what Texas is all about.

And I encouraged the people there last night to take a moment, especially if you're from a large urban area, to go explore this great and vast and wonderful state.

Anyway, those of you who know me, know that I'm not much of a shopper, and I mentioned when I talked to my wife last night on the telephone that I stopped at Round Top and she dropped the phone. So I don't think that you'll surprise anybody by stopping at a place like that or exploring Texas, but I encourage you to do so.

MR. NICHOLS: I'd also like to welcome everybody here. We do very much appreciate you taking time out of your day to be with us, and share your ideas for transportation as we work.

The chairman had left a letter at the entrance talking about this past month has been a pretty substantial historic month in transportation. I know there was emphasis on the first major contract related to the Trans-Texas Corridor.

Also this past month Governor Perry signed the first in the nation agreements partnering for rail relocation of two major railroads in the state. So it really has been a great month for transportation.

Thank you very much for being here.

MR. WILLIAMSON: Thank you.

Welcome, good morning and thank all of you for being here.

We have a somewhat full and I expect fun-filled agenda. Commissioner Johnson has to leave somewhere around noon to take care of some matters that were previously scheduled, and I have some staff that need to leave no later than three o'clock to participate in the recognition of one of our staff members and an award. So it's my intention to work through lunch.

Normally if we see it's going to be a six-hour meeting, we'll break around 11:30 and grab a quick sandwich, but we won't do that today. We'll continue to work, and members who need to eat may leave the dais for a brief time.

I want to take a moment to remind everyone that if you wish to address the commission, I need for you to complete a speaker's card which you can find out at the registration table.

We use the yellow card if you wish to speak on an agenda item, something that's posted. If you have something that you want to say in the open comment period, we use the blue card.

But in either event, I need for you to fill out a card, and because we do have a relatively full agenda, we would request everyone to try to limit their remarks to three minutes.

One other matter for my neighbors from North Texas. I know we told at least one senator last night that we thought we would begin your presentation at ten o'clock. We're going to try very hard to hit that target but it may be more like 10:15 to 10:30, and if we need to convey that to the senator or any other member of the legislature that we may run a few minutes late, I wish that one of you would do that out of respect for their office.

And I'll reserve my remarks on the rest of the agenda for later on.

We want to take a moment, as we do in this great agency, to stop and honor one of our division directors who is retiring today.

Mr. Behrens, would you please take over.

MR. BEHRENS: Certainly. Thank you, Mr. Chairman.

At this time I'd like to ask Sue Bryant to come forward. She's our director of our Public Transportation Division. And Sue, I'd like to read a resolution in your honor.

The resolution says:

"Whereas, the Texas Transportation Commission takes great pride in recognizing Sue Bryant as an outstanding, dedicated administrator and employee who has served the Texas Department of Transportation for 27 years;

"And whereas, Ms. Bryant has provided insight, experience and leadership in developing policy, procedures and services while establishing, promoting and fostering a spirit of effective and helpful public service wherever her duties have taken her;

"And whereas, Ms. Bryant has devoted her professional life to public service with TxDOT in roles as diverse as director of public information and education in the Traffic Safety Section of the Traffic Operations Division, as aide to a TxDOT deputy director, as director of the Traffic Safety Section, and most recently as the director of the Public Transportation Division, having been appointed on October 1, 2003;

"And whereas, Ms. Bryant, in the course of nearly 14 years as director of the Traffic Safety Section, administered a $42 million program to help save lives on Texas roadways through extensive efforts informing motorists of the perils of drunken driving, of the importance of using safety belts, and of the benefits of driving Texas friendly;

"And whereas, the Public Transportation Division, guided by her leadership, managed the efficient transfer of the Medical Transportation Program from the State's Health Department to TxDOT, and developed new funding formulas for public transportation throughout Texas;

"And whereas, Ms. Bryant has devoted her professional life to improving the quality of life for all Texas;

Now, therefore, be it resolved that the Texas Transportation Commission, having received notice of her retirement from the service of the State of Texas, hereby recognizes and thanks Sue Bryant for her career achievements and loyal service on behalf of Texas and its citizens.

"Presented by the Texas Transportation Commission on this, the 31st day of March 2005."

Congratulations, Sue.

(Applause.)

MR. WILLIAMSON: Do you wish to speak?

MS. BRYANT: Only to let the commission and my bosses know how much I very, very much appreciate the constant and incredibly gracious support that I've had. The work is far from done.

And I would like to also recognize that everything that's done is a team effort, and it is the TxDOT family that does it, it's never one person.

So thank you.

MR. WILLIAMSON: We'll take a picture, if that's okay.

MS. BRYANT: I combed my hair.

MR. JOHNSON: I did too.

(General laughter; pause for photographs.)

MR. WILLIAMSON: The next item on our agenda is the approval of the minutes from the February meeting.

Members, the minutes are included in your brief materials. Is there a motion?

MR. JOHNSON: So moved.

MR. HOUGHTON: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: Opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries; the minutes are approved.

Mike, in a moment I'm going to turn the agenda back to you, but I want to, for our audience, for those who might be watching via remote and for the record, I want to speak a moment about this business of consulting engineers.

The governor of this state and the legislature of this state, going back six years, have commanded the commission to plan, build and maintain roads as cost-effectively as possible and to expand our system as quickly as possible.

If men and women who believe this state are serious about those two matters -- and I believe they are -- then it is incumbent upon the commission, and by extension its employees, to examine every core and radial term of the transportation world to seek out and implement policies and procedures which result in fast construction at the cheapest price possible, never sacrificing the safety of the driving public.

We have done several important things in the past six years. Internally we have evolved authority to the regions and the local leadership of this state, a marked difference in the TxDOT business culture, in order to permit projects to be identified, designed and constructed faster.

We have demanded of our contractors bids which reflect 24-hour-day operation and rewards for quick work and penalties for slow work, a major departure from this culture.

We have, to Mr. Nichols' great credit, taken on and successfully settled the notion that the fuel taxes of this state were not being collected in the most efficient manner possible.

And we conclude today our discussion of whether or not the manner in which we procure engineering services from the private sector is the most effective and efficient process available to us.

In the process of exploring this aspect of our business, one could infer from a distance that there is hostility at the commission and department level towards the private sector engineering world. Such is not the case.

Most of that world is populated by our former employees; many of our current employees will eventually end up in that world. We could not prosecute the business of this state without a strong and vibrant private sector engineering component.

That should not prevent us from publicly discussing and presenting to the legislature some ideas on how that process could be more cost-effective and more beneficial to the taxpayers of this state.

As the governor said when he assumed office six years ago, monopolies are not good, closed government is not good, it is incumbent upon us to at least discuss these matters.

And then, if the transportation world we share with Mr. Petty and those in the Dallas/Fort Worth area, and Mr. Stevens and those in the Houston area, Senator Shapleigh in the El Paso area, Ted, and Mr. Reed from the San Antonio area, if they wish to also take up this cause, they will do so, and the legislature will act. And if not, they won't, and we will get a life and move on.

But please don't confuse our focus as one of anger. We're a civil commission, we see the distinction, we discuss and fully air it out and all things will be considered in order to build our roads and design our rail and move as quickly as possible.

Having said that, Mike, I turn the meeting over to you.

MR. BEHRENS: We'll then turn to item number 3 which is a discussion item concerning our consultant selection process. This is a continuation of the discussion that we had last month, and it will be presented by Amadeo Saenz, our assistant executive director for Engineering Operations. Amadeo.

MR. SAENZ: Good morning, commissioners. For the record, Amadeo Saenz, Jr., the assistant executive director for Engineering Operations for the Department of Transportation.

First of all, this is a follow-up to our meeting last month. At last month's meeting the Transportation commission directed staff and asked them to provide some additional information related to the department's use of consultant firms, their reasons for providing professional engineering services and architectural services and surveying.

This information was presented to the commission representing our ongoing effort. And then there were also some questions that came out of this meeting that you asked us to research and bring back to you.

In December, you the Texas Transportation Commission adopted your 2005 legislative agenda, pursuant to the requirements of Transportation Code 201.0545.

One of the positions advanced in the agenda concerns the process you, the members of the commission, believe that the department should follow in obtaining the services of private consultant firms to assist the department in project planning and design.

During the February commission meeting, the process was presented which TxDOT currently uses or undertakes in the selection of a firm, or in most cases a team, to do consultant work for us.

As you may recall, the process begins with the department issuing a notice of intent; the interested firms reply with a letter of interest, LOI; the department consultant selection team then selects a short list or develops a short list out of the people that submitted the LOIs; and a proposal or an interview is then conducted and the firms are evaluated; and then, of course, one is selected; and then once we have one selected, we negotiate with that top-ranked firm. If the negotiations are successful, then a contract is executed.

MR. WILLIAMSON: I'll try not to interrupt too much today, Amadeo, but I want to be sure the slides you laid out would give one the impression that when you went from short-list determination to proposal/interview that you interview and review the proposals of all the short list.

Do you look at all of them and then select a firm to negotiate with?

MR. SAENZ: Yes, sir. What we do is we receive letters of interest and then we review those letters of interest, and from those letters of interest we short-list. And at that point we then go back to the short-list approved and ask them to either submit an additional proposal or we bring them in for interviews. And based on the interview evaluation, then we select a firm.

MR. WILLIAMSON: And so, for example, if your short-list is three firms?

MR. SAENZ: We interview the three firms.

MR. WILLIAMSON: You interview all three firms and then make a decision.

MR. SAENZ: Yes, sir. We interview the three firms and then we select the top firm, and then that is the firm that we move forward with in negotiating a contract.

MR. WILLIAMSON: Thank you.

MR. JOHNSON: Mr. Chairman, may I ask a question?

Amadeo, during the interview, what are the subjects covered or the questions asked typically when you're interviewing a short-list?

MR. SAENZ: Some of the topics are: the consultant's understanding of the project; the experience of the team; the experience of the project manager; the ability to meet the schedule; some of the other items that the district consultant selection team decides that are important to that project.

And then based on those evaluations, then a firm is selected.

MR. JOHNSON: Thank you.

MS. ANDRADE: Mr. Chairman, I have a question.

MR. WILLIAMSON: Please.

MS. ANDRADE: Walk me through the negotiation briefly. Do we negotiate face to face, number one; and number two is do we have a deadline as to whether we must negotiate within 24 hours, 48 hours?

MR. SAENZ: Yes, ma'am. Once a firm is selected, then the district normally meets with the firm -- and it could be a division, but I'll use the district -- the district consultant team will meet with the firm and they will review the scope of services for the contract. Then the district has already probably come up with their estimate of what the fees should be; they did that because they were already requested to use a consultant.

And then, of course, once they meet and discuss the scope, then the consultant goes back and will prepare a cost estimate based on that scope. Or if during the going back the consultant decides that there may be some other issues that maybe were not included in the scope, he will bring in those issues up to the next negotiation time.

MS. ANDRADE: And do we give ourselves a time line for negotiations?

MR. SAENZ: We have 30 days to negotiate the contract from the point that one is selected.

MS. ANDRADE: Do we need 30 days?

MR. SAENZ: Thirty days is what has been put in place by rules, and in all of our contracts, we do have a process where we can extend the 30-day period, and there have been some contracts that we have extended the 30-day period to allow an additional 30 days, and then there's also a second extension.

That first extension requires my approval and then there is a second extension that would require Mr. Behrens' approval. But normally, for the most part, all our contracts are negotiated within that 30-day period.

MS. ANDRADE: Thank you.

MR. HOUGHTON: I have a question regarding the fees. Is that a dartboard or is that just history, experience? I mean, if you say this project is to build overpasses and the project is $20 million in construction, and how do we know what the estimated engineering costs are on that overpass? Is that a history thing?

MR. SAENZ: Well, our people, because of history, we've been in the business for quite a long time, know how much effort it would take to design that particular project.

MR. HOUGHTON: Do we have to throw out a fee? It seems to me that when a fee is established by the department, everyone runs to that fee. There's nothing underneath that fee. If it's a $3 million engineering fee, I'm going to run to that fee and there's no negotiation after that.

MR. SAENZ: The fee is an internal document that the districts submit to the division and to administration to approve the use of consultants. The fee is not available to the consultant so they don't know what the fee is.

No one knows what our estimate of the fee is up until after we start negotiations.

MR. HOUGHTON: I've heard that differently. I've heard that the estimated engineering cost is about 3 million bucks on a project and --

MR. SAENZ: Let me ask -- this is Camille Thomason, our director of our consultant services.

MS. THOMASON: This is Camille Thomason.

We have quarterly projections that we do make available, our quarterly projection of contracts on our website, and at that time sometimes we do identify a rough number that indicates the size of the contract, but that is not typically our detailed number that we develop prior to initiating negotiations. But it gives the consultants an idea of the magnitude of the work that would be involved.

MR. WILLIAMSON: Based on historical costs?

MS. THOMASON: Yes.

MR. HOUGHTON: Do we have to do that?

MS. THOMASON: We don't have to, but that's typically the way the information has been provided.

MR. HOUGHTON: That leaves no room for -- we can't negotiate the fee anyway, but they run to that number and that's the established number.

MR. SAENZ: I guess one of the other things that you may be hearing is some of our contracts are indefinite deliverable, or evergreen contracts, and those evergreen contracts are --

MR. WILLIAMSON: Let the record reflect that for those of us who didn't go to Texas A&M, we find the term "indefinite deliverable" strange.

(General laughter.)

MR. SAENZ: The evergreen type contracts have a maximum cost, and that is readily known at all times. We know that when we advertise, we're going to go out for an indefinite deliverable contract of this amount. But that just basically says the actual negotiations are made up of a series of work orders or work authorizations, and each one of those is negotiated independently and has its own limit that's done throughout the life of the contract.

MR. NICHOLS: I had a question on that.

We short-list with two or three firms or a small number of firms that we have determined are very qualified, capable, have a history of doing these kind of jobs successfully, have a team we feel comfortable with, all that kind of stuff. So we have several -- in most cases, I would assume, several firms that have expressed an interest and that meet that qualification.

We also, on that specific project, as I understand it, have internally -- supposed to have done a detailed estimate of what we think the cost is.

MR. SAENZ: Yes, sir.

MR. NICHOLS: Which I'm kind of a little bit confused where Ted was, whether or not we have shared that with the short-listed firms or not.

But at some point when we select the first firm, then we sit down with them, lay out a detailed scope of work, and then they go and try to calculate how many hours and how many dollars for how much it would cost.

MR. SAENZ: That's correct.

MR. NICHOLS: Okay. Why do we not share that same scoping with two or three of them and let them each independently develop a cost and an approach?

MR. SAENZ: We cannot do that right now under the present requirements.

MR. NICHOLS: Because it's against the law?

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Against the law or against the rules?

MR. SAENZ: Against the law.

MR. WILLIAMSON: And you're going to tell us when that law was established?

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Please proceed.

MR. SAENZ: Okay.

The commission's legislative agenda included a proposed alternative process for consultant selection. Representative Sylvester Turner has filed House Bill 2673 that outlines this proposed process.

It is important to note that the revised selection process is still a qualifications-based process. The alternative process would only be applicable to projects that would have very defined scopes, and the process would bring in elements of both design and project innovation.

The alternative selection process, as I mentioned, is a two-phase process, it's a two-phase approach: the firms submit a letter of interest; a short list is selected based on qualifications; the short-listed firms then submit proposals. The selection is based on the understanding of the project scope, the experience and the ability to meet the schedule, as was done currently.

The two new parts in the selection would be based on design innovation and also the cost of the design. The current selection process, as it exists today, can still be used on other contracts where basically a very defined scope of services is not actually known at the time that we're procuring the services of the consultant.

For example, if we want to go out there and do a planning contract or a route study contract, there's some preliminary engineering where we don't know exactly how many public meetings we're going to have to have, or how much effort it's going to take, then that would follow the existing process.

MR. WILLIAMSON: Time out, Amadeo.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: You're a civil engineer, are you not?

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And you have what's called a PE ticket?

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: I want to establish for the record the process that you're presenting to us is a process that commission members who are not engineers have told you they want designed.

MR. SAENZ: That's correct.

MR. WILLIAMSON: You have not designed this yourself.

MR. SAENZ: No, sir.

MR. WILLIAMSON: Nor has any other civil engineer who works for the department participated in the design of this proposed alternative.

MR. SAENZ: That's correct.

MR. WILLIAMSON: Only non-engineer commission members have designed that.

MR. SAENZ: That's correct.

MR. WILLIAMSON: And would you care to know why I asked you that question, or do you already know?

MR. SAENZ: I think I know.

MR. WILLIAMSON: Why would I ask you that question on the record?

MR. SAENZ: As a professional engineer, you want to make sure that I, as a professional engineer, or any other professional engineer within the department is not basically -- I'm trying to figure out -- that we're protected so that the board cannot come back and basically say that we're trying to do something that is against the law.

MR. WILLIAMSON: And remove your license.

MR. SAENZ: And remove my license.

MR. WILLIAMSON: So a civil engineer in this state, because of the statutes and the rules and regulations in the state, can't advocate for a cost-based decision without running the risk of losing his professional license.

MR. SAENZ: That's my understanding.

MR. WILLIAMSON: That's also my understanding.

Would you venture a guess as to how many people in the state know that that's the law?

MR. SAENZ: I would venture to say that all professional engineers should know what the law is, that's what they work on.

MR. WILLIAMSON: Thank you.

MR. NICHOLS: For the record, Mr. Chairman, to the commission members, when you said non-engineer commissioners, two of us are engineers, but we're not registered professional engineers, we have engineering degrees.

MR. WILLIAMSON: I thought you were a lawyer.

MR. NICHOLS: No, just been sued by a bunch.

(General laughter.)

MR. SAENZ: Thank you.

Based on the previous discussion that we had last month, the members of the commission asked staff several questions and directed that these items be further researched.

First, staff was directed to review the history of professional service procurement by governmental entities, and that's what I will cover next.

And what we did is I looked at the Government Code, as well as the Transportation Code, to kind of provide a history of the Professional Service Procurement Act.

In 1972 the Professional Service Procurement Act was created in the Government Code. This Act specified that the selection was to be based on qualifications rather than on competitive bid.

In 1989 the Government Code was amended to put in place a two-phase process: the initial phase is a qualifications-based selection, and the second phase is the negotiation process.

I'm going to jump a little bit over to the Transportation Code because I wanted to keep my time line moving forward. In 1991 the Transportation Code stated that it was the department's policy to achieve a balance between private sector and in-house engineering design. However, no minimum amounts for outsourcing were established in the Transportation Code.

Continuing, in 1993 the Government Code was amended to add that professional fees must be consistent with and not higher than recommended fees published by professional associations.

Our Transportation Code was amended in 1997 to create a minimum level of expenditures for engineering-related private sector services. The minimum level of expenditures was to be based on a rider in our Appropriations Act, and we also had Rider 44 was codified that a minimum level of expenditures for private sector engineering for TxDOT for 1998-99 biennium was set at $207 million.

MR. WILLIAMSON: Stop a moment.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: There was a statute passed that said --

MR. SAENZ: The statute was passed that created a minimum level of expenditures that would be determined by rider.

MR. WILLIAMSON: So there was a rider in the Appropriations Act --

MR. SAENZ: The Transportation Code was codified that created the minimum levels of engineering-related private sector services.

MR. WILLIAMSON: Yes, but I want to understand, there were actually two documents

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: The Appropriations Act said of the money appropriated to the Texas Department of Transportation, no less than $207 million will be contracted out through private sector contracts.

MR. SAENZ: Right.

MR. WILLIAMSON: For a two-year budget cycle.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And at the same time there was a statute passed that said using that $207 million as your minimum basis, you will --

MR. SAENZ: There was a statute passed that said that the minimum level of expenditures for engineering-related private sector service would be set by rider.

MR. WILLIAMSON: I see what you're saying.

MR. SAENZ: And then there was a rider in the Appropriations Act that set the amount.

MR. WILLIAMSON: What was the department's FTE count in 1997? Do you know?

MR. SAENZ: I'm sorry?

MR. WILLIAMSON: The department's FTE count. How many employees did we have in '97?

MR. SAENZ: Just over 15,000.

MR. WILLIAMSON: What was it in 1993? About the same?

MR. SAENZ: Yes.

MR. WILLIAMSON: And we've just let it attrit down to 14,000 or about where it is now?

MR. SAENZ: And really we've been capped at 14,800 the last few years.

MR. WILLIAMSON: Okay, thank you. Continue.

MR. SAENZ: Finally, in fiscal year 2000, TxDOT was directed by statute in 220.3041 of the Transportation Code, to increase the expenditures in Strategy A1.1 -- which is our Plan-Design-Manage Strategy -- to use private sector providers at least one percentage point per year, increasing one percentage point per year until we reached a maximum of 35 percent.

MR. WILLIAMSON: Maximum or minimum?

MR. SAENZ: A minimum. I'm sorry. A minimum of 35 percent.

MR. WILLIAMSON: Of that strategy?

MR. SAENZ: Of that strategy.

Just as a side note, TxDOT exceeded the minimum percentage of 35 percent the first year because we were already using consultants quite heavily during that time.

What I'd like to do now is I'm going to turn the program over a little bit to Mark Marek to make the presentation on the next part which you asked us to look into some of the studies that have been done in the past concerning the use of consultants and the comparisons of consultants and in-house engineering services.

Mark?

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

Mr. Saenz said the staff was directed to provide a summary of studies done with respect to the cost of preliminary engineering done by in-house staff versus the cost of outsourced preliminary engineering.

Before discussing these studies, it may be beneficial to review the makeup of overhead costs since that was an integral discussion topic of each study.

Business costs have two components known as direct costs and indirect costs. Direct costs are any costs identified specifically with a particular final cost objective or project-related cost. These may include labor as contributes to the direct labor base, materials, and project-related travel. These costs are typically recovered by direct reimbursement through project invoicing.

Indirect costs or overhead expenses are those not identified specifically with a project such as rent, utilities, supplies, and non-billable salaries or indirect labor.

Overhead expenses, indirect costs, include two basic categories: general and administrative expenses such as rent and utilities, and fringe benefit costs such as insurance and payroll taxes.

Not all overhead expenses are considered allowable in terms of calculating a firm's overhead rate for billing purposes. The Federal Acquisition Regulations, or FAR, define what are allowed expenses.

Firms hire independent auditors to calculate their overhead after completion of a fiscal year. This annual report is what firms submit to TxDOT as record of their allowable overhead expenses.

For the fiscal year, the report also includes a firm's direct labor base which are their total billable wages for that fiscal year. Overhead rate is then calculated by dividing allowable overhead expenses by the direct labor base, or their billable wages.

A firm typically strives to maintain a reasonable overhead rate because most of the firm's client base includes more than just TxDOT or other governmental entities. To achieve this, a firm must maximize the direct labor part of the equation and minimize overhead costs.

Although we do receive an audited overhead report, TxDOT does reserve the right to negotiate the overhead rate.

There were three independent outsourced versus in-house engineering costs done in 1987. These studies are sometimes referred to as the Tri Consultant Studies.

The first of these was titled "The Utilization of Consultations by the State Department of Highways and Public Transportation." This study was done by the Center for Transportation Research at the University of Texas at Austin in January of 1987.

This study used 23 paired projects of similar work done by in-house staff and consultant staff. The study concludes that the estimated costs of preconstruction engineering, a ratio of indirect costs and supportable costs to personnel salary and wage costs may be delivered for less with in-house services than with consultant services.

The study concludes that a global cost analysis suggested that the consultant total preconstruction engineering costs were 30 percent greater than similar in-house costs.

The study concludes that there were many individual projects which can be more efficiently done by in-house staff and there are projects which can be done more efficiently by consultant staff.

The study states that it was not feasible to determine a value or quantity by which the effectiveness of a unit of time or a unit of cost expended for preconstruction engineering could be completely measured.

