STAFF:

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

PROCEEDINGS

MR. WILLIAMSON: Good morning.

AUDIENCE: Good morning.

MR. WILLIAMSON: It is 9:07 a.m. and I call the April meeting of the Texas Transportation Commission to order. It is a pleasure to have each of you here this morning.

Please note for the record that public notice of this meeting, containing all items on the agenda, was filed with the Office of Secretary of State at 9:42 a.m. on April 20, 2005.

As we always do, before we begin today's meeting, let's all take a moment to place our pagers, cell phones, and Dewberries on the silent mode. And please don't just assume it; check it and make sure yours is turned off. We prefer silence around here. Thank you very much.

As is our custom, we will open with comments from the commission, and we'll begin this morning with Commissioner Houghton. Ted.

MR. HOUGHTON: Good morning.

AUDIENCE: Good morning.

MR. HOUGHTON: Mr. Chairman, I don't know what's on the agenda, or lack thereof, but we have a sparse audience today, so we must not be giving away anything.

MR. WILLIAMSON: Or taking away anything.

MR. HOUGHTON: Or taking away anything. That's right.

I look forward to visiting with those who have a spot on the agenda, and I appreciate all the people here today, and for their attendance and their support of the transportation commission and TxDOT. Thank you.

MS. ANDRADE: Good morning.

AUDIENCE: Good morning.

MS. ANDRADE: Thank you so much for being here, thank you for your interest in transportation.

I'm looking forward to taking care of business today. I believe we also have some of our friends from the Port of Corpus Christi. Welcome.

And I look forward to our discussion items also so that we can learn more and make decisions that we need to to expedite transportation in Texas. Thank you.

MR. JOHNSON: I'll give you another chance. Good morning.

AUDIENCE: Good morning.

MR. JOHNSON: Thank you. I'll just echo what my colleagues to my right, your left have said. It's great to have you here this morning. Obviously these meetings are extremely important to a lot of people and the issues that we consider are important to the state because it has such an impact on the quality of life.

I want to just make special note. It's nice to see the Chair has a lot of spring in his step, and it's nice to see that Mr. Nichols also has a lot of spring in his step.

MR. NICHOLS: I'd like to also welcome everyone here and let you know how much we appreciate those of you who have traveled long distances to be here to talk about your communities' transportation issues.

A lot of you are volunteers from your communities that have come here to do that, some of you are paid staff, but you're all welcome and we do look forward to your input.

In particular I want to recognize a special group in the back of the room. Mr. Chairman, we have the Jacksonville Leadership Institute in the back of the room.

Would you guys from Jacksonville stand up?

(Applause.)

MR. NICHOLS: The stores are shut down because they're all here.

MR. JOHNSON: Who's left in town?

(General laughter.)

MR. NICHOLS: That's it. Thanks.

MR. WILLIAMSON: I thank each of the commissioners for their comments. And I also welcome all and appreciate your participation.

I, over the last year or so, developed a habit of taking this moment to point out the things on the agenda that we believe are important to the state's interests.

We're going to discuss today how we deal with toll credits and the distribution of toll credits, primarily to transit systems in the state.

You know, the whole matter of toll credits is kind of interesting. The United States Congress is currently considering reauthorization of the Highway Administration Trust Fund, Highway Program, and on the House side, led by Michael Burgess, Kenny Marchant, and Majority Leader DeLay, the House adopted a more forward-thinking definition of how toll credits could be used that will greatly benefit the State of Texas.

We hope that our two United States senators, who so far have not been too engaged in the transportation world, will step back and reflect on the importance of toll credits, design-build, and other federal initiatives that are possible and their impact on the state.

And we hope that each of our United States senators will become more personally involved in the business of redefining how the federal government and the state government interact on transportation matters.

We will also give some thought and perhaps make some decisions on our continually expanding pass-through toll program.

And in that context, Joe, had my colleague not recognized his hometown, I would not have drug you through the embarrassment, but since he did it, now I've got to do it.

WE also have, in addition to great Texans from Jacksonville, great Texans from Weatherford, Texas with us today, and I'm not sure of all who made the trip but I know our city manager, our mayor, I believe, are here.

Anyone else from Weatherford? Y'all stand up if you're from Weatherford, Texas, please.

And my county judge Mark Reilly is all the way back there.

So county judge, city manager of the City of Weatherford and the mayor of Weatherford, who will make comments later on, who also -- Hope, you'll be interested to know -- retired as one of the all-time greatest school superintendents in the state of Texas, Joe Tison. All my kids learned under Joe.

We will continue and probably conclude our rolling discussion of how the department's relationship with consulting engineers has developed over the years and will be changed over the next few months. That will have some impact on how we make decisions about engineering contracts.

That will be the highlights, I think, of today's meeting.

So as my colleagues said, we welcome all of you and we appreciate your participation.

I want to remind each of you that if you wish to address the commission during the meeting today, I need for you to complete a speaker's card. You can find a card on the registration table in the lobby.

If you want to comment on an agenda item, I need for you to fill out the yellow card and identify the agenda item upon which you wish to comment. If you want to make an open comment, comment on something not on the agenda, that is permissible, but I need for you to fill out a blue card for the open comment period.

Regardless of which card you fill out, we'd ask that you try to limit your remarks to three minutes, unless you're a sitting member of the legislature, in which case you may speak as long as you wish.

Our first item of business is the approval of minutes from our last meeting, our March meeting.

Members, you have copies of the minutes in your book. Do I have a motion?

MR. JOHNSON: So moved.

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.

At this point, we will deviate from our schedule and we will ask a great member of the legislature, Senator Seliger from the greater western Parker County area of Amarillo, who wishes to comment on an item and we wish to listen. And welcome to the legislature and welcome to us, sir.

SENATOR SELIGER: Thank you, Mr. Chairman and members. It's important to note that my district, the 31st Senatorial District, is larger than ten states, and so everything that goes on in transportation is particularly important to us.

But today, I represent those two great cities, as you develop criteria for toll credits to emphasize how important these are specifically, as they are all over the state of Texas, to this area.

The Midland-Odessa Urban Transit District is not an old entity. It is one that's developing to meet a very profound need in those two cities to ease transportation between those two, and it will become increasingly important to the State of Texas and the United States to cut down on automobile traffic, to preserve much-needed fuel and to control emissions.

Specifically what this transit district chooses to do with the toll credits is to leverage them into the federal money and buy renewable fuel buses, liquified natural gas, in this case.

And I think that this will be a pilot program, though it is not designed to be, but an example of efficiency and reduced emissions in toll systems which is going to be critically important as Texas continues to urbanize.

And I simply make this appeal and request of you to remember West Texas and the sub-metropolitan communities all over the state of Texas as they choose to avail themselves of the same sort of amenities and efficiencies that all people of the state of Texas will want to have in the future.

And while you've offered me unlimited time and I could certainly use it, I won't today, and I appreciate your time very much.

MR. WILLIAMSON: Well, we appreciate your being here.

Members, do we have any questions or dialogue we wish to have with the senator?

MR. NICHOLS: Do you have a particular application that they are working on that you know the dollar amounts they need for the toll credits?

SENATOR SELIGER: I think the toll credits themselves are about $250,000.

MR. JOHNSON: And there's a sensitive time issue here also, is there not?

SENATOR SELIGER: There is because of some federal program that will expire. The cost of that loss is about $983,000. And so it is time sensitive. I assume that it is in many areas around the state of Texas, but acutely so here.

MR. WILLIAMSON: We always take seriously any House or Senate member who takes the time to come over here and tell us what's on their mind. So we appreciate you taking time out of your busy session to come over, and certainly we will pay close attention.

SENATOR SELIGER: Thank you very much, Mr. Chairman and members.

MR. WILLIAMSON: Good to see you.

SENATOR SELIGER: You too.

MR. WILLIAMSON: Okay, Mike, let's return to our agenda and I think agenda item 2, and it's your ball game, buddy.

MR. BEHRENS: Thank you, Chairman.

We'll go then to agenda item number 2; it's our Aviation item for the month and that will be presented by Bill Fuller.

MR. FULLER: Good morning. My name is Bill Fuller with the Aviation Division.

This minute order contains a request for grant funding approval of ten airport improvement projects. The total estimated costs of all requests, as shown in Exhibit A, is $9,134,745, of which $7,447,270 is federal, $432,000 are state funds, and the remainder is comprised of local support from airport sponsors of $1,255,475.

A public hearing was held on March 21 of this year. No comments were received. We recommend approval of this minute order.

MR. WILLIAMSON: Members, you heard the information. Do you have questions or comments?

(No response.)

MR. WILLIAMSON: Do I have 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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you.

MR. BEHRENS: Agenda item number 3 under Public Transportation will be presented by Bobby Killebrew and will be a recommendation for an additional member to the Public Transportation Advisory Committee. Bobby.

MR. KILLEBREW: Once again, good morning Chairman Williamson and commissioners, Mr. Behrens and Mr. Simmons.

For the record, I am Bobby Killebrew, the Public Transportation Division interim director.

For your consideration today is a minute order which authorizes the appointment of one member to the Public Transportation Advisory Committee.

Selected by the commission and governed by statute, the committee consists of four members representing public transportation providers, three members representing public transportation users, and two members representing the general public.

One of the nine members of the committee which was appointed in September 2003, whose term expires this coming September 2005, has resigned.

The minute order today appoints Mr. John Wilson to serve the remainder of that term, representing a public transportation provider.

Your consideration and approval of this minute order would be appreciated.

MR. WILLIAMSON: Members, you heard the information presented. Do you have questions or comments, and do we need to have any dialogue amongst us?

(No response.)

MR. WILLIAMSON: Is there a motion?

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 number 4 is a discussion item where James Bass will give us a current status on our toll credits and also discuss some possible distribution of toll credits. James.

MR. BASS: Good morning. I'm James Bass, director of Finance at TxDOT.

At the August and October commission meetings from last year, there were discussion items that involved toll credits. Today what I hope to do is present you with some additional information, and along with Mr. Killebrew, respond to any questions that you may have.

To start off, I'd like to provide a little background material, and as the chairman mentioned earlier, toll credits can be earned by states for expenditures they make entirely from non-federal funds for capital improvements to toll roads.

To earn toll credits for expenditures in a particular year, the state must also meet a maintenance of effort requirement. Once earned, these toll credits can be used as sort of a soft match that would allow the federal share to be increased up to 100 percent to the extent that toll credits are available.

An important thing to note is that toll credits are not cash but they serve as an alternative matching mechanism and provide funding flexibility.

Texas has earned just over $153 million in toll credits for 1992 through 2000, and has utilized over $39.4 million of those toll credits, leaving a balance today of slightly over $114 million.

MR. WILLIAMSON: Available to us to be used.

MR. BASS: Correct.

One thing I omitted, the numbers are allocated and credited through the year 2000. We have the ability to increase that through data for 2001 and 2002. Unfortunately, the state did not meet the maintenance of effort calculation for 2003 or for 2004, so under existing rules, we would not be able to get any credit for expenditures in those years.

MR. JOHNSON: James, do you have an estimate on the amount of toll credits that would be obtainable for the years '01 and '02? And why did we not meet the maintenance of effort requirement?

MR. BASS: Well, your first question, I do not have an estimate at this point because we're waiting for information from one of the key players during that time frame that would allow the state to earn toll credits.

MR. WILLIAMSON: And who would that be?

MR. BASS: That would be Harris County Toll Road Authority.

MR. WILLIAMSON: Thank you.

MR. BASS: And that's more so because of us, not a timing issue from them, but we have not sought and received that information from them.

The issue of the maintenance of effort, it looks at the state expenditures for capital improvements in a particular year and compares that to the average of those expenditures of the previous three years.

And there's an exception there. If one of those three years is offline with the other two by more than 30 percent, you can ignore it. We didn't run into that situation, and actually one of our calculations for one of the years -- I believe it was in 2003 -- we were $100,000 short in expenditures from meeting the maintenance of effort requirement.

And some of that just has to do with the fluctuation of expenditures on capital improvements from one year to the next.

MR. WILLIAMSON: Hold on, James.

MR. NICHOLS: Let me ask, please, sir. Part of the maintenance of effort and some of the critical points which trigger states to not be allowed to have those, those are some of the things that we have been requesting, as I understand it, in our federal legislation and the reauthorization. Is that correct?

MR. BASS: Correct.

MR. NICHOLS: Okay. So had that legislation already been passed, we may not have lost?

MR. BASS: It's quite possible we would have met the maintenance of effort in 2003 and in 2004 -- almost certainly for 2003 since we were so close.

MR. NICHOLS: And that just shows what the critical nature of that federal legislation is in the reauthorization.

MR. WILLIAMSON: And as a follow-up to Commissioner Nichols' line of questioning, I just want to make it clear once more, toll credits are not things issued in anticipation of states building a toll road, toll credits are issued after a state has actually made the decision and expended funds to build a toll road.

So improving the federal language to assist the state will in no way be encouraging additional toll road construction -- if you happen to be opposed to it -- because if we don't end up building any toll roads, then it wouldn't matter. But if we do build the toll roads we think we're going to build at the local, regional and state level, it will matter to us in terms of billions of dollars in flexibility. Correct?

MR. BASS: Correct. If local governments make that decision to toll a particular road, this will bring advantages to the state as a whole with funding flexibility.

MR. WILLIAMSON: So like design-build, like federal rail flexibility and the other four pillars of our seven-point federal program, this is very important to the state's financial position in transportation.

And we wish that all of those who are in the audience that intend to contact our two senators -- and I'm sure there are many -- will emphasize that Texas benefits as much from this stuff as it does from the never-ending battle to get more equity -- which we never seem to win that battle, but these battles we can win.

MR. BASS: And from the federal perspective, it doesn't, in theory, cost the federal government. We're not potentially taking federal dollars away from any other state, it's just allowing us more flexibility with the federal dollars that are already allocated to Texas.

MR. WILLIAMSON: To do things faster, better, cheaper.

MR. BASS: Yes.

MR. WILLIAMSON: Which is every bit as important to a Texan as always losing the battle of equity.

I can't resist saying those things for the record.

(General laughter.)

MR. WILLIAMSON: No greater sin than wasted time and wasted energy. Go ahead.

MR. BASS: In the spirit of that, Texas has used toll credits to serve as the non-federal match for both highway and transit projects to date. Other states utilize their toll credits also for the required match of non-federal funds for highways, transportation enhancement and transit projects.

And I believe in the materials you have it lists how some of the other states have utilized their toll credits.

In the earlier discussion items with the commission last year, you wanted to know what interest there was by transit providers in toll credits. A questionnaire to evaluate industry interest was sent to 77 small urban and rural transit operators, and 43 of those, or 56 percent, responded.

They expressed an interest in $12 million in toll credits from those various systems. The important thing is that this $12 million of toll credits would serve as the required match for $46.2 million of project costs to be funded by federal funds.

In addition, the Texas Transit Association recently completed a survey that reflected a need of $3.3 million of toll credits that could be used to secure $12.8 million of federal funds that's currently at risk of being lost.

If you'll recall, I believe in some of the public comments from some of the earlier discussion items, a lot of the local transit providers at times are faced with a very difficult position: they have federal funds that are available to them but they're required to come up with a local match.

And so they're either having to look at their local budget and pull money from some other priority area locally to redirect so they can capture and pull down these federal funds, or reduce services in one area to gain a savings so they can gain access to the federal dollars.

Through the utilization of toll credits, they would not have to rob Peter to pay Paul, if you will, in order to gain access to those federal funds.

And what the survey from the Transit Association said, there was about $12.8 million of federal funds that could be accessed through the utilization of $3.3 million of toll credits.

Another question that arose during the earlier discussion items, and I think maybe the primary point today, was what would some possible distribution criteria be for toll credits for transit projects.