The study also provided responses from the consultant sector on the methodology of the study itself. These responses indicate that the consultant industry believed that if all department cost factors such as large overhead and support costs are considered and that costs incurred by the private sector as a result of public policy such as taxes and insurance are factored in, then the consultant-delivered engineering services could be at the same cost level or lower when compared to those of the department.

The second of the Tri Consultant Studies was entitled "The Utilization of Consulting Engineers for Highway Project Development" done by the consultant and management firm of Ernst & Whinney in May of 1987.

This study used 19 paired projects of similar work done by in-house staff and consultant staff. The study concluded that comparison of costs of plan work done by consultants and in-house personnel showed that in most cases it costs less to do the work in-house.

On average, the cost per in-house project was about 40 percent less than the cost per consultant project. The study stated that this appeared to be the case regardless of project design complexity, location, or the degree of in-house participation.

Sensitivity tests showed that the finding was fairly strong with respect to large increases in estimated overhead rates.

The third of the Tri Consultant Studies was entitled "Utilization of Consultants by the State Department of Highways and Public Transportation." This study was done by the Texas Transportation Institute at Texas A&M University in May of 1987.

This study used 18 paired projects of similar work done by in-house staff and consultant staff. The study concluded that the comparative costs of conducting preliminary engineering in-house are less than the costs of similar work done by consultants.

Further, the overhead rates for consultants are larger than the overhead rates assignable for in-house preliminary engineering.

The study found that preliminary engineering for in-house projects was lower than for consultant projects in all project categories.

The study makes an additional point in the discussion of the difficulty of assigning accurate overhead rates. If all other factors remain unaltered, any increase in department overhead rates also yields an increase in the cost of department support provided to consultants.

MR. WILLIAMSON: Do you know who put up the money for the study done at UT in '87?

MR. MAREK: Yes, sir. All three of these studies were paid for by the department.

MR. WILLIAMSON: By direction of the legislature or by choice?

MR. MAREK: By choice.

MR. WILLIAMSON: So while the conclusions of these three tend to favor the department, the fact that we paid for it could tend to taint its conclusions?

MR. MAREK: It could cast a shadow there, yes, sir.

MR. WILLIAMSON: Okay. Continue, please.

MR. MAREK: A fourth study was done in 1997 entitled "A Review of TxDOT Cost Allocation Methodologies." This study was done by MGT of America for the Consulting Engineers Council of Texas.

This study differed from the previous studies in that no attempt was made to directly conduct a cost comparison of work performed by consulting engineers and by TxDOT engineers.

This study focused on the way TxDOT collects and accounts for both direct and indirect engineering cost information used in comparing the cost of in-house engineering services to the cost of contracting out for these services.

The study concluded that TxDOT's current allocation method understates the resources used to perform the engineering function of the agency.

The study states that there are a variety of cost allocation methods, none of which can be considered correct or incorrect. However, some methods, the study states, produce more realistic results than others.

Some factors to consider in choosing the allocation method include size and complexity of the project, the behavior of the costs and the correlation to the activities they support and the resources available to devote to using a more sophisticated costing methodology.

MR. WILLIAMSON: Who paid for that?

MR. MAREK: That was sponsored by the Consulting Engineers Council of Texas.

MR. WILLIAMSON: I wouldn't want to publicly state what one might infer from that.

Please go to the next one.

MR. MAREK: The fifth study was entitled "Highway Design Cost Comparison." This study was performed by PricewaterhouseCoopers in February of 1999.

This study was a comparison cost study of in-house and contracted preliminary engineering and design work related to 13 types of highway design projects.

The analysis applied established cost comparison guidelines and methodologies including those prescribed in OMB Circular A76, Performance of Commercial Activities.

The database consisted of almost 6,000 historical projects. The study's statistical analysis of adjusted cost established with a high level of confidence -- that being 95 percent or greater probability -- that outsourced costs are higher than in-house costs for eight of the 13 design project categories.

On average, outsourced work for these eight design categories was 62 percent more expensive. Cost comparison results for the remaining five categories were indeterminate.

The staff also contacted the Texas Society of Professional Surveyors and the Texas Society of Architects, but no cost comparison studies related specifically to surveying or architectural services were discovered.

MR. WILLIAMSON: You know, obviously my question is going to be who paid for the 1999 study. Do we know?

MR. MAREK: That study was also paid for by the department

MR. WILLIAMSON: So one could infer, because we paid for it, the conclusion that department costs were lower than private sector costs might be shadowed somewhat.

MR. MAREK: That question could be raised, yes.

MR. WILLIAMSON: Michael, there are way too many people here and way too many very important elected officials participating in your presentation. I didn't mean to indicate that we would make them wait.

At the moment that the folks from across the street that you want present are here, please let me know and we'll stop this and we'll go immediately to the partners.

Please continue, Mark.

MR. MAREK: With that, I will turn it back over to Amadeo Saenz.

MR. SAENZ: Thank you, Mark.

MR. WILLIAMSON: I'm sorry. Does anybody want to ask Mark any questions?

(No response.)

MR. WILLIAMSON: Thank you, Mark.

MR. SAENZ: If I let Mark make the whole presentation, there won't be any questions.

MR. WILLIAMSON: Or let Camille make the whole presentation and there wouldn't be any questions at all.

MR. SAENZ: Well, we can do that.

MR. WILLIAMSON: Be nice to her.

(General laughter.)

MR. SAENZ: Staff was also asked to give a breakdown of the type of payments, both in number and in dollar amounts.

The department's standard contracts include a series of four payment types. The payment types include: cost plus fixed fee; lump sum; specific rate; and unit cost.

For contracts with multiple work authorizations -- again, our evergreen contracts -- it is possible for more than one payment type to be used on one contract.

MR. WILLIAMSON: So you're telling me we have a multiple work authorization with an indefinite deliverable?

MR. SAENZ: Yes, sir. We have an indefinite deliverable contract with multiple work authorizations.

MR. WILLIAMSON: Only an engineer could come up with that.

(General laughter.)

MR. SAENZ: In other words, one work authorization may have different payment types than another.

For the five-year period between 2000 and 2004, 17 percent of our contracts were cost plus fixed fee or work authorizations, 24 percent of them were lump sum, 28 percent were specific rate, and 13 percent were unit cost.

Eighteen percent that were identified basically included more than one work authorization, more than one type. And those are the dollar figures right there.

MR. WILLIAMSON: Now, Amadeo, I want to understand something about this lump sum. This is the first time I've seen this.

To an oil and gas guy like me and John, lump sum means turnkey fixed price, but it means turnkey for the outcome, not turnkey for the number of hours.

Does lump sum in this context mean turnkey or lump sum for the outcome or for a number of hours?

MR. SAENZ: Turnkey for the outcome.

MR. WILLIAMSON: So we have some contracts where we say to whomever -- I don't want to use a company name --

MR. SAENZ: ABC Consulting.

MR. WILLIAMSON:  -- ABC Consulting, Design this bridge according to the scope and you will do it for $50 million.

MR. SAENZ: Yes, sir. Under a lump sum contract, what we do as we negotiate, we identify the different elements of the design, the hydraulics, the structure, the foundation, and we negotiate hours and we negotiate a rate, but eventually we come down to a set amount that we want to pay for it.

MR. WILLIAMSON: But I heard you say two different things.

MR. SAENZ: Well, we use hours in our negotiation to come up with the lump sum amount that we then agree upon.

MR. WILLIAMSON: Okay. Well, what happens if they design the bridge in less hours than you agreed upon?

MR. SAENZ: We agree to pay that amount of money for the design of that bridge.

MR. WILLIAMSON: What happens if it takes twice as many hours?

MR. SAENZ: We pay the same amount.

MR. WILLIAMSON: Never go over it?

MR. SAENZ: No, sir.

MR. WILLIAMSON: No overage at all.

MR. SAENZ: Under lump sum, we do not go over.

MR. WILLIAMSON: Well, one of the things that I hear directly from the private sector community, and I have heard from my boss, is are you sure it's not the department's behavior that's driving this lack of competitiveness.

So I guess I have to ask you why don't we have a lump sum contract on every contract.

MR. SAENZ: Some contracts do not lend themselves for lump sum.

MR. WILLIAMSON: Because of them or because of us?

MR. SAENZ: Because of the type of work that it's going to be, the type of work that you're asking for.

For a contract where you do have a very specific or known scope of work, I want to design this bridge, it's here, we know exactly how long that bridge is, we know how wide it's going to be, we have what type of bridge, we can basically design a lump sum contract for that.

For a project that we are going out there to do a route analysis or route study, environmental documents, is going to involve a lot of maybe public involvement and public outreach in a series of meetings where we do not know exactly what the scope is, we don't have a good defined scope, then we move to the cost plus fixed fee type.

MR. WILLIAMSON: It still looks to me like we could go to lump sum, but we'll talk. I'm sure we're going to be changing our rules, whether the legislature changes the law or not, so we'll talk about that a little bit later.

MR. SAENZ: We have evolved. In the years in the past, we used to do everything cost plus fixed fee, and then of course, the lump sum, specific rate and unit cost have evolved as part of our process.

And if you notice, 24 percent of our contracts are now lump sum.

MR. WILLIAMSON: Amadeo and members of the commission, if you do not object, we're going to take a two-minute break to allow our guests to prepare themselves and to allow us to exit the podium, and we're going to take up and listen to a great transportation story from North Texas.

So two minutes for everybody to switch out seats and we'll get started again.

(Whereupon, a brief recess was taken.)

MR. WILLIAMSON: In a moment we'll turn the meeting back to Mr. Behrens to introduce our guests. Let me just take a moment to invite our guests to stay after the presentation to hear the rest of what the department has to go through, but if you can't, we will understand. We'll take a break after this presentation to permit people to leave.

And let me also take a moment to say, as I always do, how proud I am of the transportation leadership of North Texas, whether it's Senator Shapiro, Senator Brimer, Representative Phillips, and did I say Representative Eddie Bernice Johnson who led a valiant effort with Kenny Marchant and Michael Burgess to change the federal bill just a month ago to potentially route -- and I want everybody to think about this -- as much as $8 billion of toll credits to this state if we proceed along the path of building toll roads.

It's important to convey that, I think, to our two senators, $8 billion of state money can be replaced by toll credits, permitting us to invest that state money in commuter rail, mobility projects, and clean air projects.

People have no idea how important it is unless you talk about it and the free press writes about it, and that effort -- and of course aided by the majority leader -- could be singularly the most important financial decision that the federal government has made about our transportation for our state in 20 years.

And right on down to Michael Morris and Mike Moncrief and Laura Miller and the hundreds of county and city officials that come together to plan for our region, I am proud of what we do in transportation. Even Glen Whitley.

(General laughter.)

MR. WILLIAMSON: Oh, Margaret, you're here. And Margaret.

Michael.

MR. BEHRENS: Thank you, Chairman. We'll go to item number 4 which is a delegation presentation from the Dallas/Fort Worth Area Partners in Mobility.

At this time I'd like to call on the mayor of Fort Worth, Mike Moncrief, to lead off this report and to introduce subsequent speakers.

And mayor, if you would, as members possibly from the legislature come, feel free to interject them into your presentation at any time.

MAYOR MONCRIEF: Thank you very much.

Well, good morning, Mr. Chairman and members of the commission. I'm Mike Moncrief, mayor of the city of Fort Worth, and I'm proud to be joined today by two members of our council, Ms. Wendy Davis and Ms. Becky Haskin, and also with former mayor of this city, Kenneth Barr, who is part of our delegation.

On behalf of the Dallas/Fort Worth Area Partners in Mobility, I'd certainly like to thank all of you for our opportunity to join you today.

As you well know, each year we come to discuss with you the mobility changes and challenges facing North Texas with one theme in mind: continued investment in our region's surface transportation system is critical to our economy and to our quality of life.

We strive to bring to you innovative solutions to these challenges, solutions that are based on the continuation of our long-standing and successful partnership with this commission and with TxDOT staff.

Our coalition includes mayors, city council members, county judges and commissioners, city managers, chamber presidents, business and civic leaders, and transportation professionals from throughout North Texas.

I would like at this time for our delegation to please stand and be recognized, and I want to thank every one of them for being here. Could you all please stand?

Thank you, Mr. Chairman.

Through the combined efforts of our state leadership and this commission, we have new opportunities to address the transportation infrastructure and financing needs of our region, as well as the entire state.

Our presentation today will focus on several of these key initiatives and how the North Texas area is promising to make the most of these opportunities.

We recognize your leadership and vision associated with the development of the Trans-Texas Corridor and we would like to share with you our concepts on integrating the Trans-Texas Corridor/35 proposal with our region's needs.

Our legislature is currently debating ways to address major fiscal challenges that we are facing at the state and local levels, and I don't envy them.

We will highlight several of our ongoing legislative initiatives. Last year our presentation focused on our efforts to aggressively move out on the financing and implementation of transportation improvements with the tolls provided by House Bill 3588.

We want to provide you with a brief update on the progress of those efforts because we're excited about that progress.

And finally, it's easy for you to see that a region of our size will not be sustainable without a seamless passenger rail system which we are now concentrating on with other regional partners.

Against today's major fiscal and environmental constraints, it is the partnerships of elected officials, the private sector and the Transportation Commission working together that will lead to our ultimate success.

We look forward to this continuing strong partnership with you to address the mobility needs of North Texas.

Mr. Chairman, I think I can truthfully say, on behalf of our entire region, we are excited about the momentum we feel, we are excited about the synergy that's taking place, we are excited about not having to deal with large city versus small city controversy that so often become turf wars that lead to failure of being to work together. We've gotten past that.

We are working to try and make a difference, a difference in not only the mobility needs of our region, but also the quality of life of the people who live in our region and who we represent.

And with that, I'd like to thank you, Mr. Chairman and commissioners, and I'd like to introduce Bob Estrada to continue our presentation.

MR. WILLIAMSON: Thank you, Mike.

MAYOR MONCRIEF: Thank you, Mr. Chairman.

MR. WILLIAMSON: You're always welcome here, buddy.

MR. ESTRADA: Thank you very much, Mayor. And good morning, Mr. Chairman, commissioners, Mr. Behrens. It's a great pleasure to be here.

As most of you know, I'm Bob Estrada with Estrada Hinojosa & Company, but I'm particularly proud to be here today wearing my civic hat representing the Greater Dallas Chamber and the DFW Partners in Mobility.

We've seen and we concur with the growth forecast on the Interstate Highway 35 corridor between Laredo and Dallas/Fort Worth, and we applaud this commission's vision and your leadership in promoting the Trans-Texas Corridor as the key to moving people and goods, not only in the Interstate 35 corridor but also throughout Texas.

Over the last several months, in response to your request for public input regarding the TTC-35 proposal, elected officials in our area, other transportation interest groups throughout North Texas have taken part in a dialogue regarding this concept of TTC-35.

The outcome of these deliberations has been the development of a regional policy position on the TTC, Trans-Texas Corridor 35 that was recently transmitted to you through our Regional Transportation Council. Overall, we support the TTC-35 proposal to help address our mobility, reliability, safety and air quality needs.

Within the Dallas/Fort Worth metropolitan area, we're promoting that you consider and proposing that you consider the Trans-Texas Corridor on a mode-by-mode basis which will provide the opportunity to expedite important auto, truck and freight rail corridor improvements needed in our region, all of which feed the multimodal corridor to the south from the center of our region.

We are suggesting that you consider a phased implementation approach that allows for addressing sustainable development concerns while also preserving future right of way.

Our proposal features urban connector alignments for automobiles, trucks and passenger rail, providing access to the existing economic infrastructure of Dallas and Fort Worth.

This includes an east-west connection on the south side of the DFW area, an element that was missing from the original TTC-35 proposal, that we think is key to unlocking congestion on the interior of the region and to cost-effectively complete the original economic development goals of the Trans-Texas Corridor.

We believe that the evaluation of alternative routes and staging of investments should include an analysis of economic impacts to the existing and the expected future population and employment of the region.

For example, outside of our region, the intercity portions of the TTC-35 between Hillsboro and Laredo should perhaps be spaced as closely to Interstate 35 as feasible in order to provide the maximum amount of access and economic benefit to the communities that are already there and well established.

With that, let me turn the presentation over to my friend David Russell to discuss some of the specific recommendations for the development of modal corridors within our region.

Thank you very much.

MR. RUSSELL: Thank you very much, Bob, and good morning, commissioners and Director Behrens.

I am David Russell, vice president of external affairs for Verizon, but I'm here in my capacity this morning as the chairman of the North Texas Commission.

My office is in Dallas County and my home is in Tarrant County, and so for almost 20 years I've been a regular daily commuter on the Texas highway infrastructure, so I'm especially excited to be here today to talk about something I think could make a real impact in the traffic that we face in that daily commute, and hopefully before I retire from my career with Verizon.

As Bob mentioned, an important distinction of our proposal is the delineation of separate routes for individual modes, including urban connectors to facilitate movement within the region.

The staged auto mode calls for the use of the TTC-35 consortium investments and concession fees to evaluate and, as feasible, construct additional capacity improvements to the toll road automobile urban connector along existing and planned sections of the Dallas North Tollway, State Highway 161, the President George Bush Turnpike, and State Highway 360, as shown in red on the map on the screen.

Ultimately, as demand warrants, the next stage of investment is construction of an auto loop around the DFW region.

On the next map, shown in green are the TTC-35 truck urban connectors and improvements. The near-term improvements could include dedicated truck lanes, intelligent transportation systems, geometric improvements, interchange and frontage road improvements, and truck safety enhancements, leading to the eventual construction of an east-west truck bypass.

To address the shipment of rail freight, the TTC-35 consortium investments and concession fees should be utilized to construct both an east-west freight rail bypass to the south of the region and a north-south freight rail bypass to the west of the region.

These bypasses would alleviate congestion at Tower 55 and relocate hazardous material shipments out of downtown Dallas and downtown Fort Worth.

Finally, the high speed rail portion of the TTC-35 should access the Dallas/Fort Worth International Airport from the south, as recommended by the recent Dallas/Fort Worth Airport Rail Access Study, and should also connect to the regional light and commuter rail systems to facilitate movement to other destinations in the region.

These recommendations represent our region's initial response to your TTC-35 proposal for your consideration. Once we have concurrency between TxDOT and the MPO for the TTC-35 routes within the metropolitan planning area, the final element of our regional policy position calls for the TTC-35 proposal to be placed in our region's metropolitan transportation plan.

We look forward to a continuing dialogue with the Texas Transportation Commission and TxDOT staff on making the TTC-35 project a reality.

Now Dallas County Judge Keliher will continue our presentation.

JUDGE KELIHER: Good morning. Good morning, I'm Margaret Keliher, the Dallas County judge and the co-chair for the Dallas Regional Mobility Coalition.

The partners in mobility are committed to working alongside with the commission to continue to address transportation funding. These issues, as they come up during this next legislative session, we will be also working hard on.

And I want you to note that they gave me my favorite topic to talk to you about, and that's money and what are we going to do for more money.

(General laughter.)

JUDGE KELIHER: We recognize that, first and foremost the transportation resources, the revenues, the authority and the flexibility that was achieved by House Bill 3588 have got to be protected during this legislative session.

This includes the use of the Texas Mobility funds in those areas that are willing to leverage the funds, the construction of highways as toll roads, and the use of the comprehensive development agreements. These are all necessary tools to improve mobility throughout our metropolitan regions.

There are two ways that we actually believe that we can increase funding for transportation.

First, we can eliminate or reduce the diversion of highway user fees and taxes that are deposited into the General Revenue Fund rather than into the State Highway Fund.

Second of all, we could take the dollars that are deposited into the State Highway Fund and use those dollars for transportation projects rather than for non-transportation uses.

SPEAKER FROM AUDIENCE: All right!

(Applause.)

JUDGE KELIHER: I told you they gave me my favorite topic to talk about.

Both of these circumstances which represent lost opportunities for improving mobility across Texas need to be corrected. The Partners in Mobility strongly encourages the Texas Legislature to not allow the continued escalation of diverting these needed transportation funds.

These funds need to be deposited either into the Texas Mobility Fund or into the State Highway Fund during this 79th Texas Legislature.

We encourage the Texas Transportation Commission to join us in informing our Texas legislators about the damaging consequences of diverting these highway funds into uses other than transportation uses.

The Partners in Mobility are in support also of the proposed plan to index the Motor Fuels Tax to the Consumer Price Index. This will stabilize the purchasing power of the Motor Fuels Tax relative to the cost of maintaining and constructing roadways which has gone up each year while the Motor Fuels Tax has remained constant for the past 14 years.

We have been working with our statewide partners through the Texas Urban Transportation Alliance -- better known as TUTA -- to encourage the legislative support of this proposal. However, while we do support the indexing, we also support using those dollars only for transportation purposes, and again, not allow those dollars to be diverted for other uses.

The Dallas/Fort Worth region is moving forward with the construction of toll roads which allows us to build projects more quickly and to provide future revenues to build additional transportation projects within our region.

The revenue generated from the toll roads needs to be constitutionally dedicated to transportation funding only within the TxDOT district in which the toll revenue is generated. Without this protection, it will be difficult to maintain public support for toll roads.

We recently concluded an 18-month process focused on finding ways to bring a seamless regional rail system to North Central Texas. We had a lot of local leaders and business community involved who participated in the Regional Transit Initiative to identify financial institutional structure and legislative implementation strategies in order to make this regional rail system a reality.

This effort is crucial given that in 2025 only 47 percent of the Dallas/Fort Worth population is projected to reside within the boundaries of our current transportation authority service areas.

We are continuing to look at solutions and proposals and legislative needs that we will have available to us to be able to make this a reality.

We want to thank the commission for your decision to allow flexibility in the use of Texas Mobility funds to construct public transportation with your recent commitment of $100 million in the 2005 UTP for intermodal connections in our region.

These funds will go a long way to help jump-start our regional rail initiative. We, as elected officials, stand ready to assist the state in getting these bond funds sold as quickly as possible.

And yes, I did read today's newspaper and saw what was on the front of the paper. But we do believe strongly that we have got to continue to work hard on this issue.

I am now going to turn the podium over to Jack Hatchell who will continue with our presentation.

Thank you very much.

MR. WILLIAMSON: Thank you, Judge.

MR. HATCHELL: All I have to say is amen to her comments.

Good morning, commissioners and Director Behrens. I am Jack Hatchell, Collin County commissioner, and this year's chairman of the Regional Transportation Council. I am joined today by two fellow commissioners, Phyllis Cole and Joe James.

On behalf of the entire Regional Transportation Council, I want to thank you for the opportunity to appear before you to address our concerns on regional mobility and transportation.

Last year our Partners in Mobility presentation focused on our efforts to move out aggressively, with you as partners, in the financing of transportation improvements through tools provided in House Bill 3588.

I am proud to say that we're continuing to make great strides in this direction, and more importantly, to report that we have not lost any ground on our commitment to you to take advantage of the opportunity to expedite financing and construction of as many projects as feasible.

You may recall this map which we presented last year in our presentation to you which reflects our region's highest priority projects.

We also shared with you our proposal for funding for each of these corridors that includes a combination of: TxDOT Category 2 funds, Texas Mobility funds, RTC Surface Transportation Program Metropolitan Mobility funds, Commission Strategic Priority funds, toll funding, and local funds.

This is nearly a $7 billion partnership program to construct these high priority projects over the next ten years.

Over this last year we have been working diligently with the TxDOT Dallas and Fort Worth District office and staff and our transportation partners on the details of this partnership funding program.

Several of these corridors are fully funded, however, funding needs still remain on some of the key projects. Securing your Strategic Priority funding commitments is critical in order for us to continue to move forward.

The partners in the Dallas/Fort Worth area region are focused on ways to get the most out of our transportation dollars.