And some potential criteria for your consideration and discussion today, before deciding to award toll credits for projects, would be:

Does the project support regional and local coordination efforts;

Is the project a part of or fit within TxDOT's public transportation plan;

Does it reduce air pollution and/or contribute to attainment plans;

Does it have benefits and/or ties to other health and human services programs;

Does the project generate cost efficiencies;

Does it improve service delivery, making additional services available;

And does the use of toll credits provide an incentive for performance.

And having said that, I'll welcome any questions or comments you'd like to make, and also point out that Mr. Killebrew from the Public Transportation Division is here as well to attempt to respond to any questions you may have.

MR. NICHOLS: Are you providing us information or are you making a recommendation?

MR. BASS: I think since this is dealing with transit projects, I would defer any recommendation or possible recommendation to Public Transportation.

MR. WILLIAMSON: Members, we are going to hear from one witness, Edna Johnson with TTA. Do you wish to hear from her first, or do you want to talk to Bobby first?

MR. NICHOLS: Let's listen to her first.

MR. WILLIAMSON: Okay. If you don't mind, Bobby.

Edna?

MS. JOHNSON: Good morning, Mr. Chairman, members of the Transportation Commission.

For the record, my name is Edna Johnson and I'm the executive director of the Texas Transit Association.

I am pleased to be here before you today to urge the commission to set aside and allow the uses of toll credits for public transit agencies for eligible capital projects which include 5307, 5309, 5310, 5311, JARC and VCR programs.

We are aware that the commission must continue to evaluate funding for the entire transportation arena, to determine whether toll credits and other financial tools would best maximize benefits to the public.

I am here to present this testimony today to ensure that the use of toll credits by public transportation systems does, in fact, provide many benefits to Texans.

When toll credits first became available to transit systems, public transportation systems were able to effectively use the credits in a number of ways that help both local transit agencies and the state to pull down the use of federal dollars.

Toll credits will be used to draw down federal dollars to replace aged and high-mileage transit vehicles. With the added increase in purchasing alternate-fuel vehicles and the increase in cost of operating these vehicles, where many of the propane-operated vehicles are only averaging three to seven miles per gallon, toll credits would allow these transit agencies to continue to purchase vehicles while using their local dollars to operate them.

Another need for toll credits are for transit facilities, vehicle maintenance shops, transit operation facilities and intermodal bus terminals which increase the coordination between the city bus, intercity bus carriers, local taxicabs and used as Amtrak passenger stops, along with planning ahead for when commuter rail does pass through many of our rural communities.

Again, toll credits have been a critical source of match for these facilities and have brought in an economic stimulus to these local areas.

Public transit agencies rely heavily on these credits to access and draw down federal funds to replace and purchase vehicles as well as construct intermodal facilities.

If an operator has to use their current operating monies to match for eligible capital projects, then the result is that service must be cut because there simply are not enough funds available to maintain or grow the existing system and obtain additional funding for capital projects.

Mr. Bass has presented the results of our survey to you, and we strongly urge you now, as we have on prior occasions, to immediately set aside $10 million in toll credits to be used as matching funds for capital projects that have been on the books for FY '03 through FY '05.

And on another quick note, Mr. Russell asked that I address a question that Commissioner Nichols had raised at the last meeting.

Mr. Russell indicated that the TTA's executive committee had approved the position that was laid out on our funding formula. We have surveyed rural and small urban providers, and at this point we offer you this information.

Out of the 38 rural transit systems, 31 support the TTA position, 5 had no comment, and 2 supported the proposed formula.

Out of the 30 small urban transit systems, 23 support the TTA position, 6 had no comment, and one supports the current proposed formula.

And with that, I thank you for the opportunity to appear before you, and should you have any questions.

MR. WILLIAMSON: Does that mean you're going to come back up and comment on the formula when it appears elsewhere in the agenda?

MS. JOHNSON: Well, of course. It will be, I think, next month it's on your agenda.

But toll credits are really, really needed and I can't say enough how much they affect people's lives. The majority of toll credits are for vehicles and that allows the service to continue on.

MR. WILLIAMSON: I apologize. You're right, that is next month.

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

MR. WILLIAMSON: Please.

MS. ANDRADE: Edna, thank you so much for coming before us and thank you for everything you do for public transportation.

But I have a question. Give me again the results of your survey.

MS. JOHNSON: For the proposed formula?

MS. ANDRADE: Uh-huh.

MS. JOHNSON: Of the 38 rural transit operators, 31 support our position, 5 I have had no comment from, and 2 support the proposed.

Of the 30 small urban, 23 support our position, and 6 had no comment, and one supports the current proposed formula.

I have found with calling them and talking to them, we're like a big family and everybody supports each other. And it's a tough decision and I understand what you have before you, but everybody kind of just supports each other and wants what's best for each other.

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Or maybe another way of saying that is everybody just wants to leave everything alone. Those are the two perspectives of the same conclusion.

MS. JOHNSON: I think that, no, I kind of find that the systems that are proposed to receive cuts want them to just maintain their funding, and those that are standing to gain -- people want the ones to gain, gain.

I mean, there is huge support, people understand what other people are going through and what it takes to put service on the street. So I find a huge support for one another.

You know, you can look at the numbers, some that have been under-funded, you can see where they need to have the money to grow. Just don't cut them but let's help support the other systems that are under-funded.

And I get little comments here and there that I find are real supportive of each other. Somebody from West Texas goes: I don't know what she's going to do if she gets cut. You know, so I think they support each other.

MR. NICHOLS: I think I kind of found that from your first teleconference. Before we'd have public hearings, people in East Texas would meet, South Texas would meet and West Texas, but when we did the teleconference where everybody from all over the state could have a conversation at the same time, I think people were surprised at the different concerns.

I thought it was very awakening.

MS. JOHNSON: Yes. It's kind of different because, as you know building roads, people in West Texas have it different than South Padre.

MR. NICHOLS: I think we're talking about two different subjects here.

MS. JOHNSON: Okay.

MR. NICHOLS: Unless I'm mistaken. One relates to toll credits and how they're distributed, and I think you were also commenting on urban/rural distribution formula.

MS. JOHNSON: Correct.

MR. NICHOLS: Are we just talking about toll credits here?

MS. JOHNSON: Which would you like?

MR. NICHOLS: I understand. There's an issue with both. I think this one is focused primarily on the toll credits.

MS. JOHNSON: On toll credits, right.

I think the urgency right now is that there is a lot of federal projects that are coming up that people need to apply for, there's a lot of projects that they have that they don't have the local funds. So I think the urgency right now is to release some toll credits for use because they either will not apply for them or they will lose them.

And I just did a survey -- and people hate surveys, as you know -- in March and there are projects out there that they will let go back of the federal dollars.

MR. NICHOLS: I think on the toll credit portion of this issue, I think it's real important for you to know, and others who are interested in this issue, we are very interested in having a formula for toll credit distribution to try to incentivize and fix real needed problems and certainly maximize federal draw-down and increase flexibility with either local or state money.

I think we would have been there a year-and-a-half ago except for the fact that the question going forward on how much toll credits we have is so dependent on the federal reauthorization that the United States Government has been expired, they let it expire a year-and-a-half ago, and we're all in limbo.

MS. JOHNSON: Right.

MR. NICHOLS: We've been thinking for a year-and-a-half that every three months they were going to have a vote. And so they're a year-and-a-half behind on a six-year formula, and it's continuing to mess up our transit.

So I think our commission is very interested in trying to set up something, even if it's temporary, until we know exactly what we've ended up with at the federal level.

MR. WILLIAMSON: Members?

MR. JOHNSON: Mr. Chairman, first of all, I think the issue of toll credits has been one of those that's sort of been off the center of the screen, but it's extremely important and I appreciate your having it in such a prominent place on the agenda.

My sense is that the accrual of toll credits that we have currently is one of those things that's just been sitting there, and as Robert pointed out, we don't have either informally or formally a plan of the distribution or use of those toll credits, and yet year after year or meeting after meeting, the number stays the same.