One of the strategies that we're pursuing is to leverage state and federal funds by partnering with local agencies in the construction and operation of transportation infrastructure and services. This type of innovative leveraging will expedite the delivery of needed transportation projects.

For example, since we are proposing that your Strategic Priority funds are primarily used to construct revenue-producing facilities, excess revenues will be generated for other transportation projects.

An ongoing example of the leveraging strategy is to use commission Strategic Priority funds to complete the financing package for the President George Bush Tollway extension.

This new tollway -- which has now received environmental clearance -- will provide congestion relief to Interstate 635 and provide access to growing population and employment centers in the north and eastern portions of Dallas County. The project will aid in the reconstruction of Interstate 35 which is vital to our region.

The estimated project cost is $442 million. All but $150 million of this funding is in place and the Partners in Mobility are asking the commission to complete the funding package with Strategic Priority funds.

The Strategic Priority funding leveraging strategy will expedite the construction of this needed tollway facility and provide a funding stream that can be used to fund future transportation projects in the Dallas District.

We also believe that there's an opportunity to use your Statewide Transportation Enhancement Program as a leveraging opportunity with the private sector to increase funding that we would like to explore with you in the future.

The partners in the Dallas mobility region are supporting the construction of additional toll roads in the North Central Texas area. Several agencies have been identified as potential issuers of toll bonds, those including the North Texas Toll Road Authority, TxDOT Turnpike Authority Division, and private investors for the use of comprehensive development agreements.

We're actively engaged in policy discussions that will allow our region to take advantage of the flexibility provided by House Bill 3588 for all these groups to build toll roads in the region and continue to work together to identify specific funding packages and lead agencies for each potential toll project.

The Regional Transportation Council has committed over $385 million of Surface Transportation Program Metropolitan Mobility funds to the projects in our partnership program with the Transportation Commission.

This commitment of funds is provided as part of the funding strategy for the high priority toll and TxDOT projects needed in the region.

In order to preserve this commitment on these important projects, the RTC is requesting that the commission complete the funding packages with the programming of Strategic Priority funds.

We are here today to secure from you your commitment of Strategic Priority funding of $75 million per year for the next ten years.

Commissioners, we thank you for the opportunity to present this information to you and we thank you for your attention.

Commissioner Glen Whitley from Tarrant County will conclude our presentation.

Before he does this, I would like to recognize our staff at the RTC and the North Central Texas Council of Governments.

Mr. Chairman, you've already mentioned Michael Morris, so Michael is here, his assistant Dan Kessler, and several of the staff. And as you well know, we couldn't do our job without them. They're the ones that do all the work and we take all the credit, so we sincerely appreciate what they do.

And likewise Vic Suhm, executive director of the Tarrant County group, and also James McCarley, the head of the Dallas Regional Mobility Coalition.

So with that, I would like to turn the podium over to Commissioner Whitley. Thank you.

MR. WILLIAMSON: Good to see you.

MR. WHITLEY: Thank you, Jack. I'm Glen Whitley, Tarrant County commissioner and chairman of the Tarrant Regional Mobility Coalition -- we're new -- Tarrant Regional Transportation Coalition.

We appreciate the opportunity to come to you today and the time that you've given us, and we extend our thanks for all the support you've given us in the past years.

We look forward to the continued partnership that we've enjoyed, and what I hope to do today is to summarize what our specific suggestions and requests are.

In response to your request for input on the TTC-35 proposal, we have transmitted to your staff a regional policy position from the Dallas/Fort Worth area.

We hope that you will evaluate and consider the multimodal urban corridor recommendations submitted as a part of this policy position as the means for integrating the state TTC-35 project with the Dallas/Fort Worth area.

As you've heard from us again today, we believe that the future of transportation funding lies in our collective ability to allocate funds to projects that generate additional revenues that we can reinvest back into the transportation system.

The commission is urged to allocate TTC-35 concession fees to those regions that can use the funds to leverage additional transportation revenue.

You know, we were very excited about the reception that we had last night and we really have looked forward to the presentation today. I will have to say it was a little frustrating to get up and read in the paper that we are now looking for another $300 million to possibly divert from transportation funding.

Diversion of state transportation revenues to non-transportation uses continues to undermine your ability and ours to address the state's transportation needs. The Dallas/Fort Worth Partners in Mobility and our colleagues at the Texas Urban Transportation Alliance -- it would just be easier to say TUTA.

MR. WILLIAMSON: As in toot a horn?

(General laughter.)

MR. WHITLEY: As in toot a horn -- remain committed to the importance of communicating the issues to our state legislators.

We urge your active participation -- as I know you are already doing -- in this dialogue to explain the need for increased transportation funding and limiting diversions from our transportation resources.

We've worked hard over the past two years on the refinement of plans for a regional rail system in North Texas, including the institutional and financial requirements needed for implementation.

We want to thank you for your support of the effort with your approval of Texas Mobility funds to be used for rail projects in our region, and we look forward to the issuance as soon as possible.

The recently completed Texas Metropolitan Mobility Plan documented the need for an additional $130 billion of metropolitan transportation system funding across the state over the next 20 years. Funding strategies that maximize transportation revenue are critical for addressing this shortfall.

The commission is urged to allocate Texas Mobility funds and Category 12 Commission Strategic Priority funds to those regions demonstrating the ability to use these funds to construct projects that generate additional transportation revenue.

Finally, the Regional Transportation Council has committed $386 million of Category 7 Surface Transportation Program Metropolitan Mobility funds to TxDOT Dallas and Fort Worth districts to construct freeway/tollway system improvements.

We are requesting that you allocate $75 million per year for the next ten years of the Category 12 Commission Strategic Priority funding to the Dallas/Fort Worth area to fulfill its partnership program.

We again want to thank you for the opportunity to come before you today, and we'll be glad to answer any questions that you may have.

MR. WILLIAMSON: Who would you suggest would be the proper person for us to collectively address our questions to: would it be you; would you prefer Michael to come up?

MR. WHITLEY: Probably Michael.

(General laughter.)

MR. WILLIAMSON: We are always happy for Michael to be here with us.

MR. MORRIS: Michael Morris, director of Transportation, Dallas/Fort Worth Region.

MR. WILLIAMSON: Thank you, and welcome.

I'll touch on a couple and then stop for a moment and let the other commission members speak.

There are three points I need to make. Well, first of all, I need to say thank you for a great presentation. And I think the elephant is in the room so we'll just say it from a personal perspective.

I thank the region for stepping back and looking at TTC and saying: Now, wait a minute, what does this mean to us and are they really serious about influencing how it affects us; it's big, it means something to us, and we need to influence it. And I appreciate that attitude more than you can imagine.

You know, after having several websites created in my name and having taken more than my share of shots, it's good finally for people to say, you know, maybe this isn't bad.

And to lead into that, I think we all have to be very aggressive in saying to our constituencies: Concessions are new to this state, but it may well be the only way we can build some of our bigger projects. It may be no longer a choice between raising taxes high enough to rebuild something or concessions.

And certainly concessions don't apply to every project, but it may well be the case that we need to turn to businesses and say we are willing to give up your revenues for a number of years if you're willing to come construct assets we've got to have. And if we're frank and forthright and willing to say that to our constituencies, I think they'll understand it.

I happen to personally believe it's the only way we can get some of our larger problems solved quickly.

The second point I need to make is I believe the commission and CINTRA is going to always be focused on working with regions to make this work. You're our partners, you are who we work for, it wouldn't make any sense for us to have a divergent plan.

We're going to need your help this session on getting some land use authority because some of the corridors suggested in your layout, we probably can't reserve unless we start moving real fast, and in order to move real fast, the legislature is going to have to give us the authority to do that in some way.

We've asked the legislature for a couple of bills, we don't have the corner on the marketplace of good ideas, there may be some other ideas. But I think Carter Casteel has one of our proposals. Is that not correct?

MR. BEHRENS: Yes.

MR. WILLIAMSON: That basically permits counties to go out to citizens and say: Look, you need to reserve this and TxDOT is prepared to pay you for it, but we need to not do any more building here because we think someday we're going to be asking the federal government to give us a footprint.

The third point I would make is that none of us want to walk through the state and try to tell the happy story of tolls. We all recognize that it's one more way to pay for roads. You can raise taxes or you can borrow money and buy tolls.

And I am deeply appreciative of the recognition by the region that we really don't have much choice if we want to build things. If we don't want to build things, then we do have a lot of choices, but if we do want to address these things, that nasty word has got to become part of our daily life, whether we want it or not. I appreciate it.

Members, questions for the Dallas/Fort Worth area? Please go ahead, Robert.

MR. NICHOLS: Okay. Comments and questions. The first comment is outstanding presentation. It is such a pleasure to have a group who has come up not just with their hand out asking for a project or for money, but with an overall plan.

I mean, you have a vision, you have a plan not only of how to do it but how to implement it, you've worked it out together. You support us in statewide efforts that we are going to help your region plus the rest of the state in transportation. Extremely important for everybody to work on those things together.

You've identified a couple of key elements in what needs to be done. We certainly would appreciate because it would be very helpful.

In your planning, one of the early things that caught my attention in the layout was the elements that are in the Trans-Texas Corridor, your recognition of how that fits. Freight rail, not just cars and trucks, but how the freight rail can interact and how it can benefit by having freight rail relocations, for instance, on new corridors, how that can benefit your new commuter rail, how all that ties together.

The one element I did not see, or maybe I missed it, the last element is utility transmissions, something we're trying to plan more with because there is a real recognition that these utility companies, whether it be a large electrical transmission line, they've got to come through and put it somewhere. And so we're trying to incorporate that.

MR. MORRIS: It's not included in this presentation, Commissioner, but it is included in the vision.

Our elected officials in our region very much understand under deregulation that the issue in electric generation is no longer the power plant capacity, it's the transmission capacity.

MR. NICHOLS: Right.

MR. MORRIS: And just like we have congestion on the roadway side, there is congestion on the transmission of that electric power, especially within metropolitan areas and especially within the Dallas/Fort Worth region.

Bill Hill is here today and I talked to him about it, I think, probably about eight days ago. Not only is the Trans-Texas Corridor a potential corridor for transmission capacity to hold down or lower electric utility rates within the region, we think the hidden revenue source within the Dallas/Fort Worth region are the transportation corridors that could be potential electric utility corridors within the transmission constrained areas of metropolitan areas.

And there's going to be issues that we have to bring back to staff about how do we protect, by putting up transmission lines, buffers around those poles so we don't create safety problems. And I think there's a whole new generation of professional -- of integrating transmission lines in some architectural urban design sense in a safe way that protects it from the traveling public as a way to reduce the electric power transmission loss.

It's in the Trans-Texas Corridor vision, you have it very much in there. And we think as these elected officials continue to get briefed on this huge expense, out-of-pocket cost to the citizens of the region, to actually bring back to you maybe within the Dallas/Fort Worth region or El Paso or Houston, a within-region mini Trans-Texas Corridor vision with regard to those transmission losses.

MR. WILLIAMSON: Absolutely.

MR. NICHOLS: Second question was in the layout of how all that connects, at least visionary, I was counting the number of counties that your plan touches, and in some of the layouts I'd hit nine counties, in some of the layouts I'd hit 12 counties.

In your metropolitan planning organization, how many counties do you currently have?

MR. MORRIS: That boundary there, Commissioner, is portions of nine counties; it's almost nine full counties. The state of Maryland in land area and in population can fit inside the Dallas/Fort Worth planning region.

(General laughter.)

MR. NICHOLS: Probably more economic development going on back here too.

MR. HOUGHTON: They love to hear that back east.

MR. MORRIS: Commissioner Whitley flies back there once a month to the state of Maryland to remind them of that.

Just to let you know, the region will be going through a re-evaluation of that. We now have a full nine-county non-attainment area, so there's some small slivers of that that are not included, and the regional transportation will be looking to see if this nine-county area should be expanded.

MR. WILLIAMSON: What's the size of the COG?

MR. MORRIS: The COG is 16 counties.

MR. NICHOLS: In incorporating uniform planning for commuter rail, the transit, the tolling systems, all that kind of stuff, do all of these entities have the authority to work with that many counties? Because that's where your people are going to be and it's a system that needs to fit.

MR. MORRIS: As the elected officials have digested -- and I want to touch on this notion of a financial RMA just for a second. You have the North Texas Tollway Authority that can build toll roads in four and in all perimeter counties.

MR. NICHOLS: And perimeter.

MR. MORRIS: They can opt in to that particular initiative. So we can get up to this urban boundary.

Obviously your TxDOT division can build toll roads in any of that area, and obviously comprehensive development agreements can. So we think all three mechanisms are available to us anywhere within that jurisdiction.

Obviously we have two very able highway department districts to build transportation. We're flattered and we thank you for inviting us to the signing of the MOUs between the governor and the rail freight operators, because that institutional structure needs to be created to develop for this century what the interstate highway was for the last century: new partnerships to build the rail freight system.

And as you heard from our elected officials and Judge Keliher, the big problem we have is on the passenger rail side. Within 2025, a majority of our citizens will reside outside our three existing transportation authorities.

Not too many cities have opted into those authorities in the dozen years. So that is why over the last year and a half we have talked about the creation of a fourth, and hopefully final, rail authority that can go six-seven counties and pick up the regional rail components that are outside of those other existing authorities.

Those transit needs in that other area -- and it's important for you as commissioners to understand -- are basically regional rail non-bus-oriented users. And we've had elections by cities who see buses moving into markets where they're really looking at regional rail as their solution and not a bus system.

So a regional rail authority or some institutional structure that is seamless. We already have a compact between all transit agencies where they seamlessly go between the systems. The vehicles cross boundaries, the fare systems cross, the transfers are free. That's all worked out internally among the transportation authorities.

There's a lot of focus, and I know both here and across the street, on somehow consolidating these initiatives into a new institutional structure.

The elected officials in our region do not think -- in fact, we think we're building more transportation than any city in North America. We're very proud of the surgical capability of the DFW Airport Board, of these rail authorities, and of these toll road initiatives. It's very precise, it's very particular, it's at a very high standard. Aggregating those functions into an institution will water down that more surgical capability.

What needs to be coordinated now with two, three, five, seven, nine CDAs potentially, comprehensive development agreements built in our region is the coordination of the resources.

As Judge Keliher said and as Mayor Kirk stood before you several times: Follow the money. And the money and the revenue stream is generated by the institution of all these toll roads that are going to be built.

So we're suggesting there's a financial RMA or a capture or an audit or an account of all these funds that are then pooled within each of the districts that are then leveraged, including your own Strategic Priority funds.

Our suggestion is you put your money on toll road projects, that toll project creates revenue that pays you back your Strategic Priority funds that we hope you keep in our district for you to then assign to more transportation projects within our region. That's the theme of this.

So it's about keeping track of the money. It's about telling the 121 constituents -- which you received so many e-mails about -- that if you, instead of taking the gas tax-supported roadway, take the toll road, you will have a seat at the table to decide what that money will be used for.

And those MOUs were signed two weeks ago. We need a mechanism to keep track of the revenue that's generated by what might be that CDA, one suggestion by the Regional Transportation Council, so all those agreements can be honored on what that money is going to. And that's why they want constitutional protection that those revenues stay within the district that is there.

So Commissioner, we think it's the transit component that needs an institutional addition and that's why we're concerned about this notion of aggregating transportation providers when we really should be looking at the boundary of the RTC's responsibility and they're able to capture the revenue stream to make sure all those agreements are honored.

MR. NICHOLS: Ever since the issue of toll equity a number of years came up, the commission has always been supportive of keeping those revenues inside the region. And I think as time has moved on, we realize that those revenues can be used or possibly used, there's a potential to use those not just for roads but for expanding the system which could include all those other elements, whether it be rail relocation, commuter rail, transit or whatever.

And it's going to be real interesting to see how well we can protect those funds and the uses of those funds. Because whenever there's funds, there's always a temptation of what everybody's ideas are, as we know.

MR. WILLIAMSON: The more I've thought about this idea of a financial RMA, the more intrigued I am by it, and I think it's an idea that's worth watering and see if it will grow a little bit.

I think I can speak here, never for the governor but I think I can speak what's in the back of his head.

As you know Michael, he's been focused on regionalism from the day he took office. His view has always been that regions plan better and individual governments execute better -- the current disagreement we're all having about caps on appraisal values, notwithstanding.

(General laughter.)

MR. MORRIS: I'm glad you brought that up.

MR. WILLIAMSON: Don't throw anything at me, but I agree with him.

But seriously, he views regionalism as the mechanism for modern society to most quickly solve its problems. The difficulty is in figuring out what's really a region versus what is the current power centers of a particular area, and then compromising the regional boundary lines based on those power centers. And I say that without being negative to anyone.

I think his view of North Texas is that it's 16 or 18 or 19 counties, not four or six or seven, just like his view of Southeast Texas is is not just Harris County, it's probably eight or ten counties.

It's the counties that have right now and the counties that have not, who will someday be the counties that have and the counties leaving the counties of have-nots.

And I know many times you and I have visited, and Mayor Miller and I have visited on this notion of what happens if we abandon urban Texas.

I think the governor's focus is on making sure that urban Texas isn't abandoned by creating a regional concept that says it's as important to plan for Decatur as it is to plan for Dallas, it's as important to have Hillsboro committed to the region as it is to have Haslet committed to the region.

So I'm thinking that if we talk about a financial RMA in terms of a larger physical area, you're certainly getting a lot of support from the second floor middle room.

MR. MORRIS: Well, I think certainly the nine-county/16-county, the footprint that again has been laid out from a standpoint of just looking at the TTC-35 Corridor, allows us to really begin moving more and more in that direction because it gives us something to look toward protecting for the future.

MR. WILLIAMSON: I'm sorry. I didn't mean to interrupt. Members, who's next?

MR. JOHNSON: I had an observation or two.

One thing, it's an extraordinarily comprehensive report. I think Robert did point out one component of the TTC that you've well thought out but have not included in the report.

I continue to marvel year after year that this group continues to grow, but also that what you bring to us in terms of ideas and organization really serves as a template for groups like you, and I salute the organizational ability, the leadership and the whole community that you serve for what you do.

I wanted to mention one thing I think that the chair was emphasizing, and that's the idea and the issue of where the decisions should be made.

One of the great strides, I believe, that this department has made in our planning and in delivery is that we have pushed to local decision-makers, local leaders who really know their needs and their priorities, more and more of that decision-making authority as to which projects are done and in sequential order through our planning, through the MPO process and actually through the funding.

One of the fears, I believe, of people that have lined up against the concept of the Trans-Texas Corridor is this great new transportation system is going to be shoved down our throat and there's not going to be any local input received nor listened to.

And I think that what you've illustrated today confirms my belief that by working together we're going to arrive at the best solutions, and those are going to be locally driven because you know your constituents, you know your needs, you know your priorities. I mean, you've demonstrated that time after time.

I know there's a lot of talk, especially in rural areas about the landscape and what this is going to do to the ag centers, agricultural interests and ranching interests.

And those considerations are going to be deep and thoughtful and well thought out, as are they as we go through and around our urban areas. And I think what you have done here exemplifies that, and in my mind reaffirms the fact that these decisions are going to be driven locally.

Now, as Mayor Kirk pointed out, you've got to follow the money and ultimately economics, in terms of the proportionate share of the decision-making, are going to be one of the prime factors.

But I'm comforted by that or certainly lifted by what you bring in total concept on all these issues, and I'm grateful.

MR. HOUGHTON: Well, I just want to make a comment or two regarding what has been said previously here. I think this group is a marquee group as to the way you've coalesced, and as Commissioner Johnson just talked about, the template that could be used across the state, I hope people take note of that.

One of the things I think communities are going to have to start looking at that I have discovered is that we need to look outside our regions, especially look outside the state on what's getting ready to happen to us from the Pacific Rim.

Fifty-three percent of goods produced now are produced in northern Asia -- that means China, Hong Kong, Japan -- and they're coming this way. The Port of Los Angeles and the Port of Long Beach are almost at capacity.

Those ports are now being challenged by ports in Mexico which will come up through Laredo, El Paso, Brownsville, and the two distribution points in Dallas/Fort Worth.

And we need to look outside what's coming to us and plan for it and tag some of the revenue opportunities of 3 million trucks crossing the border between El Paso and Brownsville, northbound, an additional 3 million trucks headed out of our ports from Brownsville to Port Arthur, along the Gulf Coast.

So Mike, when I talked about the rail and some of the things we were looking at here yesterday, it's profound what's going to happen to this state in a positive way, but if we're not ready for it and don't plan for it on a more global instead of regional, we're going to be our own worst enemies. And that's some of the things we're going to be bringing to you.

But again on a positive note, I think this is an outstanding group and I appreciate the amount of work that's gone into it.

MS. ANDRADE: Mr. Chairman.

Mayor, commissioners, Bob, it's great to see you here this morning, and thank you. I'm always so impressed with your presentation. You truly are the leaders and being visionary in understanding how we all need to work together. So I salute you for that also.

And Judge, I have to tell you that I loved your presentation on money and you're right on target on the issues. We just need to make sure we keep communicating that and talking about it. So I certainly enjoyed your presentation.

And I have to tell you all how appreciative and how fortunate you are to have Michael and how fortunate this state is.

(Applause.)

MS. ANDRADE: You know, Michael, I'm just always so grateful for all your expertise and support. You're always so willing to help.

For those of you that do not know, Michael has also agreed to lead a study group for us for the commission on public transportation, and he gives so much of his time.

And I watched him yesterday for three hours, and I thought, you know, if it wasn't for Michael leading this group, we wouldn't be where we're headed. And so thank you, Michael, for that.

Thank you all very much. Congratulations. How can we not work with you? So I'm looking forward to working with you.

MR. WILLIAMSON: As you know, Michael, we don't make decisions about SP money at these meetings, but the information and the arguments presented by groups have great impact on the decisions the commission makes.

Ted touched on something that I just can't pass up. When were putting together the initial maps and the thought processes that the governor wished to lay out four years ago, one of the key drivers was our very firm belief that few people were really concentrating on what was going on on the West Coast -- as Ted said -- and that almost no one was paying attention to what was happening to the energy world and what was likely to happen to the dollar value of crude oil, and the implication of that for the opportunity to wind farm electricity in West Texas.

And folks can say, well, you know, that just happened, you can't plan on that stuff, but really if you're kind of thoughtful, it's not very hard to kind of figure out the way your world is going to be in a few years if you just look at the information available to you.

And it was apparent to us, it's been apparent to my department for years that West Coast ports were filling up and eventually one of two things were going to happen: either the United States of America was no longer going to be an economic powerhouse, or different ports were going to develop in different ways to transport the nation's goods were going to happen and that was going to involve the state of Texas.

And there was only one logical conclusion: the ports of Mexico were going to grow, and that traffic, that freight was going to be put on trucks and trains and it was going to go straight through the state of Texas.

And as it turns out, the Dallas/Fort Worth area is the key distribution center for the central United States. So if you take the population growth of the country, it is all east of kind of a line running from Memphis to Buffalo down to Mobile, Alabama. That's where population is growing and that's where all this trade is going to go, and they're all going to be using our highways and our railroads.

And I had a friend of mine representing that area out west of Weatherford who said, Well, yes, but there will never be a reason to take the corridor out Interstate 20, there will never be a reason to take it out Interstate 10. I'm looking at him and I'm thinking, you know, you're just not really seeing the future.

The day will come when we will want an 85-mile-an-hour 100,000-pound truck corridor from El Paso to Dallas/Fort Worth, that day will come. And oh, by the way, the day will come when we're going to have to erect 7.65 kilowatt, whatever it is, megawatt transmission towers to bring wind energy out of West Texas to Dallas/Fort Worth to lower our cost of operations so we can be competitive with Monterrey and Hong Kong, that day will come. So yes, the corridor will be out 20 sooner than you think.