And there are agencies and providers that would like to qualify or apply for and receive these toll credits because they're very important to what they do, and nothing transpires.

I think you and I have had a personal conversation. I have great empathy for the plight of the rural and the small urban transit providers and their needs, and we've talked about the idea of utilizing toll credits. And I think James Bass's presentation has some bullet points of some excellent ideas that we sort of put as requirements.

You know, the senator appeared here and there's some hard federal money that is not going to be achieved unless one of two things happens: we either distribute to the Midland-Odessa Transit Authority maybe $200,000 worth of toll credits, or they come up with the cash themselves.

I don't think it takes a Nobel laureate in economics to realize which is better, a toll credit or cash, from their vantage point. So I have a great deal of concern and sympathy for what they do, and I support that we do come up with a plan. I mean, these $113 million in toll credits has been sitting here for a long time.

I would also urge our agency to: one, make application for the toll credits that we think we've qualified for as a state, but secondly, to track these things and make sure that if there's a time period that we're in danger of not qualifying for the lack of maintenance, that we take our actions into consideration.

Because it's shameful to allow something like that to get away from us, especially considering the small amount of money, James, that you mentioned was the case in that one particular fiscal year.

Please excuse my ramblings.

MR. WILLIAMSON: Anyone else?

MR. HOUGHTON: I just want to ask James a question.

MR. WILLIAMSON: Thank you, Edna.

MR. HOUGHTON: Thank you.

What fund does the money come from out of the displaced match? In other words, the local is not putting up cash, it's coming out of the federal fund. What fund?

MR. BASS: Well, in the case we're talking about here, it's normally from a Federal Transit Association program.

MR. HOUGHTON: There's only so many dollars in that program.

MR. BASS: Correct, and so it doesn't -- as we talked earlier, by using toll credits, it doesn't increase the transit pie for Texas or the highway pie for Texas, we're not pulling from other states, but I think as you heard some of the discussion, it does allow in some cases there may be federal money allocated to the state or to local transit providers, but as you know, that federal money requires some non-federal match.

And in the transit situation, a lot of times the local has to come up with that cash locally, and so this gives them the flexibility to get the money that's already available to them that they might be able to capture and pull down, they can do so now.

MR. HOUGHTON: But it's not an endless pot of money.

MR. BASS: Correct.

MR. WILLIAMSON: I mean, there's an allocation, an appropriation of money. So in other words, if we say here's $300,000 of toll credits, there is no formula for us to do that, we don't have that formula today.

MR. BASS: Right.

MR. HOUGHTON: Is that part of the reauthorization on the transportation?

MR. WILLIAMSON: No. The reauthorization that we try to speak of --

MR. HOUGHTON: I mean, is there dollars in there or is it a separate transit bill that comes out of D.C.? Separate transit bill or is this one bill? One bill, okay. So it is reauthorization, the dollars.

MR. WILLIAMSON: This 114- in credit we've got, we've already got. It won't depend upon whether or not the two senators from the state of Texas pay more attention to the seven point Texas federal program to improve transportation funding to the state, one piece of which is toll credits.

MR. HOUGHTON: So the real issue here is trying to come up with a formula that we distribute these credits equitably across the state.

MR. WILLIAMSON: And there's a little more to the story that we'll get into in just a second. We have another witness who has decided to speak, decided he wishes to offer us his wisdom.

Glenn?

MR. GADBOIS: Good morning. My name is Glenn Gadbois. I'm the director of Just Transportation Alliance.

And I don't want to take a whole lot of your time. Mainly I want to thank you for your generosity with the $114 million that you already have, and you have already dedicated some of that money to a JARC grant for the border colonias area.

I want to personally thank you for being willing to use toll credits to support public transit in this state.

I also want to thank you for your leadership in helping Texas to get more toll credits because as was pointed out earlier, I think that that can be a huge issue for the state of Texas.

Transit, as it has worked thus far, is only going to be a small portion of the overall toll credits you need. As you heard from the surveys, that is not anywhere near the amount of toll credits you have currently. If we start generating as a state a lot more, we will be able to use those strategically to go to discretionary programs from Core Bore to JARC, job access, to some of the new starts for rail, as well as possibly use that to pull down freight rail federal money that this state does not compete very well for now.

And so I am hugely excited and just wanted to come here and thank you folks for your leadership on this. I appreciate it.

MR. WILLIAMSON: Questions or discussion for Glenn?

(No response.)

MR. WILLIAMSON: Thank you, Glenn. And actually, Glenn, I didn't know what he was going to say, but he provided me the opportunity to sort of respond to your question -- thank you -- and to also maybe take some of the pressure off the four of you and off the staff, because as everyone in the department knows, I have been the principal resistor to distributing these toll credits based upon two concerns.

First, that the reauthorization, if it ever occurs, including the seven point Texas plan to improve transportation infrastructure in Texas, it may well be the case that these toll credits can be used for something other than assisting transits to buy buses.

The second reason is from the time I entered the legislature through the time I left the legislature, till the time I came to the commission, to this moment in time, it appears to me that the world of public transit has been relegated to such a seat far in the back of the bus as to not even have received the benefit of leadership on planning and execution, certainly at the same level we plan and execute transportation asset construction.

And there are many people responsible for that lack of leadership: the commissioners here, House and Senate members across the street, governors, and also the agencies themselves and the people who live professionally in the transit world.

And the second reason that I resisted us making decisions about toll credits, John, is because there has not been and there is yet a rhyme or reason for how those toll credits are distributed and what the state's interest is when they are distributed.

For example, how do we define that it's in the state's interest to send toll credits -- and I'm not picking on MoTran, I'm using them because they're the topic of the day -- how do we know that the state's interests were served in permitting them to purchase, help them purchase those buses through that federal program?

What is the impact on our new responsibilities in the health and human services world? What is the impact of doing that on the formula distribution of state and federal funds that we're still arguing about?

So I hear the membership clearly, we're going to move to resolve this because four of you feel strongly that we need to, we'll do it now. But I just warn you and staff, you know, you can keep doing things the same old way and never have a plan, never have a goal, never have a criteria for assessing success or failure, you can keep rewarding the same old way you do business, or you can decide to do business differently and manage for objectives and know what you're doing.

And I think this is part of the whole public transit world that still is a little bit ill defined.

But staff has heard the discussion and heard the members, and Mike, if you'll see to it that we start looking at something concrete on a distribution decision in the next month, that will be fine.

Other comments, members, discussion, dialogue?

MS. ANDRADE: Mr. Chairman, I have a question. So what I'm hearing is that we've resisted or we've held back on allowing these toll credits to move forward for public transportation because we don't have the right formula in place that will ensure us that they're used for the right reasons.

MR. WILLIAMSON: Or a criteria that's objective, whether it's a formula or some other kinds of criteria.

MS. ANDRADE: So then with the urgency on this, we must work on a formula, James.

MR. JOHNSON: Chairman, it occurs to me, after listening to some of the things that you said, that one thing that puzzles me or concerns me is that we are waiting for something that may or may not happen. When do you make the conclusion whether that they're going to be changes, what the changes are?

I hate to use a golfing reference because I know you're not a golfer, but there's a little known thing called a mulligan that occurs in various tournaments and a lot of people get so hung up over the use of their mulligan that they never use it.

And that's what concerns me with these toll credits is that we have $113 million worth of toll credits that have been sitting there, they're not drawing any interest.

We've had numerous requests, most of them, to my knowledge, have complied with the benefit to clean air that's going to provide some alternatively-fueled vehicles which I think, in my way of thinking, is in the best interest of this state and its citizens, and you know, there have not been any distributions.

So I salute what you've done and I think it's a good course of action, and we need to be expeditious about it.

MR. WILLIAMSON: And we shall be.

Okay, thanks for a good discussion item and a good give-and-take, and staff, if you would, react appropriately.

Before we go back, Mike, is Representative Riddle in the audience?

(No response.)

MR. WILLIAMSON: Okay, let's proceed then.

MS. ANDRADE: Mr. Chairman, I have one. Do we have a time line for this as to when they will bring back a proposed formula?

MR. WILLIAMSON: I believe they'll have something for us next month.

MR. NICHOLS: So we'll have an action item?

MR. WILLIAMSON: We'll have something to consider to take action on next month.

MS. ANDRADE: All right. Thank you.

MR. BEHRENS: We'll go to agenda item number 5, our Transportation Planning item. Jim Randall will lay out five minute orders that pertain to the Grand Parkway or the Grand Parkway Association.

MR. WILLIAMSON: Well, is this not the item Ms. Riddle wishes to comment on?

MR. BEHRENS: 5(c).

MR. WILLIAMSON: We don't want to take up 58 until she's here.

MR. BEHRENS: Go ahead, Jim.

MR. RANDALL: Jim Randall, Transportation Planning and Programming Division.

Item 5(a). The Grand Parkway Association was originally created by Minute Order 82325, dated October 25, 1984, for the purpose of facilitating the development of the Grand Parkway, a proposed 182-mile facility from State Highway 146 in Galveston County to Business State Highway 146 East in Harris County.

The department supports the development of the Grand Parkway as a toll facility with full multimodal capabilities.

This minute order authorizes additional funding of $700,000 to complete studies for the development of Segment B of the Grand Parkway from State Highway 288 east to I-45, a distance of approximately 26.2 miles.

Minute Order 108543, dated June 28, 2001, authorized funding of $8.3 million to the association for the development of Segment B from State Highway 288 east to the Galveston County line.

Under a separate agreement between the association and Galveston County, the county provided $1.2 million for the development of Segment B-2 of the Grand Parkway from the Galveston County line east to I-45.

The department and the association have coordinated the development of a comprehensive study of the entire Segment B from State Highway 288 to I-45.

Both Galveston and Brazoria County officials have participated in the early public involvement activities for the project.

Due to public comments to the proposed project study, it is necessary to consider additional alternatives. In order to remain consistent with commission direction and with current Houston-Galveston Area Council planning and conformity efforts, this segment will require revised modeling of the toll and non-toll travel demand analysis.

Staff recommends approval of this minute order.

MR. WILLIAMSON: Members, you've heard the presentation. Do you have questions or comments?

(No response.)

MR. WILLIAMSON: Do I have a motion?

MR. NICHOLS: So moved.

MR. JOHNSON: 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. RANDALL: Okay, sir. Item 5(b). This minute order will authorize additional funding of $250,000 to conduct studies for the development of Segment C from US 59 in Fort Bend County south and east to State Highway 288 in Brazoria County, a distance of approximately 26 miles.

Minute Orders 107648 and 107649, dated October 29, 1998, authorized total funding of $2-1/2 million to the association for the development of Segment C.

Under a separate agreement between the association and Fort Bend County, the county provided $2.2 million for the development of C-1 and C-2 from US 59 south to the Brazoria County line.

The department and association have coordinated the development of a comprehensive study of the Segment C. A draft environmental impact statement was prepared and a public hearing was held in June 2001.

Since that time, an active Bald Eagle nest was identified in the vicinity of the proposed alignment. A biological assessment will be required to identify and propose mitigation for any impact to the Eagle or its territory.

Again, in order to remain consistent with the commission direction and with current HGAC planning and conformity efforts, this segment will require revised modeling of the toll and non-toll travel demand analysis.

Staff recommends approval of this minute order.

MR. NICHOLS: Let me ask a question.

MR. WILLIAMSON: Are you speaking for the Bald Eagle?

MR. JOHNSON: Some people think those are my relatives.

(General laughter.)

MR. NICHOLS: We're advancing the environmentals to clear these projects as toll roads. Yes or no?

MR. RANDALL: That's correct.

MR. NICHOLS: At what point do we designate them as toll roads?

MR. RANDALL: I'm sure we'll have to get through the record of decision before we'll be able to designate them as a toll road.

MR. NICHOLS: Is that a legal question? Is that the right answer? This is real important. I've got somebody over here.

MR. GORNET: I'm David Gornet with the Grand Parkway Association.

Commissioner, it is the intent in the final environmental impact statement which is being prepared and requires these additional traffic studies, to designate the recommended alignment as a toll facility. That will be done in the final environmental impact statement which is being prepared for Segment C, E, F-1 and all of those.

There is a preferred route identified in the draft, it's recommended in the final, and at that point it's designated as a toll facility.

MR. NICHOLS: The reason I ask the question is that there's various pieces of legislation working over there that have different definitions as to conversion and non-conversion, and I want to make sure that these projects are going to meet each and every one of those and that we don't run afoul.

MR. RANDALL: Yes, sir.

MR. NICHOLS: Okay.

MR. WILLIAMSON: Other questions or comments, members?

(No response.)

MR. WILLIAMSON: You heard the information and the comments of Mr. Gornet. Do I have a motion?

MR. JOHNSON: So moved.

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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. RANDALL: Item 5(c) is the one that I believe the representative wants to comment on. Do you want me to move forward?

MR. BEHRENS: 5(d). We'll come back to that one.

MR. RANDALL: Okay, sir. Item 5(d). This minute order tenders a proposal to the association for the development of Segment H and I-1 from US 59 to I-10 East, a distance of approximately 36 miles.

The association and the department have received numerous inquiries regarding the future routing of these segments. Development activities in this potential corridor may limit the department's ability to determine a route that avoids and minimizes impact to the natural environment, citizens and businesses.

Developing Segments H and I-1 will provide continuity to Segments E, F and G in Harris and Montgomery counties, and Segment I-2 in Chambers County.

In order to move forward with project development, these segments need to be analyzed in a comprehensive study. This project will alleviate congestion and improve traffic flow in the north and northeast Houston metropolitan area.

The association would be responsible for providing the corridor feasibility studies, preliminary engineering, environmental studies, traffic and revenue studies, and right of way mapping, including entering all necessary contracts.

The association will submit all contractor invoices to the department for approval and payment. It will also consider any in this corridor feasibility study the alternative of developing Segments H and I-1 as a toll road.

In turn, the department will fund these studies in an amount not to exceed $8 million.

Staff recommends approval of this minute order.

MR. WILLIAMSON: Members, you've heard the information. Do you have questions or comments?

MR. NICHOLS: So moved.

MR. JOHNSON: 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. RANDALL: Okay, sir. We're going to move on to item 5(e).

This minute order appoints two members to the Grand Parkway Association Board of Directors. Since its creation in 1984, the commission adopted Sections 15.80 through 15.93 of the Texas Administrative Code relating to the creation and operation of transportation corporations.

Section 15.85 states, in part, that the commission will review an individual's application, financial statement and letters of reference and may appoint members of the corporation's board of directors.

The board has nominated Hans C. (Chris) Olavson of Houston for a first term and has submitted the required information to the department.

John Chiang of Houston was originally appointed by the commission in March of 1999 and has been nominated for a second term to the board. He has also submitted the prescribed documentation to the department.

Based upon the review and consideration of all relevant information, as documented and filed with the commission, and based upon the board's recommendation, it appears that the nominees are fully eligible and qualified to serve as members of the board.

We recommend your approval of these two appointments to the Grand Parkway Association Board of Directors.

MR. WILLIAMSON: Members, any questions or comments?

MR. JOHNSON: Might I ask a question of David Gornet?

MR. WILLIAMSON: Please. David, are you out there, still?

MR. GORNET: Yes, sir.

MR. WILLIAMSON: Identify yourself for the record, please.

MR. GORNET: I'm David Gornet, executive director of the Grand Parkway Association.

MR. JOHNSON: Chris Olavson is a former TxDOT employee.

MR. GORNET: Yes, sir.

MR. JOHNSON: Is he currently employed by a consulting engineering firm?

MR. GORNET: No, sir, he is not. He resigned that position about a year ago.

MR. JOHNSON: Thank you.

MR. WILLIAMSON: Did he retire or did he just leave on his own? What's the deal behind Mr. Olavson?