The growing recognition of that is just short of heartwarming.

Thank you very much, we appreciate it. We're going to recess for five minutes.

(Whereupon, a brief recess was taken.)

MR. WILLIAMSON: We will return from recess and pick back up with our discussion about engineering consultants.

MR. SAENZ: Thank you, commissioners. For the record, Amadeo Saenz, assistant executive director for Engineering.

On our discussion item, we were talking about payment types, and of course, the slide before you provides the different payments types that we have on contracts, it shows the percentage of the types, and also the dollar figure and percentage of the dollar figure.

I think the discussion we were having had to do with lump sum contracts. And of course, as I mentioned, a lump sum contract is where as we negotiate, we negotiate the lump sum amount that we are going to pay for particular items within the design of a project, and then of course, the sum of those items becomes the total that we will pay out.

And then as the design work is done, we pay based on percentage of design complete until the project is completed, and the maximum amount payable is the lump sum amount that we negotiated.

MR. NICHOLS: Let me ask a question there real quick.

MR. SAENZ: Yes, sir.

MR. NICHOLS: On the lump sum, obviously that is the price. On several of those others, don't we also include a cap not to exceed?

MR. SAENZ: Yes, all our contracts have a cost not to exceed in the contract.

MR. NICHOLS: And the assumption was this is the cap, but we're really billing whatever is necessary?

MR. SAENZ: That is correct, sir. Some of these we have a cost not to exceed. For example, I'll just go back to an evergreen contract.

We have a cost not to exceed, say $5 million, and then we issue work orders but we can never issue work orders where we exceed the total cost of the contract.

MR. NICHOLS: When you issue a work order, does it have a cap dollar amount?

MR. SAENZ: Yes, sir, the work order is also capped at what we negotiated. Of course, that number can then be amended through a supplemental or an amendment.

MR. NICHOLS: But the idea is unless you're doing a lump sum, the idea is to have an estimated number of hours, and then whatever hours and fees it actually works out to get the job done, that's what it ought to be, but not to exceed a certain number?

MR. SAENZ: That is correct, sir.

MR. NICHOLS: Okay. Now, I don't know if our auditor, Owen Whitworth, is here, but my understanding is, because I had asked him to go back and review those, in almost every single instance, so I would say virtually every instance, the not to exceed was billed almost right to the limit in almost every case.

So the idea of having billable hours and fees down here not to exceed in effect ends up being that is the amount maxed out.

MR. SAENZ: Right. In other words, they charged the total number of hours that were estimated.

MR. NICHOLS: Right.

MR. SAENZ: Now, even though as we negotiate a contract and we execute the contract and we have a cost not to exceed, if for some reason we identify that there is some additional scope that needs to be done, additional work that needs to be done that was not part of the initial scope, we can amend the contract to add those additional hours to the contract and also increase the total cost of the contract. That can be done also.

MR. WILLIAMSON: Do you go through the same procedure of identifying the best person?

MR. SAENZ: No, sir. At that point there you already have a contract in place, you're doing the project. If something comes up on the project that was not identified in the initial scope, both the department and the consultant agree to that, so then we negotiate this additional work and then supplement the contract.

MR. WILLIAMSON: We can proceed with that, but my observation about this lump sum business is still the same, Amadeo. I can't think of many things in my business world that wouldn't fall into a lump sum arrangement, can you, John?

Let's continue, please.

MR. SAENZ: Okay. Staff was also asked to look at how many contracts have been terminated over the years. The number of contracts reported by the districts and divisions that have been terminated is 12.

Some of the reasons included: the death of the owner of a small firm, so therefore there was no one to continue the project; the phasing out of a portion of the company; excessive turnover in the project staff; and also lack of performance. Those were the reasons given for the termination of those 12 contracts.

MR. WILLIAMSON: There's almost as many reasons for termination as there have been terminations.

MR. SAENZ: Well, it was a small pool that we could go find out why.

MR. WILLIAMSON: Out of how many contracts?

MR. SAENZ: That's just history of our contracts, and we do between 250 to 300 a year, and we've been contracting since the early '90s.

MR. WILLIAMSON: Out of 4,500 contracts, we've only had 12 terminations?

MR. SAENZ: That's correct.

MR. WILLIAMSON: Does that strike you as odd?

MR. SAENZ: We've been getting the work done and have not had to terminate contracts.

MR. WILLIAMSON: Continue, please.

MR. SAENZ: Staff was asked what are the overhead and profit rates for each firm doing business with the department. Of course, profit rates typically range from 10 to 15 percent. This is a typical range for the transportation engineering industry. By law, the rates cannot exceed 15 percent. Profit rates are identified by project and not by firm.

The project fee, also known as the profit or the margin, is not arrived at through a mathematical solution. Judgment is required; some of the primary factors taken into consideration include the project size, the complexity of the project, the duration, and the risk.

Another factor that can be considered is the firm's overhead rate. I think Mark mentioned earlier that we can negotiate the overhead rate.

If a typical profit rate for a particular project is 12 percent, the actual rate used could be less if the firm's overhead rate is considered higher in comparison with comparable firms within the industry.

As kind of a rule of thumb, a lot of our districts use what is called the multiplier of three which is when you take the direct cost, you apply the overhead rate and apply the profit. Those two numbers would be from the direct cost to the total number, you would have a multiplier of around three. And a lot of our districts are doing that.

MR. NICHOLS: I don't understand. Would you repeat that?

MR. SAENZ: To calculate the total cost, you take your direct cost, you multiply it times one plus the overhead rate, and you take that total and multiply times one plus the profit.

So if the overhead was 160 percent or 1.6, you multiply times two plus 2.6, and then you take that total and you multiply times the profit. If the profit for the project is 15 percent, you multiply that by 1.15.

MR. JOHNSON: Amadeo, under that calculation, they're making a profit on their overhead.

MR. SAENZ: That's correct.

MR. NICHOLS: They do make a profit on their overhead; we have to pay a profit on their overhead.

MR. WILLIAMSON: Sounds like an indefinite deliverable to me.

MR. SAENZ: That's how it's calculated.

So when you take that total of the 2.60 times 1.15, that number is pretty close to three. A lot of districts use a rule of thumb somewhere around three in their negotiation to look at profit and overhead.

MR. HOUGHTON: How closely do they look at this at the district level?

MR. SAENZ: I think our districts take a good long hard look at negotiating. Every district does it a little bit different, but they all take a good hard look at negotiating and coming up with what they think is a fair price for the work that they're going to get.

MR. HOUGHTON: Even though we've already put out here's what our estimate is, then these people go back to -- I'm assuming they go back to their paneled wall offices and come up with here's how we're going to get to that estimate.

I believe we set the benchmark for them; I think we set the standard for them. If we're giving out a number of an estimate, they go back and say we'll work to that estimate.

MR. SAENZ: Of course, both of the numbers are generated based on a scope of services that was agreed upon, and we probably had a good estimate. I would say that we had a good estimate.

MR. NICHOLS: Ted, I know that over the years they send a report we get that shows what the original estimate was, what the original proposal was from the firm, and then what the negotiated amount was. And I've been looking at those things for years ever since we've been generating them, and in almost every single case the amount that the firm proposes is always equal to or higher than our estimate. Only in very rare instances is it below.

MR. HOUGHTON: They're running to the estimate.

MR. NICHOLS: Yes. It's always equal to or higher in, I'd say, 99 percent.

MR. SAENZ: While profits are associated with characteristics of a project, overhead rates are associated with characteristics of a specific firm.

Department rules require firms submit audited overhead reports for contract values over $250,000 or greater. The Audit Office currently has audit reports for 102 firms. These firms range from small, those with a direct labor base of around $65,000, to large, those with a direct labor base of around $350 million.

The graph shows that we have 37 firms with a direct labor base of less than a million dollars, 39 firms with a direct labor base between $1 million and $10 million, 21 firms with a direct labor base between $10 million and $100 million, and five firms with a direct labor base of over $100 million to $350 million.

When evaluating a firm's overhead rate, it is recommended to look at comparable firms within the industry. Therefore, it is recommended to group the firms by size so that you don't compare a small firm's rate directly to a national multi-office firm.

So what we try to do, we give our districts what the overhead rates are based on firm size so that they can compare as they negotiate.

The graph shows along the bottom nine different groups by size based on direct labor costs. Each group in the graph shows two numbers: the average and the median overhead rates for the firms that fall within this group.

The average remains fairly constant for small to medium firms, somewhere between 1.6 and 1.7, but as you can see, there appears to be a decrease in the number of firms with a direct labor base greater than $30 million. And we see a drop, and you can see that the overhead rates for the larger firms dropped down to about 1.5.

MR. WILLIAMSON: So does that give them a competitive advantage, the larger firms?

MR. SAENZ: It could. They've got a lower overhead rate, but the numbers, they've got a lot more people, they still have to produce a lot more to keep that rate that low because of how the overhead rate is calculated.

MR. WILLIAMSON: Well, I mean, that's the heart of my question is because of the way it's calculated does that end up giving a firm -- well, I guess we would know if we went back and looked at that slide from a month ago that shows how our dollars are distributed.

If an inordinate amount of our dollars were distributed to larger firms, that would be the proof -- if that's the right word -- or that would demonstrate that you have a competitive advantage.

MR. SAENZ: I guess if you're using that multiplier of three and using that as a rule of thumb, if your overhead rate is lower, then you're able to go with a higher profit margin. So that might be an additional advantage.

MR. NICHOLS: But if you're talking about a competitive advantage, it would not be a competitive advantage, regardless of whether your overhead is low or high, if you cannot take into consideration cost and overhead when you choose a firm before you begin your negotiation. Is that correct?

MR. SAENZ: That's correct.

MR. NICHOLS: So there is no such thing as a competitive advantage when it comes to costing.

MR. SAENZ: No, because you're negotiating with only one.

Staff was asked what monitoring does TxDOT do with respect to payment to primes and in turn their payment to their sub-consultants.

The department's standard engineering contracts includes a form as an attachment that is required to be submitted with each prime invoice. The form includes a list of the sub-provider on the team and an indication if they are a HUB or a DBE and the amount that they are paid with each invoice.

The form is reviewed by TxDOT managing staff office, the form is also submitted and forwarded to the Construction Business Opportunity Program office so that we can track to make sure that the HUB goals are met on that particular contract.

Staff was asked if the profit margins for sub-consultants are the same as the prime since sub-consultants may have higher or lower overhead rates. Profit margins are typically the same. It is a rare occurrence when the department sees different rates for sub-providers.

For the cost plus fixed fee contract, the specified rate payment type contracts, the rates for the prime and the sub-consultants are addressed during negotiation and are identified in the contract cost proposal. And of course, as we get a billing because they are cost plus fixed fee, all that is submitted in each of the billings. So the rates are also evident in the invoices that are received.

For lump sum payment type contracts, the rates for the prime and the sub-consultants are also set during the negotiation and also identified in the contract cost proposal, but they're not as evident in the invoice because at that point we are paying for a work product or a percent of a work product or a percent of a work product complete, and we do not have the breakdown of how much work was done by each one.

MR. WILLIAMSON: Hang on a second.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: You say the profit margins are typically the same for the prime and her sub, but that's what the prime negotiated with us. Correct?

MR. SAENZ: That's what the prime negotiated with us, yes, sir.

MR. WILLIAMSON: Does the law require the prime to go through the same submission process with her subs as the law requires us to go through to acquire the prime?

Let's assume Robert is my sub and I want to do work for the department, and I go through the notice of intent/letter of intent selection process, and I'm selected to negotiate for the project. And you and I are going through a negotiation and I know he's going to be my sub.

When you and I go through, am I required to turn around and actually go to Hope and Ted and Robert and ask them to submit to me and do I go through the same process in selecting Robert as my sub? Or do I just call Robert and say, I need a sub with expertise on bridges, would you like to be my sub?

MR. SAENZ: I will answer that based on the type of contract.

For the cost plus fixed fee contract where we are negotiating hours and rates, we have the entire contract and all of the different people or types of people that are going to be working on this contract, so we negotiate every single one. And that is part of the contract.

MR. WILLIAMSON: But you're not negotiating with the sub, you're negotiating with the prime.

MR. SAENZ: I'm negotiating with the prime, but the sub has submitted to the prime their proposal, and that proposal is attached to the prime's proposal.

So I have the prime's direct costs and then I have the sub-consultant costs that were submitted to them, and we negotiate the entire contract. We negotiate the fee structure for the entire contract, the hourly structure for the entire contract, and of course, the overhead and the profit.

Those contracts, as they're executed and then continue the work product, as we get a billing, we get a billing of the work done by each individual entity.

MR. HOUGHTON: You negotiate the profit for the subs too?

MR. SAENZ: We negotiate a profit for the contract and we apply the same profit for all of them.

Now, if it's a cost plus contract, then I have all that information in my contract. Now, if I had negotiated a lump sum contract, I do not know if the prime and the sub have a separate contract where they've negotiated a different lump sum amount for work that the sub was going to do for the prime.

MS. ANDRADE: Mr. Chair, I have a question.

So ultimately, we don't know how much profit the sub makes.

MR. SAENZ: For lump sum contracts, I don't know how much money the sub makes.

MS. ANDRADE: And then once we negotiate a contract, we don't know if that prime goes back to the sub and negotiates with them.

MR. SAENZ: No, ma'am. Now, if it is a cost plus, then if we said the sub is going to do this work and it requires a designer level of so much, we have agreed that we're going to pay that designer level of so much and then we've agreed on the hours. So when the billings come in that the sub submits his work, we pay what we agreed upon.

MS. ANDRADE: With all the discussion that we had last meeting with protecting the subs and so forth, have we come up with anything that can protect them?

MR. SAENZ: Well, I guess what we could do is we could ask for the prime for the sub-consultant contracts to be submitted and become part of the contract so that we have some way of knowing what they are actually getting paid. Yes, we could do that.

MS. ANDRADE: I think I'd be more comfortable with that.

MR. NICHOLS: My question was going to be similar. In other words, if we have a 12 percent profit margin that we've agreed to, that applies straight across for the prime and the sub, but does the sub get 12 percent or does the sub get a lesser amount? In other words, does the prime take a portion of the sub's profit margin? Do you understand what I'm saying?

In other words, the sub works for the prime.

MR. SAENZ: Yes, sir.

MR. NICHOLS: If we're applying a 12 percent profit margin across the board -- so that would be for the sub, for the prime -- but we pay the prime, does the sub get the 12 percent profit or does the prime take 3 or 4 percent of that and let the sub have 8 percent, or something like that.

MR. SAENZ: I guess they could negotiate something like that, but we do know --

MR. NICHOLS: That's not something we delve into, that's always been between the prime and the sub?

MR. SAENZ: Yes. I still go back, under the cost plus fixed fee contracts, we have the details and we have the calculations. Then we can compare, as the invoices come in, how much the sub is going to get paid. And if the sub is a DBE or a HUB, then we track to make sure that the prime is meeting their goals.

MR. NICHOLS: That would be their hours times their rate plus their overhead. But the agreed upon fee, the 12 percent, do they get the whole 12 percent or do they get a portion of it?

We don't write the check to the sub, we write the check to the prime.

MR. SAENZ: No, sir. We write the check to the prime.

MR. NICHOLS: Yes, based on that formula, but does the sub get the 12 percent?

MR. SAENZ: The only way we can compare is --

MR. NICHOLS: Let's kind of double-check that.

MR. SAENZ: Okay.

MR. WILLIAMSON: I'm kind of curious. Do we have anybody in the audience this morning who's familiar with this procedure from the private sector world that would care to share that information with us? Do we have a volunteer? We have a volunteer.

Mr. Monroe, is it acceptable for us to do this?

MR. MONROE: Certainly, sir. It's a discussion item.

MS. WALKER: Good morning, commissioners. My name is Tina Walker. Mike, how are you this morning?

I am currently employed by the engineering firm of Parsons Brinckeroff Quade & Douglas. I worked for 20 years for the Lufkin District, and my last five years with the department, I was involved in selecting, negotiating and managing consultant contracts.

I'll be happy to answer any of your questions.

MR. WILLIAMSON: I think our question is when you're the prime -- and it's interesting that you came forward because you're also a big sub, your firm is. Your firm is a big prime and it's also a big sub.

In a lump sum arrangement when we're negotiating with someone as the prime, and then that someone turns around to Parsons as a sub, is the negotiating process the same?

MS. WALKER: Typically the teams are identified at the letter of interest stage. The prime will identify those needs where they would like to, either through expertise or relationships, choose to augment their capabilities by creating these teams.

My experience in negotiating contracts is I've never seen through the negotiating process the intent of a prime to offer anything less to a sub-provider than what the department has agreed to.

And as Amadeo said, the fees that are arrived at for the value of any type of contract are based on the hours and rates, and typically that information goes in the Attachment D to arrive at like a lump sum value.

And while it is true that a lot of the districts do not have the storage space, have not typically requested copies of the sub-consultant agreements once those agreements are executed after the notice to proceed, that information should be readily available should you choose to check that work.

In arriving at the payment portion on the invoicing side, the record of the payment to the sub-providers is through that H-3 that Amadeo was speaking to, and that's based on how much money has actually been turned over to the sub in that invoice period.

So in cases where the prime submits an invoice that is processed within 30 days, if I submit an invoice in June for work that I did in May, I won't show on the H-3 necessarily the value of the sub's work for May because I haven't gotten paid for it yet. So it's a little behind, the H-3 forms are always kind of tracking a little bit behind.

MR. WILLIAMSON: So if I understand it correctly, the proper way, from our perspective, to look at this is the prime already knows who the sub most likely is going to be on a particular project and the economic arrangement between the prime and the sub is worked out ahead of time, and it's probably along the lines of we're going to negotiate for this but if it ends up being something less than this, your sub payment will be something less than this, and if it's this, it will be what we negotiated.

MS. WALKER: Right. And it's the role of the prime during the negotiations, if the department has any questions about the rates or the hours associated with that prime, the prime is responsible to negotiating the state's position and concerns with the sub to arrive at acceptable hours for all members of the team in arriving at that fee.

MR. WILLIAMSON: And I appreciate you volunteering to talk with us, and I'm not in this next question attempting to trap you or make a point, but it may seem that way.

(General laughter.)

MR. WILLIAMSON: When you're the sub and ABC Consulting calls you or when you're out there in the world and ABC Consulting calls you and says we want you as our sub on this project, do they go through the same tortuous process to select you and negotiate as we went through to select ABC in the first place?

MS. WALKER: No, not at this point. I know that there's some state regulations out of Building and Procurement relative to some regulations about how we may need to move towards interviewing DBEs and then making a selection rather than just always selecting team members based on our past relationships.

MR. WILLIAMSON: So you don't have to agree with this -- in fact, don't say anything, I don't want you to risk your certificate -- but another way of looking at it is private sector consultants can rely on relationships to make their decisions but the state has to rely on the notice of intent.

Thank you. I appreciate you being a volunteer. In fact, I really appreciate it.

It's a strange world you guys live in, Amadeo.

MR. JOHNSON: Mr. Chairman, if I might, I'm going to have to leave in about less than ten minutes because I have prescheduled conflict that I could not extricate myself from.

I just wanted to interject into the meeting some thoughts or at least some conclusions that I have made. Whether they're right or wrong or accurate or not I think is to be determined.

It occurs to me, though, that through the decision tree and the decision-makers, as those individuals get seasoned and experienced, they have a pretty good idea of the capability of the firms that they're dealing with, the efficiency, and certainly from a cost standpoint, the cost efficiency of those firms.

When there's an instance that builds itself like that, it also occurs to me that it becomes exceedingly more difficult for new firms to become part of the engineering consulting mechanism that the department has. If you're inside the loop, you're pretty well established, if you're outside looking in, you have a difficult time penetrating -- it's not a barrier, it's just one of those things that subconsciously erects itself because you're dealing with the known versus the unknown.

The other observation that I have, and it comes from listening to people and looking at some of the correspondence that we've received, the sense that I have is that the engineering community, the consulting community thinks that what we're trying to get to is just a pure auction basis.

And I know in your opening remarks you said that is certainly not the case and I believe that not to be the case.

And it also occurs to me that anybody, whether you're in private practice or doing something at your home or you're the State of Texas working on a transportation project, when you're dealing with architecture, engineers or anybody that provides professional services, somewhere in the equation or the conversation it happens that you say roughly what is this going to cost me. And that becomes part of the decision tree because obviously economics are a factor here.

Anyway, those are the observations that I've been able to deduce, and as I say, they may not be completely accurate but I wanted to state them for the record before I have to excuse myself.

Thank you. Amadeo, sorry for the interruption.

MR. SAENZ: No problem, sir.

MR. WILLIAMSON: We'll miss your dry wit through the rest of the afternoon as we attack such exciting matters as revision of our rules.

(General laughter.)

MR. WILLIAMSON: Continue, Amadeo.

MR. SAENZ: You asked staff to look at the total number of pre-certified firms in the department's database and provide a breakdown of the number of minorities or disadvantaged businesses.

In March of 2005, there were 949 firms in the pre-certification database. Of those, 250 firms, 26 percent, are HUBs; the number of DBE-certified firms is 166, or 17 percent; and there were 144 of these firms that are both HUB- and DBE-certified.

In review, a firm's pre-certification status is based on the employees that are pre-certified, employees that meet the minimum requirements of one or more of the 78 work categories.

Pre-certification does not differentiate the level of experience beyond what is the minimum requirements and does not reflect the quality of work or the ability to perform within a schedule.

MR. WILLIAMSON: Amadeo, when you say pre-certified, the 949 firms, that's pre-certified to do business with us.

MR. SAENZ: Just pre-certified to do business, that they meet the minimum requirements that we have established. We have 78 work categories that we have identified as part of our engineering process and consultant use process.

MR. WILLIAMSON: Of that 949, you're saying 250 of those are pre-certified HUB-certified.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Thank you.

MR. SAENZ: 166 are pre-certified DBEs, and some of the 250 and 166, 144 out of that pool are both DBEs and HUBs.

Of the 949 total, 320 firms have only one person pre-certified, another 145 firms have two people, and 99 firms have three people. In other words, about 60 percent of the firms have three people or less that are pre-certified.

These firms typically do not have the depth or the range of resources needed to perform as prime provider on typical engineering projects. According to our rules, a prime provider is required to perform 30 percent of the work of the contract scope but must also be prepared to assume 100 percent of the work because he is the one that we are holding responsible for that.

MR. WILLIAMSON: Now stop right there.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Let's focus on that a moment. We have 949 firms but 60 percent are three persons or less.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And one of the notice of intent requirements for most of our contracts -- or I guess all of our contracts is that if you intend to express a letter of interest, just be knowing that you've got to be able to prove to us that you can do at least 30 percent of the work, and under the worst of circumstances, do 100 percent of the work.

But we know ahead of time that in all probability for a $100 million contract that three-person or one- or two-person firm probably isn't going to meet that criteria.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: So will they even ask, will they even express an interest?

MR. SAENZ: A lot of them don't. Most of these firms typically are more suited to perform as sub-providers or sub-consultants.

MR. WILLIAMSON: How would that change if we said you have to present a bond that you will do 100 percent of the work? What if we treated engineers like -- heaven forbid -- contractors and just said bond to us that you can do the job and you can compete.

MR. SAENZ: That's something that we can look at. It might allow a lot of these firms that feel that they have the capability of doing it to be able to get -- first, I guess the issue will be will they be able to get a bond.

We'll have to look at that. There may be some issues there that they cannot get bonded, and then that would keep them from even participating at all. But it's something that we can look at.

MR. WILLIAMSON: Okay, thanks.

MS. ANDRADE: Amadeo, I have a question. We're spending all this time on subcontractors because we want to protect them. Have we had complaints from subcontractors on their primes?