MR. GORNET: Mr. Olavson retired from the department after 30-plus years of service, and was engaged by a local consulting firm to assist them in some of their planning efforts. He's decided that it was not in his financial best interest to continue to do that, and he retired from the consulting firm.

MR. WILLIAMSON: And who is this fellow Chiang?

MR. GORNET: John Chiang is a current board member. He is vice president of Suba Corporation which is a local developer in the Houston region. He has been very effective in helping us with the local politicians; he has frequent communication with them to make sure that we're meeting the goals of the community, and with TxDOT also in meeting TxDOT's goals.

MR. WILLIAMSON: Good board member.

MR. GORNET: Yes, sir.

MR. WILLIAMSON: Other questions, members?

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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. BEHRENS: Jim, if you would, we can now go ahead to item 5(c). We understand the representative won't be able to join us today, and so you can go ahead and lay out that minute order.

MR. RANDALL: Okay, sir. Item 5(c). This minute order will authorize $2.5 million in additional funding to conduct studies for the development of Segments E, F and G of the Grand Parkway from I-10 West to US 59 North, a distance of approximately 52 miles.

A supplemental draft environmental impact statement will also be prepared for Segment F-2 from State Highway 249 to I-45 North.

Minute Order 107844, dated May 27, 1999, authorized $8 million to the association for the development of Segments E, F and G.

Harris County, the association and the department have determined that due to public comments to the proposed alignments of Segment F-2, a supplemental draft environmental impact statement will be needed in order to revisit alternative alignments.

In addition, all the Segments E, F and G will require revised modeling of toll and non-toll travel demand analysis.

Staff recommends approval of this minute order.

MR. WILLIAMSON: David, are you still out there?

MR. GORNET: Yes. David Gornet, executive director of the Grand Parkway Association.

MR. WILLIAMSON: David, Representative Riddle couldn't make it over, she had important business. What would she likely have wanted to make the commission aware of? Do you know?

MR. GORNET: I would like to think that she is appreciative of TxDOT's responsiveness and agreement to go back and revisit this and provide a supplemental draft environmental impact statement that addresses the concerns of her constituents in that area.

And that she is supportive of this minute order so that we can move forward with that project and help alleviate some of the concerns that have been ongoing as people try to plan for their lives.

MR. WILLIAMSON: It seems like she was here a few months ago and was very plain-spoken about some concerns she had.

MR. GORNET: Yes, and she continues to have those issues with where the project may or may not go within her district. And this will allow us to help respond to those concerns that she has.

MR. WILLIAMSON: Okay. Thank you.

MR. WILLIAMSON: Members?

MR. HOUGHTON: So moved.

MR. JOHNSON: 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 say no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. RANDALL: Item 5(f). This minute order increases the department's Strategic Priority funding participation in the Joe Fulton International Trade Corridor at the Port of Corpus Christi by $5.2 million.

Recently, Governor Rick Perry announced that the State of Texas would commit $5.2 million to allow the port to make critical needed improvements to rail infrastructure. This is part of an effort to better support additional military missions as well as increased commercial traffic at the port.

Your approval to increase TxDOT's participation in the Joe Fulton International Trade Corridor highway project will allow the port to redirect its funds to rail improvements consisting of additional rail yard tracks for loading and unloading of rail cargo and the rehabilitation of existing rail yards.

We recommend approval of this minute order.

MR. WILLIAMSON: Members, we have one person who wishes to bitterly oppose this -- no, I'm sorry -- he's for it. John LaRue.

(General laughter.)

MR. WILLIAMSON: Would you like to hear from John before?

MR. NICHOLS: Sure.

MS. ANDRADE: Please.

MR. WILLIAMSON: Welcome back, John.

MR. LaRUE: Thank you, Mr. Chairman, commissioners. John LaRue, executive director of the Port of Corpus Christi.

And as usual, your staff got all the particulars right on this. The governor was with Commissioner Andrade in Corpus Christi at the port back in March and really took a leadership position on this.

What has occurred is the federal government, through the Department of Defense, over the past eight or nine years has made significant rail improvements at the major forts throughout the United States, and in Texas that would include Fort Hood and Fort Bliss. What they didn't do was make any improvements along the rails or particularly in the public port authorities.

We're trying to correct that through our efforts with our senators and in the House, but the governor stepped forward and made this major investment and it will allow us to double the unloading capability that we have for moving equipment.

As I think you know, both Corpus and Beaumont are strategic ports. There are 13 in the United States, but those two ports handled and continue to handle 40 percent of what has been moved to support our troops in Iraq.

And what we need to be able to do is unload that equipment off the rails quicker as it comes into the port and be able to get it on the ship and over there as quickly as they need it.

So this support and leadership from the governor and from the commission is going to be well used by the port now and in the future, and we thank you for that.

MR. WILLIAMSON: Members, do you have questions or comments for John, a good friend of TxDOT?

MS. ANDRADE: John, thank you for being here. Also, I believe that the port was honored yesterday?

MR. LaRUE: Yes. In fact, our Commissioner Hawley would have been here but she had to go to Nashville to receive an award. Both Corpus Christi and Beaumont were honored by the Army for the Quality Port Award, the only two ports in the United States and in the world.

They survey all the ports they use throughout the world and they were honored at an Army event last night in Nashville. So that's something positive not just for those two ports but for the entire state.

And the commissioner sends her regards. She was actually going to try to get a 5:30 flight out of Nashville to be here, but we convinced her that we could cover it for her.

MS. ANDRADE: Thank you, and congratulations.

MR. LaRUE: Thank you.

MR. JOHNSON: John, over the last few years has the tonnage that comes across the Port of Corpus Christi shown a steady increase?

MR. LaRUE: I would say if you looked at ten years, yes. It's probably a 5 or 6 percent increase every year.

We're still principally a petrochemical port, as you know, handle about 85 million tons of cargo a year. Houston is obviously the largest port in the United States, but Beaumont and Corpus are right there with them.

So we have seen an increase in our general cargo and it is because a lot of it is from the military load-outs, and we're also bringing equipment back.

MR. JOHNSON: Has Whataburger Field had any impact on the port and what has been the impact on the community?

MR. LaRUE: The impact on the community has been phenomenal. The first ten-game home stand which was just completed the other day there averaged over 7,000, and it only holds about 7,000.

It's a beautiful facility. It's right there, as you know, in the port. The port actually owns the land around the stadium, we sold the land for the stadium to the city and the city built it and leased it to Nolan Ryan and his group, and we built the parking lots and have a part of that operation.

So it has been a tremendous success for the entire community and we think it will lead to a lot more development.

Actually, the rail yard that we're talking about is just south of where the parking lots and the ballpark are, and one of the things that has occurred is we have a number of military there on permanent duty doing these logistics. They're given free tickets to the game so they've been getting into all of them.

It's been a tremendous success. Thank you.

MR. HOUGHTON: What's the status of the container facility that you're working with?

MR. LaRUE: We have a memorandum of understanding with a company out of the Philippines called ICTSI which is one of the seven largest container terminal operators in the world. That's in its final month-and-a-half, that agreement.

We expect them to come back to us with a decision, I would say, by probably mid to late May, whether they want to proceed with negotiations.

We have all our environmental permits from the federal government and from the state.

As the chairman was talking about the highway bill, there's another bill there that affects us as much that's called the Water Resources Development Act, WRDA, and Congress hasn't passed one of those since the year 2000 -- they usually pass them every two years.

It came out of Senate Committee and it's on the floor. That has $180 million in it for the Port of Corpus Christi for deepening of our ship channel from 45 to 52 feet, and extending our ship channel to the land where we are building our LaQuinta Container Terminal.

So the pieces are coming together but we're not there yet.

MR. HOUGHTON: Are you involved with the Land Office for financing?

MR. LaRUE: Yes, that's correct. We have been in discussions with the GLO about participating in that project, and they look very positive.

MR. HOUGHTON: Great.

MR. WILLIAMSON: Other questions or comments for John?

(No response.)

MR. WILLIAMSON: Okay. Thank you, John.