MR. SAENZ: Typically, of course, it's a contract between the prime and the sub. I have heard some indirect comments from some subs that says the job that you want to have is the job of the prime and you don't really want to be the sub.

But nothing formal has come in to say this is what's happening to us.

MS. ANDRADE: So maybe we're thinking there's a problem and there may not be a problem?

MR. SAENZ: Could be.

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Or maybe there's a problem and all the subs are afraid to say anything.

MR. SAENZ: That could also be.

I guess one of the things I will stress as we look at this thing, a lot of the times when we select a team and that team, as was said earlier, basically they've been working together for quite some time so they've been used to working together, so they know how to work with each other.

So a lot of times when we select a firm, the prime, that prime is made up of a prime contractor and several subs, and a lot of times the subs are the same subs that they've used time in/time out because they know they get good work product from them.

And I think you'll see that in a little while when we show the list of sub-consultants how a lot of sub-consultants are in a lot of contracts.

MR. WILLIAMSON: Okay.

MR. SAENZ: The database also enables staff to identify the firms that have personnel pre-certified in primarily one particular area of work. In other words, regardless of the size, their services are limited to one particular area.

Of the 949 firms, 600 or 63 percent of them are identified as being focused in one area. For example, 161 identified the environmental studies group area as their focal point; 158 were under the survey group; 64 are under the material testing and geotechnical group; and the remaining 118 are distributed among traffic engineering, planning, bridge inspection, hydraulics, bridge design, subsurface utility engineering, construction management, and value engineering.

This leaves 349 firms, 37 percent, that have one or more staff pre-certified in a range of work groups that include the core engineering categories that are required in the majority of TxDOT engineering contracts.

Also, although the database does not provide this indication, it is common for smaller firms to also restrict their marketing efforts to one city or one district or one particular region of the state. In other words, many firms do not pursue work in all areas of the state.

This is supported by discussion with our districts that a lot of times the local firms want to stay and work in that particular area, and a lot of times, through experience I can tell you that as we were going out, one of the first questions that the larger firms would come in and ask was: Who are the local firms that you all have worked with in the past that do good work?

Because they are looking for someone with local knowledge and local insight to put on their team, and then they bring them in, but they most of the time bring them in as sub-consultants.

It is also important to note that the database is consistently increasing. Where we have 949 firms today, 377 or 40 percent of those firms have been added since 2000. And as people change positions, those firms and those data files are updated. So our database is constantly changing.

In addition, we currently do not have a process in our rules for cleaning up the database. Since the pre-certification process came in in 1997, TxDOT has not had a process of removing firms that may have gone away, may no longer be in business, or maybe do not want to pursue work with the department.

MR. NICHOLS: Let me ask a question there. I'm kind of surprised about that. I thought we were constantly updating that data. In other words, if you had a particular engineer who had a specialty in a certain area who worked for a firm and then they move to a different firm, that first firm may no longer be qualified in a certain area, so we update those when those people move.

MR. SAENZ: Yes, sir.

MR. NICHOLS: So if a firm goes out of business, I'm assuming that nobody works there anymore.

MR. SAENZ: Right.

MR. NICHOLS: So if all those people have moved out --

MS. THOMASON; They would have to call us and tell us that, we don't know.

MR. NICHOLS: But if the people who are listed with those skills are working for that firm, they obviously are no longer there.

MS. THOMASON: But we don't know that.

MR. WILLIAMSON: Please identify yourself.

MS. THOMASON: Camille Thomason with the Consultant Contract Office.

MR. NICHOLS: Because they may not have gone to work for a different firm that's on the list.

MS. THOMASON: Right. If they've just decided to not do business with TxDOT any longer or if they've just closed their door, we don't know that.

MR. NICHOLS: So we don't every 18 months or 12 months or 24 months --

MR. SAENZ: No, sir. That's one thing that I think we need to look at and possibly change our rules that would allow them something real easy as a check that would say, yes, we're still in business, we're still interested in doing work with the department. That would allow our database to be a lot more current.

This brings the staff back to the discussion of the list of the top ten contracted professional service firms that was presented at the last meeting. We have prepared two tables that further indicate the distribution of work among firms.

There are numerous contracts that are not what we would describe as typical engineering contracts for development of specific projects. In order to focus more specifically on the type of work, we have subtracted out architectural, aerial photography or aerial photogrammetry, bridge inspection, hazardous materials, laboratory, survey, and utility coordination from the prior list.

As mentioned earlier, these firms are focused on one particular area and these are types of contracts that many of these firms are not able to take advantage of as far as the big engineering contracts. They will either come in as a sub or they will come for only those specific contracts dealing with bridge inspection or those specific contracts dealing with laboratory services.

The reduced list that we show here is referred to as the engineering only list. It says for the last five years between 2000 and 2004 includes 695 contracts totaling approximately $1.35 billion, the top 20 firms represent 73 percent of the total dollar volume on all the basic engineering design contracts that the department has put out.

We've excluded those articles that are shown up there, those items of work, and now these are basically basic engineering design and planning contracts and this is the breakup of the top 20 firms that get these contracts.

MR. NICHOLS: Are these calendar years or fiscal years?

MR. SAENZ: Fiscal years.

The $1.35 billion figure represents a total contract value including the amount that goes to sub-consultants.

Another summary that staff generated is based on sub-consultant contracts only. It includes 2,833 subcontracts totaling approximately $520 million, involving 587 different firms as sub-consultants.

And as you can see, I think I mentioned earlier that there are some sub-consultant firms. For example, our engineering contracts will require surveying. Well, Rod's Surveying, Incorporated, is widely used across the state by a lot of the primes as their surveyor. There are 93 contracts, they have $26 million under subcontract with a prime contract.

MR. WILLIAMSON: Okay. Switch back to the previous slide. So of a billion three in prime contracts to those 20 firms -- now switch to the next one -- is there a relationship with that $519 million?

MR. SAENZ: Yes, sir. And I think we'll see it in a slide that I've got a little bit further down.

MS. ANDRADE: Amadeo, first on that slide do primes also serve as subs?

MR. SAENZ: There are some primes that also serve as subs. Remember I mentioned that a lot of times they come in teams. There are sometimes that for this contract, for this project, the prime brings in a sub, and then for another contract where maybe it requires a different specialty of which the sub has a higher degree, they may swap and then the sub will become the prime and the prime now is his sub.

MS. ANDRADE: Okay, thank you.

MR. SAENZ: Looking at the contracts of the top firms again, the average portion of work done by primes is about 72 percent and the work portion done by sub-consultants is about 28 percent. And that's how those numbers tie together, Mr. Chairman.

MR. WILLIAMSON: All right.

MR. SAENZ: Among these contracts, on the average there are four sub-consultants per contract.

MR. NICHOLS: Just a second. On the paragraph right before you said the total number of contracts is $1.35 billion.

MR. SAENZ: $1.35 billion.

MR. NICHOLS: And the amount subcontracted is $520 million. So $520 million over $1.35 billion is a whole lot more than 28 percent. It's about what, 40 percent?

MR. SAENZ: Now here we're only looking at the top 20 for both of these.

MR. NICHOLS: Okay.

MR. SAENZ: Here we're looking at the top 20 engineering only contracts and then breaking up how much they're doing as a prime and how much they're doing with subs.

MR. NICHOLS: So those are only the top firms.

MR. SAENZ: Yes, those are only the top firms.

MR. WILLIAMSON: When I look at the footnote, that's the first reference I've had. "TTA Contacts" that should be "Contracts" I guess refers to State Highway 130?

MR. SAENZ: Sorry. It was late last night when I finished the slide.

MR. WILLIAMSON: I understand.

MR. SAENZ: My spell check did not quite work.

MR. WILLIAMSON: So that none of that money includes State Highway 130 or the TTC-35 work we've got going on.

MR. SAENZ: Right, those two projects there because they are the TTA contracts that are being paid through the bond funds. And also HDR and PBS&J are also providing some construction management services in those contracts, so they're a little bit different than the other type, so we left those out.

The United Toll Service is also a TTA that is the toll integrator for the Central Texas Turnpike Project.

MR. WILLIAMSON: Okay.

MR. SAENZ: Staff was asked how many current prime contractors are minority or disadvantaged businesses and in number of contracts and in dollar figure.

The amount between 2000 and 2004, there were 322 firms that have been primes on contracts. Of those 322 firms, 76 were HUB-certified which is 23 percent; they were on 258 contracts, and their total dollar amount was $262 million. One additional firm is a DBE-certified and they had a total of two contracts totaling $450,000. So we have about 23 percent of HUBs are also prime contractors.

Staff was asked how can we help or encourage small business participation. Of course we had asked our districts to see what they're doing.

Several districts and divisions are actively working to increase the participation of firms, particularly HUB firms in TxDOT professional service contracts.

Some districts hold meetings to allow firms to gather specific information for upcoming projects where we sit down and we discuss with them what projects are coming up, what type of work so that they can maybe start preparing for that.

A lot of our contracts are often broken down into smaller. Some contracts are broken down into specialized components to encourage smaller and also specialty firms to participate.

Our Business Opportunity Program Section of the Construction Division sponsors two-day outreach meetings to provide information to our HUB providers across the state, seeking that any HUB provider that wants to do business, we're focusing on them and trying to get them to come in and provide them some information.

Our Design Division participates over the two-day period by discussing the steps of the process of how to get pre-certified. Also, we go through the LOI preparation process, we give them some interview techniques to hopefully enable them to be more prepared to be able to come forward and compete.

A discussion on the marketing techniques is also included. As part of the program, we also invite some large firms to come in and network so that these smaller firms and the larger firms can network together and hopefully they can start creating teams and also allow the larger firms to identify who some of the HUBs are and get them together.

And of course, the other thing that we do is we also bring some of the smaller companies in and use them as examples. Smaller companies that have been in the program, have come through the program and are now successful primes, we ask them to come in and speak so that they can help us promote the program.

This concludes my presentation. I trust that staff has addressed the questions that you raised at the last commission meeting, myself and the members of the staff. I want to thank Mark and I want to thank Camille. They put in a lot of work to put this presentation together, had a few other people. And we'll be happy to answer any additional questions you may have.

MR. WILLIAMSON: Ted?

MR. HOUGHTON: What is our goal for SBE/HUB?

MR. SAENZ: Our goal is 20 percent; we've been doing about 28 percent.

MR. HOUGHTON: We do 28?

MR. SAENZ: Yes, sir, in the engineering area. But the goal is 20 percent.

MR. HOUGHTON: What happens if you raise that goal to 50 percent?

MR. SAENZ: I would imagine that there would be a different team makeup and there would be a lot more HUB usage or required HUB usage.

MR. HOUGHTON: Would that sacrifice quality potentially?

MR. SAENZ: It may.

MR. WILLIAMSON: No, it can't.

MR. SAENZ: No, it won't.

MR. WILLIAMSON: Can't sacrifice quality because the profession claims that the quality is the same.

MR. HOUGHTON: Why wouldn't we do that?

MR. WILLIAMSON: All engineers are qualified to a certain minimum level. There's no way we would be sacrificing quality if we went to 50 percent.

MR. HOUGHTON: Why wouldn't we do that? If what we're trying to achieve here is bringing the jam from the top shelf to the bottom shelf where others can reach it, why wouldn't we do that?

MR. SAENZ: I think that we can set the goal higher. I think that we also need to work at promoting and getting --

MR. HOUGHTON: Goal or mandate?

MR. SAENZ: Whatever the commission wishes to call it.

MR. HOUGHTON: I mean, we were mandated by the legislature to $207 million which escapes me.

MR. SAENZ: I would think that we would also at the same time want to do a lot better outreach program to bring in more firms that are considered HUBs or DBEs to allow our pool to get bigger and have more people to do the work. But we can do that.

MR. WILLIAMSON: Hope?

MS. ANDRADE: Amadeo, I visited with our Business Opportunities Office and I'm very impressed with what they're doing. My concern -- and I challenged them to exceed any goal that we may have or that we mandate.

But my concern is that, one, we protect the small business owner, the minority business owner, and that we not set them up for failure. So we have to work closely with them to help them get there. It's not just, you know, saying we have a goal and we're going to start recruiting them, but let's also work with them to help them.

And I realize that we're short-handed as it is, but we've got to establish some kind of program that does that, and our contracts have to have something in writing that protects our subs. We're the only ones that can do that. Thank you.

MR. SAENZ: We will look into that.

MR. WILLIAMSON: Robert?

MR. NICHOLS: I don't really have anything else right now.

MR. WILLIAMSON: I think it would be instructive to compile the results, the information we've put together the last two months, you for us, into some easily readable format for Mr. Turner, for the members of the committee that will hear the bill, and whoever else might be interested in it.

As with all things, I want to think about it a little while before I draw many conclusions, but it occurs to me, Mike, that the commission has a couple of observations.

One, we don't understand the inability to look at all proposals at once; two, we don't understand or agree with the ability to talk about money with everyone; but three, it would appear that perhaps there's some processes that we need to change internally to force a little more competition, and we perhaps ought to follow the old adage to don't look through glass houses.

So I think we ought to be thinking about what changes you want to propose to us.

MR. SAENZ: To that end, I have brought in what I would consider probably some of my best and brightest people from the districts and the divisions that have been involved in the construction consultant management areas.

And we're trying to draw from some of the best practices that are out there, and also looking and focusing on the three goals that you all gave us last time, and trying to come up with a way to work within our existing process to try to incorporate the innovation, to try to promote the use of more consultants, to try to promote the use of more HUBs.

So we're working on that and we should have something within a month to a month and a half on that.

MR. WILLIAMSON: We want innovative ideas, we want to drive down the cost, we want to drive completion time shorter. Those are things we want to do.

Thank you very much. You have all worked hard to do this.

The chair would prefer, members, if there's no objection, to change the order of the agenda a bit.

Tom Griebel has made me aware that he's about to faint if we don't go ahead and do San Antonio. No, he didn't say that.

(General laughter.)

MR. WILLIAMSON: Most of our agenda, other than items 9, 10 and 11, involve our internal workings, so if you don't object, I think we'll take items 9, 10 and 11, Mike.

MR. BEHRENS: Yes, sir, we can do that.

We'll move them to agenda item number 9 which is concerning our Regional Mobility Authority in Bexar County. And I'll ask Phil Russell to come up and present that minute order.

MR. RUSSELL: Thanks, Mike. Good afternoon, commissioners.

Commissioners, earlier this year we received a toll equity request or application, I guess, from the Alamo Regional Mobility Authority. That request was for $20 million for the development of their project, the western extension of 1604 and elements of the starter system down in San Antonio.

It was really broken down into about three components: one being a $5 million early purchase right of way acquisition request; $2 million to conduct traffic and revenue analysis and studies in the area; and $13 million for the development of that western extension of 1604.

We've worked very closely with the district and with Tom Griebel down with the RMA, and through that discussion we've decided to go ahead and defer for right now the $5 million portion for that right of way acquisition element. We are handling the traffic and revenue request but we're doing those through our normal TxDOT division contracts.

And so that will leave $13 million which is the body of this minute order which we'll be bringing to you today. That $13 million, again, is for the development of that western extension of 1604.

As you know, this is a two-step process, this is the preliminary vote that you all would be making today, and staff would recommend approval and be happy to address any questions you might have.

MR. WILLIAMSON: I am compelled to ask this question but I don't wish to throw this on a slow-burning fire, so I hope I'm not mistreated.

We have three cash matters coming up and I'm compelled to ask the question to what extent -- if the answer is none, I want the answer to be none -- to what extent are the current reconsiderations across the street of the Mobility Fund likely to affect our ability to handle this particular minute order.

MR. RUSSELL: Chairman, I don't know if I'm the correct person to answer that. It would come out of the Category 2 MPO funding.

MR. BEHRENS: If I could answer that, Chairman. I think that we will be looking at all expenditures of cash if we are not being able to move forward with bringing in some money from the Mobility Fund.

MR. WILLIAMSON: You know, the Alamo RMA has been one of our more aggressive and active partners, and I don't want to approve a minute order that we can't pay for. So that's the only reason I asked the question.

If I understand you, everything gets looked at but it appears this one is okay?

MR. BEHRENS: This minute order would give us the authority to go through the procedures with them, and then before we would actually lay out the cash, it would come back to you.

MR. WILLIAMSON: Very good. That makes me feel much better.

And we have two persons who wish to comment. Members, do you want to go ahead and ask questions of Phil before I bring them up?

MR. NICHOLS: No. I'll wait till they comment.

MR. WILLIAMSON: Okay, little Tommy Griebel, late of TxDOT.

MR. GRIEBEL: I would prefer that you call the chairman.

MR. WILLIAMSON: Well, that's nice of you. We like it that way, don't we, Billy. Old Abilene boys, we like to be deferred to.

DR. THORNTON: Yes, sir.

MR. WILLIAMSON: Should we tell them about the department store?

DR. THORNTON: Well, you sent me to college if you bought things there, and I appreciate it. It was very helpful to my family.

He's talking about Abilene when my dad had a mercantile business and the Williamson family were buyers of things.

MR. JOHNSON: We bought those shoes once a year whether our feet grew or not.

DR. THORNTON: Let me tell you how successful my family was. We had three automobile dealerships: we had a Packard, Studebaker and De Soto. Not at once; we did it sequentially so we could go through the death process three times.

(General laughter.)

DR. THORNTON: I heard Mr. Russell and I've been where you are and I know where I am, and if you hear staff recommendation for something you're asking for, the last thing you came to do was hear me talk more, so I'm not going to do that.

I will say that we're here to request these funds. We think we've run our organization well. We've been up and running almost a year now, we've developed our procedures and our policies.

Our community is accepting us fairly well, amazingly well, I would have to say. We're getting full support from our county which is funding us with a $500,000 a year loan, and our city which is likewise meeting a $500,000 a year loan.

The district staff of TxDOT has been superb. David Casteel, Julie Brown, Clay Smith, Frank Holtzman, Jennifer Matsugimba, all of those people have done well. Joanne Walsh, I think, was here -- is she still here -- our MPO director.

We recognize that we fit in to existing plans to meet needs. We're simply a facilitator, a way to capture toll road funds, to expedite and more aggressively address mobility issues in San Antonio.

We've been particularly grateful for Commissioner Andrade's guidance, support and leadership, and you too, Mr. Chairman.

Let me just from a distance say that we recognize what you're doing in Texas is a change in the way highways are built, and it's a way to bring more money in, it's a way to do financing to do projects quicker, and we realize our small role to play in that, but we are aggressively trying to meet those goals.

We're here today to ask for that $13 million, and we'll answer any questions that you have, and Tom Griebel is here to answer those questions.

MR. WILLIAMSON: Thank you. Any questions of the chair?

(No response.)

MR. WILLIAMSON: Thank you, Bill, appreciate it.

MS. ANDRADE: Mr. Chair, I don't have a question but I do have a comment. Our governor made a good choice when he selected our former Mayor Bill Thornton to lead this effort.

MR. WILLIAMSON: Indeed, I agree.

MR. GRIEBEL: Thank you for considering this today. I don't want to belabor it, but I wanted to give you a little idea of what we hope to build in San Antonio so that you don't have any misperception, and Dr. Thornton talked about the choice lanes that we're looking at, so I've got a few overheads to quickly flip through.

That's the starter system, just to refresh you, what TxDOT is building. We're going to be working on the western extension, hopefully, once we go through the negotiation and this passes and your action.

And the next slide kind of shows what 1604 looks like today which we hope to improve in a cooperative effort with TxDOT.

The western extension, part of it looks like this down to the Bandera Highway, and that's what hopefully it will look like in the future. It's going to be express lanes, it's an all-electronic system, so if someone says to you we're going to have congestion with the toll barrier plazas, we don't anticipate that because we're not going to have any barrier plazas, we're not collecting any coins, it's all electronic.

MR. WILLIAMSON: That's a good idea.

MR. GRIEBEL: And this is 281 which looks somewhat similar to the western extension south of the Bandera Highway down to 151.

MR. WILLIAMSON: Oh, look, Robert.

MR. NICHOLS: What?

MR. WILLIAMSON: You don't see it, right there.

MR. NICHOLS: I was wondering what that was.

MR. WILLIAMSON: That's your truck.

MR. NICHOLS: That's not my truck.

MR. GRIEBEL: We parked your truck out there to delay traffic is what we did. We created an incident so it would look like we had more traffic.

(General laughter.)

MR. GRIEBEL: And then hopefully the part south of State Highway 16 of the Bandera Highway down to 151 will look like this when we're finished, and those frontage roads will definitely look probably more enhanced than improved.

And then as we move forward, we're looking at kind of tackling what is called, as you build the starter system, we're going to be looking at the western extension with this $13 million it will help us develop, the northern extension of 281 to the county line, and the eastern extension from 35 down to I-10 on the east side by the Randolph Air Force Base.

And here's a line diagram showing the starter system that you are developing. It's got an estimated cost of about $450 million. And then enhancements of that and other systems will be done through a revenue bond, hopefully a large majority of that will be done with revenue bonds.

But thank you for your consideration of this, and thanks for having us today.

MR. WILLIAMSON: Questions for Mr. Griebel, Hope?

MS. ANDRADE: Tom, I have not questions but a couple of observations.

I like the way that you've labeled some of those slides to be toll lanes, because we want to reiterate that 1604 the road is not all going to be tolled but just lanes, and you'll still have lanes that are non-tolled. Is that correct?

MR. GRIEBEL: You'll always have a choice. And we have communicated to the public as well our partners in the media that that will be an alternative, and the citizens out there will not have to use the toll lanes to get where they're going today. And we're trying to communicate that.

MS. ANDRADE: Good. And if we had not done this, what year would we be doing this?

MR. GRIEBEL: Well, a big part of this process is the acceleration. On the starter system we've identified at least a 20-plus-year acceleration of those projects by packaging into an equity proposal for building the toll network in San Antonio.

And that includes bonds that you will be selling hopefully as well as Proposition 14, and then once you deal with the Mobility Fund bonds, some of that money in the starter system is also Mobility Fund bonds.

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Robert?

MR. NICHOLS: A couple questions.

MR. GRIEBEL: I don't want to belabor you here.

MR. NICHOLS: No, just some things I want to add.

MR. WILLIAMSON: We don't want you to leave too quick either.

MR. NICHOLS: The existing lanes will be reconfigured and new lanes will be built. So you'll have the same number of lanes at completion non-tolled that you currently have.

MR. GRIEBEL: That we have today, that's correct.

MR. NICHOLS: But will the usability, the free flow of traffic on those lanes be reasonably the same as it is today?

MR. GRIEBEL: Well, we would anticipate -- if you'll go back to that slide -- that we'll have more people, particularly in the peak hours, in those express lanes. So we should improve over time those general purpose lanes.

MR. NICHOLS: Okay. Because I've had some people, as we go through the toll issue, particularly at the legislature, comments from the public, a lot of people seem to think: Well, they're going to give us the same number of lanes but they're going to create obstacles like red lights and things like that to slow traffic down to encourage us to move on the toll lanes, and that's not what you are doing. I just wanted to make that clear.

MR. GRIEBEL: Obviously on 1604 where there's general purpose lanes and plus there's going to be express lanes and they're going to be peak hour advantage for saving time. So we're going to be selling time back to people if they want to pay for that time.

MR. NICHOLS: On any of these projects that you're going to toll or plan to toll, has any dirt been moving on any of these?

MR. GRIEBEL: No, sir. They are not under construction at this time, and some of them are still going through the environmental review process.

MR. NICHOLS: So no segment has been under construction.

MR. GRIEBEL: The western extension that this $13 million has been identified, we've got to complete the environmental documents, and we're working very closely with the district to undertake that. So no dirt has moved, has been turned; there's no bulldozers out there.

MR. NICHOLS: Okay. I want to say for your area how much we appreciate what you have done in taking the complicated issue of tolls. I remember when the issue came up several years ago in San Antonio. I guess shell shock was probably the initial reaction when the idea of tolling some new construction came up.

But you have managed to work with the issue, I guess understand the problem, and have really done a great job in putting it together, so I think the public understands it in the San Antonio area from what I've seen.

We said when you formed an RMA that we would help you through this process, and I think that's what this commission intends to do.

I know Governor Perry has been very clear that he likes this concept, wants us to support it, and has indicated he encourages us to try to help you in these things too. Thanks.

MR. WILLIAMSON: Ted?

MR. HOUGHTON: Tom, you made a statement that once you, the commission, deals with the Mobility Fund.

MR. GRIEBEL: Let me retract that. Okay?

MR. HOUGHTON: I would think that the metropolitan areas need to understand it's not us, it's we, and if we cannot resolve the issue -- I call it the 9050 plan -- the 9050 plan falls apart. And the cities, the municipalities, the metros need to let the people across the street know that.

And at the same time, you are one of the leaders in coalescing groups in San Antonio through SAMCO, and I applaud you for that. Again, something to replicate around the state like Dallas/Fort Worth Metroplex that are out in front of it and moving quickly.

And congratulations to you, and former Mayor Thornton, congratulations.

MR. GRIEBEL: And let me retract my comment and say when the Mobility Fund issue is resolved. I'll make that more generic. Thank you.

MR. WILLIAMSON: I echo my congratulations to you and particularly you, Dr. Thornton for the job well done, just well done. We're most proud, most proud to be your partners.

MR. GRIEBEL: Thank you.

MR. WILLIAMSON: Anybody else?

(No response.)

MR. WILLIAMSON: Well, members, shall we give Commissioner Andrade the honors?

MS. ANDRADE: So moved.

MR. HOUGHTON: Second.

MS. THOMASON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you.

MS. ANDRADE: Mr. Chairman, I'd like to add a comment. I also want to congratulate and thank our district staff because they've done an excellent job in educating our community about it, and I think Dr. Thornton will agree in that our public hearings we've just had great, great turnouts.

MR. WILLIAMSON: What is that district engineer's name down there?

MS. ANDRADE: I believe David.

MR. WILLIAMSON: David.

(General laughter.)

MS. ANDRADE: He's a star.

MR. WILLIAMSON: He's a low profile guy.

MS. ANDRADE: Thank you so much. I'm proud to live in San Antonio.

MR. NICHOLS: They train them well in Childress.

MR. WILLIAMSON: They train them well in Childress.

MR. BEHRENS: Agenda item number 10 under Transportation Planning, this is to authorize CONSTRUCT authority for a bridge in Nueces County. Jim Randall.

MR. NICHOLS: We're going to number 10?

MR. BEHRENS: Number 10.

MR. WILLIAMSON: We're at Tule Lake Lift Bridge.

MR. RANDALL: Jim Randall, director of the Transportation Planning and Programming Division.

Item 10, this minute order authorizes CONSTRUCT authority for a project to rehabilitate the Tule Lake Lift Bridge in Nueces County in Category 6, Structures Replacement and Rehabilitation Program of the 2005 Statewide Preservation Program.

The Tule Lake Lift Bridge is located on Navigation Boulevard, approximately one mile north of Interstate 37 at the Corpus Christi Ship Channel.

A recent inspection indicated defect in the bridge's lifting mechanism. Since the structure crosses the ship channel, failure of the lifting mechanism could result in the closure of the upper part of the Port of Corpus Christi to shipping.

In order to provide Nueces County citizens with a safe and efficient transportation system, it is necessary to advance the project to CONSTRUCT authority at an estimated cost of $1,275,000.

We recommend approval of this minute order.

MR. WILLIAMSON: Members, we have a witness who, I believe, will talk with us if we think we need to. I don't know that he wishes to talk unless required, or have I read that wrong?

MR. BEHRENS: Is Frank still here?

MR. DILLARD: Frank Brolin? I have not seen him, but he said he had an appointment at 12:30 across the street.

MR. WILLIAMSON: I'll amend my remarks to say we had a witness that gave up on us and left. But he was going to say, Man, we need this bridge repaired.

(General laughter.)

MR. NICHOLS: I remember several years ago we had a bridge -- I don't know if this is the same one or not -- there was a lift bridge or a swing bridge that a lot of people were claiming was a historical bridge. This isn't it, is it?

MR. WILLIAMSON: That's the one that wanted Enhancement funds.

MR. BEHRENS: That's in Freeport.

MR. WILLIAMSON: Do I have a motion?

MS. ANDRADE: So moved.

MR. WILLIAMSON: Do I have a second?

MR. HOUGHTON: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. DILLARD: Thank you.

MR. BEHRENS: Agenda item number 11 is a Pass-Through Toll for Williamson County. This will be presented by James Bass, our director of finance.

MR. BASS: Good afternoon, commissioners. I'm James Bass, director of Finance at TxDOT.

Agenda item 11 seeks authorization so that department staff may begin negotiations with Williamson County on a pass-through toll agreement. If negotiations prove to be successful, we would then come back to the commission for final approval in the future.

Williamson County has submitted a pass-through toll proposal providing for the county to construct improvements on seven local state highways through ten separate projects.

Some of those highways are FM 1431, US 79, an interchange at State Highway 29, FM 1660, and RM 620, US 183, and a couple of other road projects.

In total, the cost of these projects is estimated to be $130 million, and within their proposal the plan submitted had repayments being made over a total of 16 years.

However, your approval today would in no way be an agreement to any specific terms but would simply allow the department to begin negotiations with the county to arrive at mutually beneficial terms to then bring back to the commission for final approval.

Staff would recommend your approval, and would also like to point out to you that there are three Williamson County commissioners in attendance here today. I believe if you have any questions, they would be happy to respond to those.

MR. NICHOLS: As you stated, this is not a commitment of the funds but a commitment at least let's go to the next step and see what kind of terms we can work out.

MR. BASS: It's your authority to allow department staff to begin those negotiations.

MR. HOUGHTON: The same question is that the chair asked previously. Does anything to do with what's going on with the Mobility Fund have an impact, or potentially?

MR. BASS: The thought is that if this were to go forward in the future and we were able to come to acceptable terms, that the funding from this would come from Commission Strategic Priority which would have an impact on the cash flow out of the State Highway Fund which has been impacted by the non-action of the Bond Review Board.

MR. NICHOLS: So if we didn't have an action on one, it would disrupt, probably, our ability to --

MR. WILLIAMSON: Mike, what is the practical impact of moving forward on figuring out a way to design and build roads that aren't in the UTP?

I mean, my first reaction is we've gone through so much to extend authority to regions. In doing this, would we be in any way putting our thumb in CAMPO's eye?

MR. BEHRENS: I don't think so because every MPO they have like a 25-year plan, and I would suspect that all these projects are on that radar screen already.

And I think I see Bob Daigh sitting there in the back row, and Bob, why don't you come up here and verify that for me.

MR. WILLIAMSON: So I guess the key would be -- Bob can listen to my question while he's coming -- the key would be to not confuse any financial decision the commission decided to make about this with its financial commitment to the MPO generally over the next ten years.

MR. DAIGH: For the record, Bob Daigh, district engineer for the Austin District.

If I understand the question correctly, are these projects in the CAMPO long-range plan, and the answer is yes. And we're pleased to work with Williamson County to try to accelerate these projects.

These are projects that have critical safety needs, generally, and we are pleased to work with Williamson County to try to do what we can to bring them forward faster.

MR. WILLIAMSON: So the answer to my concern is because it is in the CAMPO plan, it wouldn't be putting our thumb in their eye.

MR. DAIGH: That's correct.

MR. NICHOLS: So even if our Strategic Priority money is federal funds, there's nothing in this process that would prohibit us from using federal funds that you're aware of.

MR. DAIGH: Nothing.

MR. WILLIAMSON: Thank you, Bob.

MR. DAIGH: Thank you.

MR. WILLIAMSON: Members, what's your pleasure?

MR. NICHOLS: So move.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

To the three commissioners, sorry we made you sit so long, and we do always like to hear from people in the hinterland, so if you have something you wish to add, you're welcome to come up and add it.

Do you really have to retire?

MALE VOICE: Well, self-imposed.

MR. WILLIAMSON: I hate it, you've been too good of a local leader.

MALE VOICE: I appreciate that.

MR. WILLIAMSON: We're glad you are here and you move forward, don't be too tough on our guys.

MS. BERGMAN: I don't believe I've met you; I'm one of the newest commissioners, Lisa Bergman. And I would just say thank you very much.

MR. WILLIAMSON: Lisa, do you want to come up here? You can come up here.

MS. BERGMAN: No, that's okay.

(General laughter.)

MR. WILLIAMSON: We're glad you're here.

Thank you, Jim.

MR. BEHRENS: Moving on to agenda item number 5, our Aviation minute order for the month of March, Dave Fulton.

MR. FULTON: Thank you, Mike. For the record, my name is Dave Fulton, director of the TxDOT Aviation Division.

This minute order contains a request for grant funding approval for ten airport improvement projects. The total estimated cost of all requests, as shown on Exhibit A, is approximately $8.2 million, $7.2 in federal funds and about a million dollars in local funds.

A public hearing was held on February 18, 2005. No comments were received.

We would recommend approval of this minute order.

MR. NICHOLS: Did anybody sign up to talk? Questions?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. NICHOLS: All in favor, say aye.

(A chorus of ayes.)

MR. NICHOLS: Any opposed?

(No response.)

MR. NICHOLS: Motion carries.

MR. FULTON: Thank you.

MR. BEHRENS: We'll go to agenda item number 6 which is under Public Transportation. This will be to award some grant funds for the Rural Economic Assistance League. And we're going to get a little bit more work out of you, Sue, before you leave.

MS. BRYANT: Commissioners, Mr. Behrens and Roger. My name is Susan Bryant and I'm the Public Transportation Division director.

The minute order before you provides needed funding resources to the Rural Economic Assistance League, commonly referred to as REAL.

On December 16, 2004, TxDOT terminated public transportation grant agreements with the San Patricio County Community Action Agency as a result of this agency's dissolution and subsequent bankruptcy.

The county then voted to become part of the REAL Rural Transit District, and REAL stepped up to provide the transit services for the county.

This minute order approves the balance of the grant funds totaling $209,354 to REAL which were previously awarded to San Patricio County, in order for REAL to continue service in San Patricio County.

The vehicle transfer that was originally scheduled is being postponed at the request of the Bankruptcy Court. Therefore, we recommend approval of this minute order.

MR. NICHOLS: Do we have title to those vans?

MS. BRYANT: We do.

MR. NICHOLS: There's no liens on those vans?

MS. BRYANT: We're working with the Bankruptcy Court right now to ensure that when we transfer the vehicles that the Bankruptcy Court will have no link to them.

MR. NICHOLS: They want to make sure that they're clean to us.

MS. BRYANT: Want to ensure that they're clean, yes, sir.

MR. NICHOLS: Anybody sign up?

MR. BEHRENS: No, sir.

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. NICHOLS: I've got a motion and a second. All in favor, say aye.

(A chorus of ayes.)

MR. NICHOLS: Any opposed?

(No response.)

MR. NICHOLS: Motion carries.

MR. BEHRENS: We then go to agenda item number 7(a)(1) which is our proposed rules for adoption, and they pertain to Public Transportation, and Sue, if you'll lay those rules out, please.

MS. BRYANT: Thank you.

Commissioners, Mr. Behrens and Roger. Again, for the record, my name is Susan Bryant, Public Transportation Division director.

This minute order proposes amendments to the rules regarding the distribution of state and federal funds to rural and small urban public transportation providers.

On June 24, 2004, the commission adopted rules establishing a formula for the distribution of state and federal funds. It was understood at that time that further adjustments would be needed to continue to provide for fair and equitable distribution of public transportation funds.

At this time, I'd like to refer you to the flow chart that will illustrate the proposed changes.

Starting at the top of the diagram, for State Appropriation, the first proposed change is the initial split between the small urban and rural providers. Instead of basing the split on the factors of population and land area, the split would revert to a more historical 35-65 percent.

Moving down on the left side, the Small Urban Allocation, the next change is that any urbanized areas which have populations of 200,000 or greater would be adjusted on a pro rata basis to reflect a population level of 199,999.

Again moving down that side of the chart, for performance criteria, these criteria would also be adjusted on a pro rata basis to reflect a population of no more than 199,999.

The formula criteria for the small urban providers would include changing local funds per capita to local funds per operating expense. This criterion would be compared on a system-to-system basis.

The inverse of operating expenses per mile would be calculated comparing a transit agency against its own performance from the previous year. Ridership per capita would be calculated on the basis of comparing system to system, and revenue vehicle miles would be eliminated as a performance measure.

These proposed changes have been recommended by the Public Transportation Advisory Committee.

To continue with development of proposed changes, the division was tasked with reviewing the formulas such that expected changes in funding amounts per provider, either plus or minus, would be accelerated over the transition period, and the impact of funding changes for 2005 as an anomaly year was reduced or eliminated.

These changes can be accomplished by setting 2004 as the base year for the 2006 formula allocations and by removing the upper level cap on growth, and would affect state funding for both small urban and rural providers.

If we can go to the next overhead, please.

Setting the base year as 2004 and removing the upper level cap on growth would also affect the chart you see here, the Federal Rural Funding Allocation.

If available funding should exceed the full formula allocations, this funding would be allocated to all systems within their respective small urban or rural, state or federal category on a pro rata basis.

These proposed changes were submitted to the Public Transportation Advisory Committee which voted to waive comment on these additional changes until the public comment period.

And I'll be glad to answer any questions I can regarding the proposed changes.

MR. WILLIAMSON: Members, we have several witnesses and I know at least one is a member of PTAC. Do you want to hear from witnesses first, do you want to ask questions first?

MR. HOUGHTON: I was going to ask historical compared to -- what time in history are you referring to?

MS. BRYANT: Historical until the commission voted to approve the formula that was approved last summer.

MR. HOUGHTON: We're going back?

MS. BRYANT: Excuse me?

MR. HOUGHTON: We're going back is what you're saying?

MS. BRYANT: That was an historic percentage change based on numbers that were actually appropriated that were included in legislation. There was not an appropriated or legislative percentage cut, but the nature of the numbers, the nature of the funding split was a 65-35 split.

MR. HOUGHTON: Okay. And the advisory committee is withholding any comment until?

MS. BRYANT: The first section of changes, the advisory committee actually voted in favor of those. The additional ones that would also address the rural apportionment, the advisory committee voted to waive comment until the public comment period.

MR. HOUGHTON: What was the vote on the first part?

MS. BRYANT: Sorry, Commissioner, I don't remember that.

MR. HOUGHTON: Unanimous?

MS. BRYANT: Excuse me?

MR. HOUGHTON: Unanimous?

MS. BRYANT: I don't believe so.

MR. WILLIAMSON: Well, let's hear from our witnesses and then I think I've got some things I want to talk about.

Vastene, are you with us today? Yes, you are.

MS. OLIER: Good afternoon. I'm Vastene Olier and I'm executive director for Colorado Valley Transit. I also serve on your Public Transportation Advisory Committee.

Thank you for that opportunity. It has truly been a pleasure but it has also been very challenging.

MR. WILLIAMSON: What a kind way to put that.

MS. OLIER: I know. Be careful what you ask for.

(General laughter.)

MS. OLIER: I wear two different hats. You've chosen to have me serve on your advisory committee, but as an executive director for transportation for 19 years, I wear another hat.

I'm going to encourage you today to not act on what the division has presented to you. We have worked very hard with the division, I think that we have made a lot of progress, but there is more work to be done.

And I'm going to say to you that not only this couple of years that I've worked on the PTAC committee, but I've had the pleasure over those 19 years to have worked on formula funding before.

When I say challenging, many of us are working together with a diverse group on PTAC, some of which have never really understood what transportation was. So therefore, we've had a great learning curve.

And within this mixture we've had the privilege of half of us being on the telephone and half sitting here in Austin this room or sometimes on Riverside, and half of us not even knowing which page we're discussing. And yet, we've been challenged with doing what?

I see the challenge that we've been provided with as State of Texas, first of all, to make public transportation available to as many residents as possible. That's the first challenge.

Then when I look at the second challenge that we have, we're talking about utilizing the resources that are available in the state of Texas as well as the federal funds that we're discussing.

And then the third part of it is accountability, making sure that as providers of public transportation within the state of Texas that we are, in fact, doing what you so desire and what the taxpayers desire. That's a challenge.

When I think about the first part of it which has to do with making public transportation available for as many citizens as possible, I look at what we've struggled with as a body at PTAC and what was presented today -- which I didn't see on the slides -- because you'll see there's a number of systems that will be losing funds.

And maybe to you saying losing funds is not the end of the world; however we do have choices, and that was not presented to you so far. I'm going to let somebody else talk about what those options are.

But I don't see you making a decision today to take transportation away from one area and give it to another.

In the 19 years that I've served trying to make public transportation available to as many residents as possible, I have seen it grow from one system to the other. Your senior citizen or your client in your area is no different than anybody. I don't think of one System A against System B. When I think of public transportation, I think of my grandmother, your grandmother and they're real people.

I'm going to give you an example. Colorado Valley Transit serves four rural areas: Austin County, Colorado County, Waller County and Wharton County, all adjacent to Harris County.

Waller County has no hospital, very few doctors, so you see our buses transporting people in and out of Houston daily, Galveston. Those individuals are real people.

If you ever want to have a challenge in your life, sit and receive phone calls where you've taken away the ride of a mother who's going to take chemo at M.D. Anderson that's depending on the transit to ride three days a week.

Talk to a son who's concerned because his dialysis mother can no longer get a ride. Dialysis is essential; those individuals receive that life-sustaining support three days a week.

That's what we do in terms of transportation. When you cut systems, you're cutting real people, you're cutting the service that we have built to try to get to the point where people are able to live independently in their homes and to have a quality of life.

Why would you cut when you have an alternative that you could utilize? Now, that's talking about making transportation but not cutting transportation.

When I think of resources, in the 19 years I can go back from 1986 when we only received federal funds, today we have a combination, and I thank you all for that because without your support, many of us would not have been able to provide the transportation to the citizens that we now provide.

We've also worked very hard with trying to pull information together about what's available locally. Some counties are very strong in support while others do not.

So when we think of resources, I think of financial resources in this case. We're talking about your federal funds, we're talking about your state funds. The State of Texas has been in a good position that we've had funds continue to increase federally. Someone else will talk about what we expect to be coming.

But at the same time, we talk about accountability, and when I think about accountability, I think that we owe it to the taxpayers to make sure that the money that we are entrusted to have is being utilized to the best that we possibly can.

I don't think that anybody within the transit industry would argue with that. How we get to that point, however, is what we differ about.

It is conceivable that if we accept the proposal that we've kind of struggled with that we may put some of those systems out of business. Is that what we want? I don't think so.

I think that what you want to do is to slow this process down and make sure that we don't take rides away from any system, that we hold people accountable, and there are ways for you to do that.

When I mentioned earlier about a diverse group, I do mean diverse. But I want you to know that PTAC is struggling and we've got a wonderful team that cares.

And what we're planning to do is to bring in some expertise to help us, to spend some quality time, not where we have one group on the phone getting disconnected and not knowing that they've been lost, but to come here to Austin to sit down and work with that group, whether it be a consultant -- we've got several options that we're working on -- and make sure that what we've put together is something that you, you, you and you can be proud of, something that we can make sure that Texas is a winner all the way around.

If we consider what we have here, we have losers, and I don't think we have to lose today, I think we can be winners.

I'll be happy to answer your questions if I can.

MR. NICHOLS: When you say there's an alternative, what is the alternative?

MS. OLIER: The alternative is to -- and I'm going to just briefly tell you this and then someone else will come up and explain -- is to cap the funding which Sue mentioned at '04 level. Because we've had the issue talking about overfunded and underfunded, meaning those individuals who have grown their systems, that have been around for a long period of time have received the bulk of the money. But yet we also have those systems that are growing and they need additional money.

And the bottom line is in the state of Texas, first of all, we do not have enough money so we're fighting over whatever it is.

But when we think of those individuals that are currently at one level, we say keep them at that level, don't take their service away from them, but whatever additional funds we get -- and we will be getting those both federally and state -- take those funds and give it to those systems that need to be able to grow their areas. They're in need of transportation for their medical, and medical happens to be the largest, especially in the rural areas.

You could think about the urban areas, their services that they provide may be a little different. But those systems are equally as important, their riders and the need to be able to address additional services is just as important as those systems that have grown their systems.

And when I say an alternative, keeping that level at '04 for those systems that are there right now, don't give them any additional money but keep them there, but any additional money that you get, give it to those other systems so that they can grow and develop the transportation that's needed in their area.

MR. NICHOLS: Kind of what I've observed over the last five or six years in this process is that many of the systems that are smaller still have a large population base and service base, but they have been denied the ability to service those people who are also in need because of the funding mechanism that was in place.

In other words, those that had the money continued to grow at a faster rate, and those who were smaller but had the need were denied because of the mechanism or the formula. So I mean, we have been denying people those rides because of that thing.

MS. OLIER: That is true, and what I'm suggesting to you is that you consider not denying them but allow the additional funds that the State of Texas will have to grow those systems to meet those needs.

MR. NICHOLS: Do you know how much extra funds we're talking about getting?

MS. OLIER: Someone else is going to give you those numbers, I don't have those numbers with me.

But I think that you're right in what you say that we've been denying, because you just don't have the money and you have people that need rides to whatever it is in their area.

MR. NICHOLS: I know I've watched in the last five years when we had the opportunity over the last actually seven years for extra money when it did come in really wasn't proportionally give to the areas that had the need that did not have the service, it was given to the areas that had the service, also had a need, but because they had been getting the money before continued to get even more money at a greater rate because of a mechanism that was in place.

So all these people have been denied year after year after year. Because we've talked to both of them, and that's not fair either.

MS. OLIER: That's exactly right, I agree with you. That's why we say give the additional money to those systems that have been denied.

MR. HOUGHTON: You're assuming we're going to have additional money. Correct?

MS. OLIER: Yes, I am.

MR. HOUGHTON: And what I'm looking at is a chart that -- your comment was cutting -- I see this as a reallocation.

MS. OLIER: When I see taking dollars away, you say reallocation, you and I look at it differently. I see it as taking away rides when you have less dollars to operate with.

MR. HOUGHTON: Right. We don't have the money, so it's like changing the chairs on a boat. I mean, here we've got the same number of chairs, we're just moving them around.

MS. OLIER: The alternative will allow you that flexibility so that you don't have that. Okay? And I think that's what you need to look at.

MR. WILLIAMSON: Thank you, Vastene.

MS. OLIER: Thank you.

MR. WILLIAMSON: Mayor Don Hill.

MALE VOICE: He had to leave, Mr. Chairman.

MR. WILLIAMSON: Did you run him off, Sam?

MALE VOICE: I did not, I promise you I did not.

MR. NICHOLS: Where is he from?

MR. WILLIAMSON: Well, Mayor Don Hill is from the City of Taylor and he was going to testify on --

Donna Halstead.

MS. HALSTEAD: Good afternoon, Mr. chairman, commissioners. I am Donna Halstead, I'm from the Dallas area, and I'm one of the folks who serves on PTAC.

I'm here today because our chairman, Fred Gilliam, could not come; he had a meeting that he was not able to adjust and he asked me to come and be available to answer any questions you might have about what has transpired in the development of the recommendation that we brought to you, and if appropriate, explain to you how we went from making that recommendation to you to waiving comment through the public comment period.

I do applaud you for including the formula we recommended to you in the proposed rules changes. I will tell you it was not a unanimous vote. If I remember correctly, I think it was a six-three vote, but it was certainly a subject that was long and very tediously discussed across a number of committee meetings.