MR. LaRUE: Thank you again. Thanks especially to your staff. They've done a great job working with us.

MR. WILLIAMSON: You and your board, the people of Corpus Christi, you all do a great job on transportation. We like working with you.

MR. LaRUE: Thank you.

MR. WILLIAMSON: Jim, do you have a recommendation for us?

MR. RANDALL: Yes, sir. Recommend approval of this minute order.

MR. WILLIAMSON: Members, you've heard the information and you've heard the testimony.

MS. ANDRADE: 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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Congratulations, gentlemen, and best regards from the governor.

MR. RANDALL: Okay, sir. The last item 5(g). This minute order authorizes $18.9 million in Federal Discretionary funds as approved by the Federal Highway Administration. These funds will be used specifically for the development of the 17 projects listed in Exhibit A.

We recommend approval of the projects identified in the FY 2005 Federal Discretionary Program.

MR. WILLIAMSON: So let's have a teaching moment, shall we, Jim?

MR. RANDALL: Okay, sir.

MR. WILLIAMSON: These are earmarks. Is that correct?

MR. RANDALL: Yes, sir.

MR. HOUGHTON: Earmarks?

MR. WILLIAMSON: Not to individuals but by Congress.

MR. HOUGHTON: Do we submit these to Congress?

MR. RANDALL: Yes, sir. We submit them through FHWA; from various sources they're submitted to FHWA.

MR. WILLIAMSON: I think what he means is are these earmarks our ideas or are they the congressperson's ideas.

MR. RANDALL: I believe it's a mixture, sir.

MR. HOUGHTON: It's who?

MR. RANDALL: It's a mixture.

MR. HOUGHTON: A mixture?

MR. RANDALL: Yes, sir.

MR. WILLIAMSON: And is this extra money? Is this free government cheese?

MR. RANDALL: Well, no, sir. Now, this is coming from, I believe, some additional funds that were available that they went ahead and formed earmarks from.

I don't have the exact; Coby might have that.

MR. WILLIAMSON: Is this out of apportionment or is this extra money, Coby?

MR. CHASE: Coby Chase, Legislative Affairs.

If I remember correctly, these come through the appropriations process. Am I right, Jim?

MR. RANDALL: I believe so.

MR. CHASE: So this is in that tricky world where it is, as you've heard me describe before sometimes in painful detail, that a certain amount of money comes to us by formula -- that's what's in TEA-21 and what will be in its successor bill; a certain amount of the money is divided up through appropriations or what is sometimes billed as new money which at the end of the day it really isn't.

These appear to all be from appropriations, and the question becomes -- and follow me here for a second -- it's new money only in the sense that it was never guaranteed to us. It still comes from the Gas Tax that we send to Washington, D.C., and through the appropriations process, if you look at all the money that is divided up, it does not look like it does through the formula process.

We tend to lose money; other states tend to do better than we do in that process.

So it's new money only in the sense that it had never been guaranteed to us before. Does it comprise what we consider to be our fair share of that money? Absolutely not.

MR. WILLIAMSON: That's the point I was getting to. We would be better off if this money were left or sent to the apportionment process.

MR. CHASE: Absolutely.

MR. WILLIAMSON: Thank you, Coby.

MR. CHASE: Sure.

MR. WILLIAMSON: So members, we all on the commission level understand this, but we take these teaching moments to remind our partners and the greater audience that watches the tape that it's very easy to have demonstration projects and earmarks and announce them and get press releases; it's a little bit harder to figure out every year how to deal with the shrinking pie.

Do you have a recommendation for us, Mr. Randall?

MR. RANDALL: Yes, sir. To approve this minute order.

MR. NICHOLS: So moved.

MR. JOHNSON: 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: We'll move to agenda item number 6 which will be our second discussion item for today. This item concerns the consultant selection process, and Amadeo Saenz will go through this presentation with you on that process.

MR. SAENZ: Good morning, Mr. Chairman, commissioners, Mr. Behrens, Mr. Simmons.

For the record, I'm Amadeo Saenz, assistant executive director for Engineering Operations.

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 the department should follow in obtaining the services of private consulting firms to assist the department in the preparation of our project planning and design.

At the meeting of the Texas Transportation Commission in February, the staff provided information related to the department's use of consulting firms to provide professional services in the area of engineering, architectural services, and surveying.

This information was presented as part of the commission's ongoing efforts to have staff identify opportunities to enhance innovation and reduce the cost of planning, building and maintaining our state transportation infrastructure.

During the February commission meeting, the process was presented which TxDOT currently undertakes in the selection of consultant firms, or in most cases consultant firm teams, that will do work for us.

As you recall, the process begins with the department issuing a notice of intent, or an NOI. The interested firms reply with a letter of interest, or LOI. The department then has a consultant selection team that makes a selection of a short list from the firms that submitted their proposals.

And then an interview of those short-listed firms is done, and of course, we evaluate that information and make a final selection, and then negotiations begin with the top-ranked firm.

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

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

The alternative selection process is still a two-phase selection approach. The firms submit letters 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's scope, the experience of the team, and the ability to meet the schedule, as was done currently.

Two new parts of the selection would be based on design innovation and design cost as shown on the firm's proposal.

The current selection process, as it exists today, can still be used in addition to the alternative process that you have proposed. You could do them under either one, whichever one that we deem necessary.

During the March commission meeting, staff identified the history of the professional service selection process for government entities. In addition, a summary of historical cost studies was also presented.

A discussion of the cost components, including both direct costs and indirect costs was presented as background information.

As part of this discussion, staff also gave a breakdown of the different types of contract payment types and the project fee determination that we use.

In February the commission identified three goals for the department: first, it was your desire to promote and reward innovation; second, it was also your desire for more participation of private sector providers; third, it is your desire to increase the number of minority- and female-owned firms competing for contracts with the department.

To that end, we put together a group of our people that work in the area of the consultant selection process from the districts and the divisions, and these staff met to discuss the goals that the commission members had identified.

And the staff has identified several ideas that I will present for discussion on how these goals might be accomplished, mostly utilizing the existing process that we have today.

MR. NICHOLS: Let me ask a question. On the third one, increasing the number, that was through primary contracts?

MR. SAENZ: Yes, sir. When I talk about competing, for them to compete so that they could be selected as prime contractors.

As with most ideas, these ideas should not be interpreted as changes that we're formally recommending at this time. Some of these we're still requesting a little bit of time to study them a little bit further.

The administration would like to take the opportunity to further evaluate these ideas individually, and where appropriate, test them on selected contracts or selected solicitations before incorporating them into the standard steps or options that go into our current process.

The purpose of this exercise is to meet our responsibility to be vigilant by periodically reviewing how we, TxDOT, spends the state's money and what is provided in return.

Some of the proposed changes we will discuss today may be perceived as significant in comparison to our current process, while others represent only minor adjustments or improvements to what we do today.

We recognize that the implementation of our process involves significant time and resources not only to TxDOT but also the firms throughout the consultant community.

The growing volume of work being outsourced and the time associated with the process have influenced our decisions in the past to modify our process in order to streamline where possible.

Streamline is considered an advantage with respect to bringing the contract on line in much less time, however, over time a repetitive process that may lack incentive to do more than the minimum can create certain disadvantages.

A lot of TxDOT work is made up of repetitive processes that have been refined and perfected through the years of research and also application.

Balance this with a significant volume of engineering work that presents opportunities for all having new ideas, and that's what we're going to present to you today.

In review of our process, we're looking at a way to make these opportunities and ideas more integral to the process in an attempt to increase the overall value of our investment which brings me back to our first goal that we want to promote and reward design innovation.

For this goal, the primary objective is to increase the value of the overall product, whether it is in the selection of an alternative, as part of a route study, or a detailed design that is ultimately constructed and maintained at a cost to TxDOT.

Similarly, we want to reduce the overall cost of design, construction and maintenance of a project but we know that, for example, we may have to pay higher design costs to get a better product that will cost us less to build in the future.

As mentioned before, we want to return some traction to the competitive process but most importantly, to do things while still maintaining a fair and consistent process.