The reason that you see a recommendation from us that we not make a public comment on these rule changes has nothing to do with the actual formula. It has to do with a number of other issues that we have discussed a great deal over the past 18 months, and frankly have had neither the time nor the knowledge provided to be able to address them to you.

And I at least wanted to mention them to you so that you'll understand what we are still wrestling with as a committee.

One of the things that has been discussed from the beginning is the initial divider of need versus performance, and that is a concern in two areas.

The first is that we have, as it stands now, the money divided with 80 percent being allocated based upon need or population that you're covering in the area, and 20 percent based upon performance.

There have been a number of discussions over the past 18 months about how we move that ratio toward a stronger emphasis on performance so that we can have the agencies demonstrating greater proficiency in using the funds that they have, and that would then benefit them as the monies are allocated over the next few years.

So one of the areas still under discussion is moving from the 80-20 split that we have today to a 50-50 split over a period of years.

Basis and caps has continued to be a discussion among the committee members. There have been a variety of problems that have been brought forward by providers like Vastene, and one of the issues that we're going to be wrestling with in the next few weeks is what really makes the greatest sense in terms of caps and basis.

One of the concerns that's been expressed is that if there is a windfall of funds, if in fact you end up with more dollars to certain agencies, do we know that there are service plans in place so that those funds would be used to implement service that has already been well thought out, well planned, and therefore, the dollars would be headed toward something that had a very strong basis in research to make certain they were going to be used effectively.

And secondly, an issue has been raised about whether or not it makes sense to phase in those decreases that we've been talking about over a two-year period or a three-year period, whatever, as opposed to making them in a single year.

Because in many cases the agencies could absorb a 3 to 5 percent cut but to absorb a 10 percent cut in one year as opposed to a 3-1/3 percent cut over three years is a far more dramatic impact on the ability of that agency to provide service.

A couple of other issues that still plague us, aside from the big one of how to promote better coordination of services across the agencies, and particularly in the area of health and human services, are within the small urban category we have 36 or so agencies and they provide different services.

We are comparing apples to oranges in this current situation because we've got a number of fixed route providers and then we've got a large number of agencies who only serve the elderly and the handicapped.

We are at the current time lumping all those together, and somehow we've got to figure out a way to address the different types of services that are provided.

Another issue that continues to be a subject of discussion is in terms of the rural areas, what constitutes the geography served.

If you're talking about a county adjacent to a fairly heavily populated area, they may have people within the entire county that they need to serve.

If you're talking about a very sparsely populated county, perhaps in West Texas with a very low population, the fact that that county is large, even if it only has a small number of lane miles and a small population, that county is disproportionately benefitted because of the geographic area.

Those are the kinds of things we don't have answers to yet, and we need to do a lot more work. And I hope that on an annual basis we'll be able to come back to you with recommendations that do in fact help to address some of these concerns.

But I thank you very much for allowing me to comment, and as I said, the chairman sent me down here in case you all wanted to throw darts. Thank you.

MR. WILLIAMSON: Wait, don't leave.

MR. HOUGHTON: What part of that vote were you on on the six-three?

MS. HALSTEAD: I was on the six side.

And frankly, the makeup of the committee makes it really hard. We have four service providers, we have three users of the services, and we have two general citizens who have an interest in public transportation but no affiliation with any agency at the present time.

And the two who have no current affiliation with any of the agencies who actually receive funds are Fred Gilliam and myself.

MR. NICHOLS: We really do appreciate the work that you all have done.

MS. HALSTEAD: Commissioner Nichols, we appreciate your taking the time to come and listen to us and recognize how very difficult these issues are for us and encourage us to continue to try and find fair solutions.

I'll be available if other questions arise.

MR. WILLIAMSON: Thank you for your service to the state. It's a very difficult thing, you and Vastene and everyone else who has to sacrifice.

Well, Sam, do you want to come up and say something?

MR. SAM RUSSELL: I thought you'd never ask.

MR. WILLIAMSON: I'm sure you're supportive of all this, aren't you?

MR. SAM RUSSELL: To an extent. My name is Sam Russell, I'm general counsel for the Texas Transit Association.

First of all, Mr. Chairman, I want all of you to understand that we always thought as an agency you could make people indentured servants, and we kind of thought that's what you would do with Sue Bryant.

We're certainly happy that you brought her to the Public Transportation Division. We certainly hate to see her go just. After it seems like we've gotten all the rough edges of our relationships worked out, then she leaves.

So we do commend her on the work that she's done and wish her well in her future endeavors.

MR. WILLIAMSON: Well, that's nice of you, and the feeling must be mutual because she's recommended to us that we attempt to hire you to take her place.

MR. SAM RUSSELL: That's very nice of her.

(General laughter.)

MR. SAM RUSSELL: With that said, Mr. Chairman, members of the commission, we are most appreciative of the work that the Public Transportation Advisory Committee, the Public Transportation Division of TxDOT, the transit agencies across the state, and the advocacy groups across the state have put in over the last year and a half into developing a funding formula for rural and small urban transit systems.

I would like to preface my comments with looking at what may be a realistic future dollar amount regarding public transportation.

The information that I have is that re-authorization at the federal level -- which likely will occur in June now -- for 2006 and 2007, the House version has an additional $8.9 million for rural and small urban public transportation, the Senate version has an additional $14.6 million for those two types of public transportation.

MR. NICHOLS: You said that's rural and small urban?

MR. SAM RUSSELL: Yes.

The Appropriations Bill across the street, the version that was recently voted out, I think this week by House Appropriations, I believe has an additional $10 million for public transportation.

So I think you're looking at the possibility of an additional $20- to $25 million available for public transportation in Texas for the next two-year cycle.

The Texas Transit Association would propose that TxDOT continue to use the existing funding formulas with two exceptions: the first being to freeze those systems that would otherwise lose funds at their '04 funding level; the other one is to continue to let those systems that would gain funds gain those funds that they otherwise would under the formula.

When this formula was adopted, you could tell the winners and losers, and the losers were spread out, I believe, over a period of time out through 2010 so they wouldn't get hit all at once with the reallocation of those dollars from one system to another.

But with using TxDOT numbers, we believe that $9.6 million would accomplish that whole process in the next two-year period. So if the additional money is there, we think it would make sense to bring this in to a two-year process rather than continuing it over the five and use the additional money that's available to make this happen.

That way we also give PTAC and PTN the time necessary to look at the history that we're making with the current formula, and the time to determine whether or not changes need to be made in the performance measures or in the funding formula itself.

So we would certainly encourage the commission to freeze those systems at their '94 levels that would otherwise lose money and let those other systems that would gain money go ahead and gain the funds so they can grow their programs and their services over this period of time.

MS. ANDRADE: So you're recommending that we freeze the ones that are losing, not the ones that are gaining.

MR. SAM RUSSELL: Correct.

MR. NICHOLS: When you say the Transit Association's recommendation, did you have a vote of all the members?

MR. SAM RUSSELL: The executive committee had a meeting.

MR. NICHOLS: Okay, the members did not vote, the executive committee did.

MR. SAM RUSSELL: The executive committee met.

MR. NICHOLS: How many members are on the executive committee?

MR. SAM RUSSELL: I believe there's five.

MR. NICHOLS: And they're with which associations?

MR. SAM RUSSELL: They represent the metropolitan agencies, the rural and the small urban, so all three types of transit systems in the state.

MR. NICHOLS: So there's two from the rural and two from the small urban?

MR. SAM RUSSELL: I believe that's correct.

MR. NICHOLS: Which two providers are the rural makeup and which two are the small urban makeup?

MR. SAM RUSSELL: The small urban is Lubbock and Brownsville; the rural are -- let's see, there's Terry Lee Scott with El Paso is on there, John Macbeth with Brazos is there as a rural, Carol Worlich with Hill Country from Temple/Belton is the other rural member, so there were two, two and one.

MR. NICHOLS: One of the things that happens is inaction -- no decision is a decision of the status quo. If we make no decision here, what automatically happens is the formula that currently exists. So we're either going to need to stay with the current formula, change the formula, or have a third option which is the one you're proposing.

MR. SAM RUSSELL: A modification of some sort, I presume.

MR. NICHOLS: Which we do not have a minute order for; there's nothing in here related to that one.

MR. SAM RUSSELL: Well, it's my understanding that your action today is for the purpose of publishing a proposed change.

MR. NICHOLS: Yes.

MR. SAM RUSSELL: And then you will have a comment period within which people can comment and you can ultimately make a decision.

MR. NICHOLS: Yes, but if the decision -- Counsel, I'm going to ask you a question related to this --

If we go out with a proposal -- because I've been through this a couple of times before -- if we go out with a specific proposed formula and from the public comment that comes in, we decide we want to change that formula based on the comments, we cannot, in effect, change that formula that was proposed without going back through the process again if it changes the dollar outcome.

MR. MONROE: I'll give you a good answer. It depends.

MR. NICHOLS: Thanks for clearing that up.

(General laughter.)

MR. MONROE: Well, I do what I can, Commissioner.

The Texas Supreme Court not too long ago came out with a decision -- and I believe I passed this on to the commission -- where they took some of the wind out of the sails of the Third Court of Appeals here in Austin, and they were talking about changing rules during the comment period.

And what they said was if you've got the same subject matter and you make a change pursuant to a public comment, then barring some really egregious situation, you do not have to republish.

So I'm not going to give you an ironclad guarantee on that, but the reasoning being if you're talking to the same community, the same people have the opportunity to comment, and in response to one of those comments you change your mind, and you stick with the subject matter but you just, in this instance, would change something about that formula, you do not have to republish.

Now, does that mean you're not going to get dragged into the courthouse by people who are disappointed? Most certainly it does not. But at least the Supreme Court of the State of Texas is telling you we're on your side if you don't try to do anything too crazy.

MR. NICHOLS: And that's a little bit different than what you used to tell us on these formulas because of the later ruling.

MR. MONROE: Right.

MR. NICHOLS: So we could go with a published proposed formula and depending on the comments that came in, that formula may or may not get adjusted.

MR. MONROE: It may or may not get adjusted.

MR. NICHOLS: Without having to go back through the proposal process.

MR. MONROE: And as always, the final decision is up to the commission.

MR. NICHOLS: Okay, thanks.

MR. MONROE: Sure.

MS. ANDRADE: My question is will we have enough time to change it after the public hearing, Mike?

MR. BEHRENS: You're talking about going through the process, going through the public hearing process.

MS. ANDRADE: Yes.

MR. BEHRENS: We always reserve some time to review comments, so we should have enough time if we choose to make different recommendations.

MS. ANDRADE: And would we still publish on our website the changes?

MR. BEHRENS: Same procedure.

MS. ANDRADE: Same procedure, okay.

MR. WILLIAMSON: Anybody else?

MR. SAM RUSSELL: Thank you very much.

MR. WILLIAMSON: Sam, were you the other witness Vastene was referring to?

MR. SAM RUSSELL: I suppose so, yes.

MR. WILLIAMSON: And we have, as a late-breaking person who wishes to comment, Glenn Gadbois.

MR. GADBOIS: My name is Glenn Gadbois. I'm with Just Transportation Alliances, a project of Texas Citizens Fund.

I wasn't going to testify because I know that you have been at it for a long day, and so I will try to keep this brief.

Given what we just heard from Mr. Monroe, I presume that we can have more conversation about this than I had originally thought. But there are a couple of things that I think are worth noting in this conversation that have not been said yet.

I think Donna Halstead did a wonderful job of relaying the depth of struggle that the PTAC has done around this.

When we originally started this process, when it was talked about and authorized at the legislature, when you all first started struggling about this, part of the question was what's the real state interest here, and part of the decision was that we really need to distribute money in a more equitable fashion.

We need to figure out a way to do that and we need to also figure out a way to incentivize performance and really tie money to that.

We are not here with this formula and it's going to take a little while and so we definitely appreciate your patience and reoccurring support for a process of developing that right formula.

But what I am here to say is this formula that is proposed to you is going in the right direction. And let me just counterpose it with the other proposal that is on the table.

When we ran the numbers and sent them to you all of looking at this formula, looking at the balancing of population and the balancing of geography, and the balancing of those performance measures, when we looked at where everybody would end up on that spectrum, what we saw was that we need about 50 million extra dollars.

The proposal that is on the table now is to forget about the formula, forget about that spectrum and where everybody really needs to end up in relation to each other with regard to population and geography and performance measures and simply hold those people that have gotten money historically at their historic levels, and then increase those others that need to be increased.

But that's still not in relation to where those historical folks have been, that is applying the formula to one side and only to one side.

It does not really do, I don't think, for our initial intent of really counting formula and the state purpose of where people are and where that limited resource needs to be invested.

And I completely agree with Vastene, this is about people being able to get where they need to go. But that need is all across this state, and it should not be determined by a protection of one system's interests or another.

The formula that is here is genuinely an attempt to move towards a more equitable distribution. It is a small incremental step in making this also a much more performance-based funding stream.

We would encourage you, now that we have the latitude for you to think about the rules, to take any additional money and keep it as a discretionary fund for the commission to then on a competitive basis truly figure out how to incentivize innovation and performance and reward that out of discretionary money.

We would encourage you to use that discretionary money. You can also use it to pro rata add to the formula to raise all boats. You could also use that to in-fill any adjustments that need to be made in the formula that were simply unintended.

We encourage you to think about doing that. That is not in the current rules and so that would need to be an addition.

We would be more than happy to get you any information that you need to think more carefully about what I've thrown out today.

MR. WILLIAMSON: Ted or Hope or Robert?

(No response.)

MR. WILLIAMSON: Thank you, Glenn.

Now, do we wish discussion? Do you have something you wish to say to everyone? Would you like for me to start?

I think that we need to move forward with posting the rules. I wish that Glenn would not read my mail. We wish to amend this rule, Mr. Monroe.

(General laughter.)

MR. WILLIAMSON: I hear carefully what Vastene says and I always listen carefully to a former member of the legislature, particularly the one who was my first chairman. That notwithstanding, I think the commission wishes to move forward with publishing.

I do believe that substantial additional money will flow to this source, perhaps even more than the folks in the audience realize, and I'm very uncomfortable with it flowing into this existing formula based on what I've heard.

So I would like to, with regard to, and if I can encourage concurrence from my colleagues, take 31.11, the State Program, and on page 6, I would like to add at line 17 -- and if my words are not good because I'm not a lawyer, please clean them up to be good -- but I want additional funding to be awarded by this commission on a pro rata basis or competitively or both.

I want consideration for the award of the additional funds to include, but not be limited to, coordination and technical support activities, compensation for unseen funding anomalies, assistance with eliminating waste and ensuring efficiency, maximum coverage in the provision of public transportation services, and reductions in air pollution.

MR. MONROE: Yes, sir.

MR. WILLIAMSON: That puts the pressure on us to make some decisions at the commission level about additional funds and them be of a performance nature.

And then with regard to 31.36, the Federal Programs, on page 11 at line 19, the exact same language that I used earlier.

Members, my argument for that is Vastene who has been in the trenches long and many years for all the righteous reasons makes good arguments about not taking away from somebody.

Donna, who I don't know as well as I know Vastene, but know of, makes good arguments that someone has got to move something forward even if it's not right now.

Sam is attempting to protect his members -- which he should -- with a fair and balanced proposal.

And Glenn makes a good point that we've got to get moving.

I don't know how you feel, we don't talk about these things ahead of time, but my judgment is we ought to post, let people comment, and we ought to post with those changes so if additional money comes, we decide how we want to get that done.

MR. NICHOLS: So post with the proposed formula and what you just added?

MR. WILLIAMSON: Correct.

MR. NICHOLS: Okay.

Question, when we use the term "additional funding" I know a month or two ago when we were looking at some of the funding, there's a term called -- Sue, I may be asking you a question here -- authorized but not released, or something like that.

In other words, we had two different dollar figures, I believe it was last month or the month before last, on some of the transit. It looked like this was what the federal government was saying you had but they could only release up to a certain amount of it. What is the difference in that term?

MS. BRYANT: I believe that depending on the proposed rules that move forward, those wouldn't necessarily be considered "additional funds." The way I'm interpreting or reading this is that if available funding exceeds the allocations -- in other words, the funding would roll through the formula but then any enhanced funding, any additional funding, funding that under the previous -- excuse me, I should say existing formula went to providers that weren't expecting necessarily to receive that additional funds, those then would become part of what Chairman Williamson is referring to as the dedicated funds.

MR. NICHOLS: I'm trying to make sure I understand "additional funding." When Sam Russell starts talking about we may get this much extra on the federal level, we may get this from the state level, that would be extra that we're not expecting, I understand that.

But I'm confused when last month or the month before we had two different dollar figures, one was $5 million more than the other.

MS. BRYANT: Yes.

MR. NICHOLS: And it was as if the federal government was saying you've got this but we can't release it now.

MS. BRYANT: Yes, I think that would not be considered additional funding.

MR. NICHOLS: That's what I'm trying to clear up.

MS. BRYANT: That's funding that the state already does expect to release.

MR. NICHOLS: We expect but we're not authorized to receive.

MS. BRYANT: Yes, we do still expect that.

MR. NICHOLS: So additional funding would be that which is above what we're expecting.

MR. HOUGHTON: Additional above current levels. Correct?

MS. BRYANT: And what Commissioner Nichols is referring to would have been considered current level if Congress had released the entire funds for the fiscal year, but they did not. Congress only released a partial allocation for the year.

MR. NICHOLS: So it's expected but it's not additional.

MS. BRYANT: It's still expected.

MR. HOUGHTON: So it's been appropriated but not released.

MS. BRYANT: Thank you.

MR. NICHOLS: Right.

MR. HOUGHTON: I have a question, when you talk about, Mr. Chairman, award by the commission on a pro rata basis, pro rata to their current funding as a percentage?

MR. WILLIAMSON: Could be. Depends on what we want to do. I just want to set the stage for we can either do it pro rata, we can do it competitively or we can combine the two.

MR. HOUGHTON: All right.

MR. WILLIAMSON: Mr. Simmons, did you want to admonish me?

MR. SIMMONS: For the record, my name is Steve Simmons, deputy executive director of the department.

Just to clarify, Commissioner Nichols, the two different numbers you saw last time, if you remember, the federal highway bill is going through extensions. They've only extended the bill so far through a fiscal year, so they've only allocated, we're only authorized to use so much of that fiscal year. And so that's what you have.

What the other number was, that $5 million more, was the total fiscal year amount that would come forward based on the previous TEA-21 bill.

MR. NICHOLS: So it's expected.

MR. SIMMONS: That is my interpretation.

MR. HOUGHTON: Appropriated, not funded.

MR. WILLIAMSON: I thought he was coming up here to get after me for not telling him what I was doing. You know how staff is about that, you're supposed to tell them what you're doing.

MR. HOUGHTON: No surprises.

MR. MONROE: Yes, sir, that gives me the items and we'll come up with something appropriate.

MR. WILLIAMSON: And such other language as you feel like needs to be changed in the process to effect that.

MR. MONROE: Yes, sir.

MR. NICHOLS: Mr. Chairman, I so move with your amendment.

MR. HOUGHTON: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

Thank each and every one of you for your comments.

MR. MONROE: Thank you, commissioners.

MR. WILLIAMSON: It's a very difficult issue.

MR. BEHRENS: We'll move on to agenda item 7(b). This will be rules for final adoption, 7(b)(1) being additions to the Department Advisory Committee Rules to include the Trans-Texas Corridor Advisory Committee.

Phil?

MR. RUSSELL: Thanks, Mike. And again, I'm Phil Russell, director of the Turnpike Division.

Commissioners, as you recall at the December commission meeting you instructed staff to develop rules which would allow the creation of an advisory committee to help us with input and insight as we develop the Trans-Texas Corridor.

General Counsel has developed those rules; we brought that to you in January.

Just a couple of the highlights. The rules would provide for the development of a committee, up to 24 members. They would report to Mr. Behrens or his designee.

Now, those rules were posted; the deadline was March 14 and we received no comments. So staff would recommend approval of these rules.

MR. WILLIAMSON: I'm sure Robert wants to vote on this, Mike. I don't want to drag it out but I do want to ask a couple of questions, and permit him time to take care of his business.

How many people applied?

MR. RUSSELL: Well, this is actually just the rules.

MR. WILLIAMSON: I understand that, but do we have people already asking about it?

MR. RUSSELL: Yes, sir. Assuming that this would be approved, we received over 250 applications/nominations.

MR. WILLIAMSON: And no comments about how we laid it out?

MR. RUSSELL: No, sir.

MR. WILLIAMSON: From the people who applied, no comments?

MR. RUSSELL: No, sir.

MR. WILLIAMSON: I don't guess Robert gets to vote on it.

Questions, members?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion, signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. BEHRENS: Agenda item 7(b)(2) is rules for final adoption concerning Toll Projects. We have two rules there, 7(b)(2)a and 7(b)(2)b. Dianna?

MS. NOBLE: Good afternoon, commissioners, Mr. Behrens and Roger. For the record, my name is Dianna Noble and I'm the director of Environmental Affairs for TxDOT.

Item 7(b)(2) is for the adoption of amendments to 27.32 relating to private toll roads, and 27.43 and 27.44 relating to regional toll authorities in order to clarify the project approval process, environmental review, and public involvement requirements, and better define roles and responsibilities.

This minute order also withdraws proposed amendments to 27.72 and 27.73 concerning county toll roads.

The proposed amendments were published in the Texas Register on December 31 of 2004. No comments were received.

Staff recommends approval and I'll be glad to answer any questions.

MR. WILLIAMSON: And I'm real sure that I know the answer to this question, but I must ask it. We had some disagreement with one of the toll authorities in the state over whether this was good or bad or it affected them or not.

MS. NOBLE: That is correct.

MR. WILLIAMSON: We all couldn't agree about that, so what we agreed to do was to do whatever they asked by way of doing no harm. Is that how it worked?

MS. NOBLE: What we decided to do was to continue to work with them, so we're withdrawing 27.72 and .73 and continue to work with them.

MR. WILLIAMSON: How's your son?

MS. NOBLE: He's still recovering but he's doing good.

MR. WILLIAMSON: Questions?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: Opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MS. NOBLE: Thank you.

MR. BEHRENS: Dianna, did we have two rules there for final adoption, or am I looking at it wrong?

MS. NOBLE: Thank you, Mr. Behrens. 7(b)(2)a was for the withdrawal and 7(b)(2)b was for the adoption.

Richard, do I need to correct the record on that?

I apologize, commissioners. Mr. Behrens is correct. 7(b)(2)a was for the withdrawal and 7(b)(2)b was for the final adoption.

MR. WILLIAMSON: No apologies necessary.

And just out of an abundance of caution, members, we will enter into the records what words are necessary to withdraw that vote, and now do I have a motion on 7(b)?

MR. NICHOLS: I move that we adopt both 7(a) and (b).

MR. HOUGHTON: Second.

MR. WILLIAMSON: I have a motion and a second to adopt both. All those in favor of that motion, please signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: That motion is adopted.

MR. BEHRENS: Now we're covered.

Okay, going on to agenda item number 8 concerning our Trans-Texas Corridor, and this is the creation of the Trans-Texas Corridor Advisory Committee and appointment of members.

MR. RUSSELL: Thanks, Mike. And again, I'm Phil Russell, director of the Turnpike Division.

Just a few minutes ago we approved the rules for the advisory committee. As the chairman discussed as well, we also were busy soliciting nominations or names, I guess, to help us with this advisory committee.

We had a fairly aggressive campaign to try to get the word out. Our Public Information Office sent out a news release to the Capitol Press Corps, some of the transportation beat writers, and distributed the news release to our various districts so that they could get to the local media.

And I think that work and those efforts by Public Information were successful. We did receive over 250 applications for the advisory committee. Those recommendations, of course, were sent up to Mr. Behrens, and in his consultation we now have 21 members which are on the attachment to this minute order which will form this advisory committee with your approval.

I'd be happy to address any questions you might have.

MR. WILLIAMSON: And all those people who applied, they didn't have any recommendations on our rules?

MR. RUSSELL: No, sir.

MR. HOUGHTON: Have these people been notified?

MR. RUSSELL: I have not notified them.

MR. NICHOLS: It looks like a great list to me. I move we adopt this list.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: Opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

Mike, do you care to read the names into the record?

MR. BEHRENS: Yes, sir, I'll do that.

Stephen Bonnette from San Antonio; Louis Bronaugh from Lufkin; Tim Brown from Belton; Sid Covington from Austin; Deborah Garcia, El Paso; Sandy Greyson, Dallas; Judy Hawley, Corpus Christi; Dr. Charles Henry, Lubbock; Roger Hord, Houston; Alan Johnson, Harlingen; William B. Madden, Dallas; Marc Maxwell, Sulphur Springs; Ann O'Ryan, Austin; Charles Perry, Odessa; Jose Ramos, Buda; Wes Reeves, Amarillo; Grady Smithey, Jr., Duncanville; Linda Stall, Fayetteville; John Thompson, Livingston; Martha Tyroch, Temple; Roy Walthall, Waco.

MR. WILLIAMSON: I know some of these people but most of them I don't. Are we familiar with all these people?

MR. RUSSELL: No, sir. We are not, we received those applications. Some of them we are familiar with.

MR. NICHOLS: And there's nobody from Weatherford?

MR. WILLIAMSON: There's sure not.

MR. RUSSELL: Didn't see anybody, Commissioner.

MR. WILLIAMSON: In fact, now that I look at it, there's not anybody from Fort Worth. I guess we could stretch Grady and call him from eastern Fort Worth.

MR. HOUGHTON: How do we pick a chair, or how is a chair picked?

MR. RUSSELL: They vote on it.

MR. HOUGHTON: They vote on it or we vote on it?

MR. RUSSELL: The committee does.

MR. WILLIAMSON: The ones I know on here are sharp people.

MR. RUSSELL: I think it will be a good group.

MR. WILLIAMSON: Well, you know, we don't want to say anything. Tell them to let it fly, whatever is good and whatever is bad.

MR. BEHRENS: We intend to do that.

Thanks, Phil.

MR. RUSSELL: Thank you.

MR. NICHOLS: I wanted to make a comment. Are we fixing to go to the next one?

MR. BEHRENS: Yes, sir.

MR. NICHOLS: A couple of things I had noted, and it's not a concern or question, I'm just stating for the public.

In the actual rules themselves when you read them, it has an expiration date of December '05?

MR. RUSSELL: Yes, sir.

MR. NICHOLS: And I'm trying to make sure I say this correctly, I don't think our intent is to abandon this committee in December '05. That's why I asked that question because that seems like an awful short period of time for such a massive project.

It's my understanding that typically all of our committees through TxDOT have an expiration date of the same period for uniformity, and at that time the commission will re-evaluate -- this is mainly for the news media people who may be reading this -- we'll probably re-evaluate how much longer and set a new time period.

Also, the annual meetings that are set up in this thing, I think our staff is anticipating meetings a whole lot more often than that.

MS. ANDRADE: Does their term also end December 2005?

MR. RUSSELL: No. I think Commissioner Nichols did a good job in describing that process. When it comes back up for re-authorization, those individuals will stay on that committee.

MS. ANDRADE: I realize that by that I'm asking is will we have a chance to either re-recommend them or remove them? I want to be able to say they're not interested in doing the job and let's replace them with somebody that does. So how are we protected on that?

MR. RUSSELL: We certainly have the ability to increase the size a bit from 21 to 24, and I may need help from Richard. I'm assuming if they're non-performing members, those could be replaced.

Richard, is that correct?

MR. MONROE: Yes, sir.

MS. ANDRADE: So you feel okay about it.

MR. RUSSELL: Yes, ma'am.

MS. ANDRADE: Thank you.

MR. NICHOLS: And that we don't have to necessarily wait until a year or two to get recommendations, that hopefully we'll get some kind of progress report along the way.

MR. RUSSELL: Yes, sir, I would anticipate so.

MR. BEHRENS: Thanks, Phil.

And now we've completed 9, 10 and 11, we'll go to number 12 under Finance, and this involves Texas Mobility Fund revenue financing.

MR. BASS: Good afternoon. I'm James Bass, director of Finance at TxDOT. Agenda item 12 is the commission's approval of the establishment of a bonding program backed by the dedicated revenues of the Texas Mobility Fund and an initial issuance of $1 billion in bonds under this program to consist of both fixed and variable rate debt to be paid over a period of 30 years.

The department has plans for future additional issuances of bonds under this program, although the timing of the subsequent issuances is not definite at this time.

Through this minute order, the commission directs the department representative -- which is defined as the executive director of the department, the director of Finance and deputy director of Finance -- to execute and deliver the bonds, and the commission also approves the associated documents associated with the Bond Program, and initially authorizes that department representative to approve any necessary revisions to the documents listed in Exhibit A, and to execute and deliver any related ancillary documents that may be needed.

If you would like, I can go through a brief description of the attached documents, or I'll stop here and be ready to answer any questions that you may have.

MR. NICHOLS: Before I ask my question, do you have some questions you want to ask?

This would be, first of all, contingent upon approval by the Bond Review Board.

MR. BASS: Yes.

MR. NICHOLS: So us voting on this today, if they approve later doesn't affect anything.

MR. BASS: Correct. And if I might add, the ability to -- you're delegating to make revisions to the documents to this department representative would be immaterial changes, wordsmithing, grammar. If we were to make any change of substance, we would bring the documents back to the commission in a subsequent meeting for approval of those changes.

MR. NICHOLS: I'm just talking about substance.

In the Comptroller's report our comments related to the proposed issue, they had a concern about payment level, the level versus stacking them on the tail-end. So if we approve this, this doesn't mean that we restrict your ability to adjust that.

MR. BASS: I do not believe so.

MR. NICHOLS: Okay. So this is not that restrictive. So you would still have the flexibility prior to issuance to adjust. I'm looking back there too. Am I seeing nods or nos?

MR. BASS: Bond counsel agrees with my previous statement.

MR. NICHOLS: Okay. So we do have flexibility to change the payment schedules and things of that nature.

MR. BASS: Yes.

MR. NICHOLS: We just had all our comments and questions. Do you want to go ahead and take a vote?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. NICHOLS: All in favor say aye.

(A chorus of ayes.)

MR. NICHOLS: Motion carries.

MR. BEHRENS: We'll now go to agenda item number 13(a) and (b) which are loans from our State Infrastructure Bank.

MR. BASS: Agenda item 13(a) seeks final approval of a loan to the City of Rosenberg in the amount of $1 million to pay for the rehabilitation of the storm sewer system along US 90A and Farm to Market 1640 and State Highway 36 in the city.

Interest would accrue from the date the funds are transferred from the SIB at a rate of 3-1/4 percent with payments being made over a period of seven years.

Staff would recommend your approval.

MR. WILLIAMSON: Are there questions about this minute order?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All in favor, signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. BASS: Agenda item 13(b) seeks final approval of a loan to the City of Robstown in the amount of $170,706 plus a 20 percent contingency to pay for the replacement and upgrade of safety lighting made necessary by the reconstruction and other safety improvements along Business State Highway 44 in the city.

Interest will accrue from the date funds are transferred from the SIB at a rate of 3.41 percent with payments being made over a period of five years.

In addition, I would point out since this loan is less than $250,000, this is the one and only time that this item will come before the commission.

MR. WILLIAMSON: Are there questions, members?

MR. NICHOLS: So moved.

MR. HOUGHTON: Second.

MR. WILLIAMSON: I have a motion and a second. All in favor, signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. BASS: Thank you.

MR. BEHRENS: Agenda item number 14 under Traffic Operations, this is authorization for funding for ITS systems. Carlos?

MR. LOPEZ: Good afternoon, commissioners. My name is Carlos Lopez and I'm director of the Traffic Operations Division.

The minute order before you seeks authorization to enter into agreements with the Federal Highway Administration for eleven ITS-related earmarked projects and two value pricing projects.

The earmarked projects generally deploy or upgrade ITS components in various areas throughout the state. The value pricing pilot projects will allow for the development of an operational plan for IH-30 in the Dallas/Fort Worth area and for plans for expansion of the HOV lanes in the Houston area.

The minute order allows the department to access approximately $8.7 million in federal funds with the state match of $1.7 million. An additional $6.4 million will be provided by local sources.

The minute order also authorizes the department to apply for $5 million worth of funds and a corresponding match of $1.25 million for future ITS projects.

We recommend your approval of this minute order.

MR. WILLIAMSON: Questions, members?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: Opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. LOPEZ: Thank you, commissioners.

MR. BEHRENS: Agenda item 15, Right of Way Acquisition. This is to seek authorization for advanced acquisition of right of way along Segments 4, 5 and 6 of State Highway 130. John?

MR. CAMPBELL: Good afternoon. For the record, my name is John Campbell, director of the Right of Way Division.

I'd like to present for your consideration a minute order under agenda item 15 to authorize the use of option contracts for the potential future purchase of right of way required for Segments 4, 5 and 6 of State Highway 130.

This minute order will provide the authority for the Austin District engineer to negotiate the execution of the option contracts and to expend the funds for option fees.

The timely execution of these contracts will enable us to effectively purchase development rights during the interim prior to scheduled right of way acquisition.

Staff recommends your approval of the minute order.

MR. WILLIAMSON: Mr. Nichols?

MR. NICHOLS: I had a question. My question is the same one I sent by e-mail. I certainly understand 5 and 6, but on Segment number 4 we have already authorized the acquisition of the land.

MR. CAMPBELL: That's correct.

MR. NICHOLS: Now we're coming back a year or two after we've already authorized the purchase of the land and we're asking for the opportunity to get an option purchase. Rather than giving them an option to purchase it, why don't we just go ahead and purchase it?

MR. CAMPBELL: That's a good point, and I can certainly understand the question.

On Segment 4 we're going to -- characteristic of a design-build project, there will be continuous design changes, some of which could affect the alignment and final alignment determination. If that throws us into a gray area regarding environmental re-evaluation would have to be done, this would give us that opportunity to get out and secure an interest, an option in this case.

MR. NICHOLS: I thought the alignment was already set when we got the record of decision.

MR. CAMPBELL: Yes, it is, but there will be some design revisions that may alter segments of that alignment. We have some specific areas of concern which I prefer not to mention to give up our tactical advantage on use of the option.

MR. NICHOLS: Tactical advantage?

MR. CAMPBELL: Yes, sir.

MR. NICHOLS: I sure wouldn't want to disrupt our tactical advantage.

(General laughter.)

MR. WILLIAMSON: Since we haven't seen that much local tactical advantages here the last week or two.

MR. NICHOLS: Okay, we understand. Does that mean we may have to go back and get a different record of decision, modify it? We won't? Okay.

MR. WILLIAMSON: Members, any other questions of John?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. BEHRENS: Agenda item 16, we have our Contracts for the month of March, both Maintenance and Highway Building and Construction. Thomas?

MR. BOHUSLAV: Good afternoon, commissioners. My name is Thomas Bohuslav, director of the Construction Division.

Item 16(a)(1) is for consideration of award or rejection of Highway Maintenance Contracts let on March 8 and 9, 2005, whose engineers' estimated cost are $300,000 or more.

We had eight projects, the average number of bidders were four. Staff recommends all projects be awarded.

MR. WILLIAMSON: We'll take a few moments to look over things, Thomas. Questions of Thomas, members?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion, signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: Opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. BOHUSLAV: Item 16(a)(2) is for consideration of award or rejection of Highway Construction and Building Contracts let on March 8 and 9, 2005.

We had 68 projects, an average of almost four bidders per project. We do show an underrun this month; the total low bid was $291 million.

We have four projects we recommend for rejection. The first project is in Dallas County, Project Number 3401. We had five bidders and it was 10 percent under. This is for a traffic management center.

We had an error that showed a different amount for the contingency that was shown in the electronic copy and the hard copy. The bidders did not see that, did not recognize that, and their bid was therefore was about $600,000 less than what they would have bid.

We'd like to reject it and go back and make the correction and rebid the project.

The second project we recommend for rejection is in DeWitt County, Project Number 3016, one bidder, 48 percent over.

We're doing some work in downtown Yoakum for sidewalks and landscape. The overrun has to be funded by the city. They would like to go back and let this locally and get the cost reduced and get more bidders for the project.

The third project recommended for rejection is in Harris County, Project Number 3027. We had one bidder for the project, 60 percent over.

It's for a right turn lane on FM 2100 in Crosby. The engineer's estimate was about $149,000.

We'd like to go back and get some more bidders for this project, and we are aware of other contractors interested in bidding this project.

The last project recommended for rejection is in Midland County, Project Number 3018, three bidders, 48 percent over.

It's on FM 1788, a rehab project there. It's estimated at $1.8 million. It includes some concrete pavement and that district would like to go back and redesign and put flexible pavement in there and see if we can't save some more money for that and reduce our cost.

Staff recommends award of all projects with the exceptions noted. Questions?

MR. WILLIAMSON: I'm going to have a question about our estimating. In fact, I think I'll ask it before.

MR. HOUGHTON: Could I ask a question on the Midland County project?

MR. WILLIAMSON: Please.

MR. HOUGHTON: Tom, was that designed in-house?

MR. BOHUSLAV: I do not know.

MR. HOUGHTON: Just assumed it's designed by a consultant engineer, redesign warranted, so we have an additional fee on the redesign. Correct?

MR. BOHUSLAV: If you're saying it was designed in-house -- let me say that first off if the district had decided that they wanted to use concrete pavement there, that would have been coordinated with a consultant and we would have approved that part of the design. And I believe that's the primary reason for wanting to go back and redesign.

MR. HOUGHTON: Redesign cost, though, is an additional cost above and beyond?

MR. BOHUSLAV: It will be. The amount of work involved may be pretty minimal, though, to go back and change it.

MR. WILLIAMSON: About a month ago we were before House Appropriations discussing or answering questions related to Interstate 10, the Katy Freeway.

Some of us testified as to the cost estimate originally and then actual cost of the project, and for whatever reasons, the Appropriations Committee asked us to look into that project for them and report back to them the results or the answers to certain questions.

We represented that the estimate was low for a variety of reasons. One of the representations we made is that we had an October 2001 estimate for the project in small segments, and the actual low bid for the entire project ended up being about a billion dollars above our October 2001 estimate.

When I look at this minute order on construction that's before me, I always have a summary -- we all have a summary that says we estimated that all these projects should have cost $308 million and the low bid for all these projects was $291 million.

MR. BOHUSLAV: $308 million.

MR. WILLIAMSON: The estimated bid was $308-, the low bid was $291-?

MR. BOHUSLAV: Yes.

MR. WILLIAMSON: When was that estimated cost established that we look at each month? Was it established when the project entered the UTP and then was it escalated by inflation, or was it established say 30 days before you sent the bids out?

MR. BOHUSLAV: The district, when they submit their plans in Austin which is about three to four months ahead of the letting date here in Austin is when they establish the final engineer's estimate for each project. So they have a process whereby they review the estimate and when they submit it to Austin, that's when it's established.

And Mark Marek may still be here, but I believe Design also may review it at the time that it comes to Austin as well. He's nodding his head yes. They also review it when the estimates come in here to Austin.

Districts have been adjusting their estimates per direction last fall to address the increases that we've had in prices over the last few years. So we're slowly catching up on our estimating process.

MR. WILLIAMSON: Okay. So I can presume then that, for example, US 67 in Erath County, a $576,000 project, the estimate of that project was probably made current as recently as six months ago?

MR. BOHUSLAV: Yes.

MR. WILLIAMSON: And it was either made current by activity or if for example it entered our planning cycle two years ago, it was either made current by actual activity or by escalating it for inflation from two years ago forward.

MR. BOHUSLAV: The original estimates in the UTP have much less detail than what we include in our plans and what is submitted to Austin. The original estimates, I'm sure, in the UTP don't have a breakdown, they try to give a whole dollar estimate.

That estimate evolves over time. We're looking at actual detailed quantities in revising and adjusting those prices based on historical prices up to that point in time.

MR. WILLIAMSON: Any other questions, members?

MR. HOUGHTON: For a project that is in the UTP $68 million today, it's going to be built scheduled for five years from now. Is that $68 million in today's dollars or is that future dollars?

MR. BOHUSLAV: I don't give the direction in regards to those estimates, and Mike might want to answer that.

MR. BEHRENS: A $68 million estimate today will be in today's dollars. We have put into our process, you look at the UTP next year, it will be adjusted for inflation and also possibly some increases in material and things like that.

MR. HOUGHTON: Five years from now, $68 million today, is it 5 percent CTI?

MR. RANDALL: Jim Randall, director of Transportation Planning and Programming. We use a 4 percent inflation factor.

MR. HOUGHTON: So when we were doing the 9050 plan and we got Dallas and we got everyone's UTP, Mobility Funds, we know we're adding a 4 percent inflation factor to for those projects scheduled for five, six, seven years.

MR. RANDALL: Yes, sir, they should have taken in the inflation factor and it would have been in that sixth year.

MR. NICHOLS: On that same subject, in the ten-year projects in the UTP, we did not always include an inflation factor in that.

MR. RANDALL: No, sir.

MR. NICHOLS: About how long ago did we start doing that?

MR. RANDALL: When we reconstructed the UTP in 2004, I guess.

MR. HOUGHTON: 2004 was last year?

MR. RANDALL: Year before last.

MR. NICHOLS: Year before last is when we did it for 2004.

MR. HOUGHTON: For 2004.

MR. RANDALL: Yes, sir.

MR. HOUGHTON: Not in 2004.

MR. WILLIAMSON: Other questions?

MR. HOUGHTON: Thanks.

MR. BOHUSLAV: I'll add one more thing, our cost index which is only a component in increasing costs in material or work costs per unit of item has increased from 143 last March and this month is 171. That's about 28 points and that is 20 percent.

MR. NICHOLS: It's gone up 20 percent in one year?

MR. BOHUSLAV: Twenty percent in one year.

MR. HOUGHTON: What has?

MR. BOHUSLAV: Our index has.

MR. HOUGHTON: Construction index.

MR. NICHOLS: If you average it over a period of years, it comes out to 4 or 5 percent. But we had a couple of years that it actually went down.

MR. BOHUSLAV: You have to remember, too, we've had several large projects over the past year, and contractors are not bidding those projects for the next six months, those projects are going to be constructed over the next four or five years, so they have to include in their bid price the inflation over future time period as well. So they're having to pick up the 4 to 5 percent or whatever it may be.

They're expecting some increase over some future time that will show up now.

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. You thought for a minute we weren't going to approve it.

(General laughter.)

MR. BEHRENS: Agenda item number 17 is our Routine Minute Orders. They're all listed, they were all posted as required. I'll be glad to go over any of those if you so desire; otherwise, we recommend approval of the Routine Minute Orders.

MR. WILLIAMSON: Mike, I always ask and I know you can't answer except from your own personal knowledge, it just gives me comfort to ask that question. Do you know if any of these items affect any of the commissioners personally?

MR. BEHRENS: Not to my knowledge. We've looked them over and we think they do not pertain, to our knowledge, to anything that would affect the commissioners.

MR. HOUGHTON: Move for approval.

MR. NICHOLS: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of the motion will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: Opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

Is there any reason for Executive Session, Mike?

MR. BEHRENS: No, sir.

MR. WILLIAMSON: Do we have any matters for the commission to discuss?

MR. BEHRENS: One person requested open comment.

MR. WILLIAMSON: Well, if it isn't Tina Walker. Is she still here? I thought we already talked to you.

MS. WALKER: That other time was unscheduled.

For the record, my name is Tina Walker and I'm here for the open comment period as vice president of the Heart of Texas Chapter of the WTS which is an association formally known as Women's Transportation Seminar. It's a national organization that is devoted to advancing women in the transportation community.

And I hope you saw your mail. We did extend an invitation for the commissioners to come to our Transportation Gala April 27, and I'm just here to reconfirm that extension of the invitation and hope that you will join us. And the CTRMA board is also invited. This will help us kick off our fund-raising activities for our scholarship which is a 501(c)(3) activity.

MR. WILLIAMSON: That's very kind of you.

MR. HOUGHTON: Where is this event?

MS. WALKER: It's going to be at the Headliners Club here in Austin on April 27. It will be the Wednesday night before the commission meeting.

MR. WILLIAMSON: Can we poll the female engineers who might be there to see if they feel like they're being fairly treated in this consultant bidding process?

MS. WALKER: Well --

MR. HOUGHTON: Just say yes.

MS. WALKER: I will let you know that I was the fifth woman engineering employee at the department when I got my license in 1984.

MR. WILLIAMSON: Really.

MS. WALKER: Anyway, we reinvigorated the chapter with the opportunities that are present in Central Texas through the work of the department and the Central Texas Regional Mobility Authority.

And it's actually those members that were active in other parts of the country that have come in and kind of jump-started the whole chapter. And so we attribute that to you and the work that you are putting through in Central Texas.

MR. HOUGHTON: So are you having an auction?

MS. WALKER: It's a silent auction to help raise funds for our scholarship fund. We're in the process of soliciting donations.

MR. HOUGHTON: Auctioning favorite recipes and things like that?

MS. WALKER: No, sir. Our information technology support person in our office is also a gifted photographer, and he's donated four 16x24 color prints of different aspects of Austin, our Austin skyline at night. We will be going out to the contracting community and hoping to solicit some greens fees and some different things. And it's not going to all be women-oriented, I can assure you of that.

MR. WILLIAMSON: I figured you would auction off like the design of a bridge.

(General laughter.)

MS. WALKER: Well, we were thinking of a gift certificate for a half hour of my time.

MR. WILLIAMSON: That would be great.

MS. WALKER: But we sincerely hope that you'll be able to come.

MR. WILLIAMSON: It's obvious we couldn't bid on it because we'd first had to qualify.

MS. WALKER: The formal invitations are in the mail Saturday and you'll have your complimentary to get in. We just ask for an RSVP by April 22. It will be a choice of three entrees at the Headliners. The reception will be from 6:00 to 6:45 and that will be the time of the silent auction. Then we'll do the sit-down dinner.

And our speaker is Mort Downey who has served as deputy secretary, US DOT under the Clinton administration. He's going to talk to us about the success of the federal legislation and tolling interest around the country.

MR. NICHOLS: Thank you very much.

MR. WILLIAMSON: Thank you.

MR. BEHRENS: Commissioners, I'm going to add that this same group that Tina is talking about, the Dallas/Fort Worth group is honoring Maribel tonight as the local engineer of the year.

MR. WILLIAMSON: That's why we've all got a no-lunch headache so we can stop and go there.

Any other business, Mike?

MR. BEHRENS: No, sir.

MR. WILLIAMSON: The most privileged motion is in order.

MS. ANDRADE: I move, Mr. Chair.

MR. HOUGHTON: Second.

MR. WILLIAMSON: I have a motion and a second that we adjourn this meeting. All in favor will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: Opposed, no.

(No response.)

MR. WILLIAMSON: For the record, the meeting is adjourned at 2:17 p.m., there being no further business to consider.

(Whereupon, at 2:17 p.m., the meeting was concluded.)

C E R T I F I C A T E

MEETING OF: Texas Transportation Commission

LOCATION: Austin, Texas

DATE: March 31, 2005

I do hereby certify that the foregoing pages, numbers 1 through 228, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Sunny L. Peer before the Texas Department of Transportation.

__________04/04/2005
(Transcriber) (Date)
On the Record Reporting, Inc.
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Austin, Texas 78731