I will discuss some possible changes as they relate to the basic steps of our project selection process, and I'm reminded: we publish a notice of intent; we get a letter of interest; then from that letter of interest group we create a short list; we then either have proposals or interviews, and mostly we do interviews; and from there we select a firm and then of course we issue work.

How these steps are implemented can depend on the contract type being advertised, whether the project is project-specific or whether it's an evergreen contract.

So I'll discuss these steps for the project-specific contracts first. And it's worth to note that of the 167 contracts awarded this fiscal year, only 19 of those contracts have been project-specific, about 11 percent.

This has become a trend over the past four years to gain flexibility to meeting our project schedules, our districts are going with the evergreen contracts so they can have consultants onboard and then issue work orders as the need arises.

The first change considered would be internal to TxDOT. In order to receive approval to proceed with the selection process, TxDOT staff would be required to submit a scope of work and the cost estimate to support the funds identified that they need to do this work.

The scope would still be subject to negotiation and refinement during the negotiation with the selected provider, but the emphasis on the early scope development will assist in more thorough identification of TxDOT's needs and priorities before we initiate the work.

Do we really need to be doing this and do we need to be doing it to this level?

The early identification of scope will allow these needs and priorities to be communicated more specifically to the consultants in the notice of intent so that they can provide better and more focused responses on their letters of interest.

We also plan to review and expand the criteria descriptions and perhaps identify weights assigned to each criteria so that everybody knows what is expected from them in the notice of intent as well as what is the weighting criteria and what are the weights assigned to each weighting criteria.

Currently we have criteria included in the NOIs but we do not include the weights.

The next change considered would be the requirement of a written proposal from the short-listed firms based on the specified format to control size and content. So we've short-listed the firms and instead of going to just an interview, we would request a proposal.

The emphasis of this proposal, though, is intended to be on project approach and innovation. It would also allow for additional information related to project experience, quality control procedures, ability of staff, in addition to the construction cost and the time as appropriate to be able to do the design and then construct the project.

There would also be an interview process. In an interview process the consultant would be given the opportunity to basically come and sell their proposal that they've just presented to us, as well as give the opportunity for our consultant selection team to ask questions.

These changes for the selection and award of the project-specific contracts would obviously require an increase in time for consultants to prepare proposals and also an increase in time for TxDOT staff to review and evaluate these proposals.

As I mentioned, we are only doing 11 percent of our contracts using project-specific type contracts at this time, so this would not really impact us too much.

The other 89 percent, of course are the evergreen contracts. So we also looked at ideas and changes that we could look into the evergreen consultant contract selection process, and we'll cover those next.

Looking back at the beginning of the process for evergreen contracts, we're considering that staff identify one project that is representative of the work anticipated in one or more of the evergreen contracts that they wish to move forward with.

The notice of intent would more clearly identify the needs and priorities as appropriate for the project identified which will allow the consultants again to provide more focused responses.

Again, we also plan to review and expand the criteria descriptions and also identify and give assigned weights for each of them.

For evergreen contracts, the proposal would probably still continue to be optional. These are usually smaller projects, more simple projects, so the proposal would be optional. But the interview presentation would be required where the consultant would come and present in the interview phase their approach and ideas on the development of that selected project that was brought in by the district, and of course, at the same time answer questions that the consultant selection team will pose to them.

After the evaluation and the selection, the contracts are negotiated and executed with one or more of the providers, the identified project -- which we would assume that the project that was identified was one that the district was ready to move and begin with -- would then be awarded to the highest ranking provider and we would then complete negotiations as we normally do.

Another change considered for evergreen contracts affects how major work authorizations could be assigned. This is for evergreen contracts that are already in place.

Let me emphasize that what I describe would not be intended to be for major issuance of every work authorization but for select work authorizations where we see that we could get some benefit from this thing.

Prior to issuing a work authorization for a consultant to begin work on a project, we would issue a work authorization that would give the consultants that we have onboard -- these are contracts that we have onboard -- an opportunity to put together a proposal for a specified project.

I have three contracts in place for three consultants that are doing evergreen work for us in the area of bridge design, we have a bridge design project. We would give them an opportunity to put together a proposal and we're willing to pay for that proposal.

We provide them some hours to prepare this proposal on the particular project we have identified. We will then evaluate those proposals and then award that work to the consultant that provided us the best proposal.

For this proposal it would be very similar to what we asked for in what I talked about prior, we would get them to provide to us their project approach, innovations that they want to bring to the project, as well as their estimated cost of the construction and the time that they estimate it will take to give us this product.

You take all of that, and then based on the proposal that brought us what I would say the best solution, then that project would then be moved forward and assigned to that contract consultant.

Again, we realize that some of these changes would require more time and effort, not only for the consultants but for TxDOT staff as well. At this point in the development of our program, we think that it's an internal investment that is warranted because I think the innovations that will come to us and the improvements that will come to us will outweigh the extra time that we'll have to spend to run the changes in our process.

We will continue to evaluate and refine how these changes might ultimately be incorporated. The process that I just described for where we are working on trying to get the current consultant contractors with evergreen projects to submit proposals for work, we are currently trying it in our San Antonio District, and time will tell to see how that works.

The second part of your goals that I would like to discuss includes more participation of private sector providers.

The objective of this goal, as understood by staff, is to increase the number of contracts or opportunities for firms, primarily small or medium size, to compete for work and gain experience in working for TxDOT, and in addition, increase the number of firms with a share of the dollar volume under contract.

To accomplish this goal, several ideas have been discussed. These ideas are associated with decisions related to project development staging and outsourcing strategies that are made early on in the overall process, prior to requesting the use of a consultant.

One way to increase opportunities is to evaluate more closely the projects to be outsourced and make better decisions about which ones are well suited for evergreen contracts and which ones are better suited for project-specific contracts.

We think that there are opportunities for more project-specific contracts out there. So if we have more project-specific contracts, there's more opportunities for consultants to propose on the different contracts. This will allow us to maybe have more.

A method to provide more opportunities for small and medium size firms to participate is to develop more discipline-specific support contracts.

These contracts might be for hydraulic studies, subsurface utility engineering, traffic engineering, bridge design, et cetera.

Some of our districts, particularly some of our larger districts, are currently utilizing this approach and are seeing very positive results with newer firms participating in the letters of interest submissions and also in the selection.

A negative aspect to this approach is that if you assign work to one consultant, then of course he's responsible for his work, someone has to take and incorporate all the different pieces of the puzzle together as they put their set of plans, but it's something that can be worked on.

Another alternative to increase the opportunities is for the department to internally divide large design projects into design sub-components, select individual contracts for each sub-component, then hire either a project manager or internally manage the project so that each sub-component basically is responsible for putting together their pieces into the final design package. And then the manager will take those pieces and coordinate them.

MR. NICHOLS: Okay. So when we've had some of these what I'd call very large engineering contracts where big chunks of that are subcontracted out maybe to minorities or small businesses, instead what we would be doing, we'd be meaning each of those pieces as a whole.

MR. SAENZ: Yes.

MR. NICHOLS: And then issuing the contracts to the other entities as primary contracts.

MR. SAENZ: Right. We would have individual prime contracts for the components of the design and then we could have one general project manager to oversee and put the package together and get it delivered.

MR. WILLIAMSON: So to put it in a normal person's perspective, instead of issuing a $20 million contract, we might issue 20 $1 million contracts which would permit more smaller firms to compete for those $1 million contracts than they could compete for the $20 million contracts.

MR. SAENZ: Yes, sir, that's correct. Of course, each project would be looked at and you would break up the project so that you could be as efficient as possible, depending on the type of work that needs to be done.

MR. WILLIAMSON: I don't know what direction the commission is going to give you when we get through, but I suspect I know.

One fact I would like your staff to prepare for us in the proposal for actual rule changes next month -- if that be the case -- is a comparison of the overhead and cost between the firms that receive $1- or $2 million contracts with us as compared to firms that receive $15- or $20 million contracts.

I'd like some concept of are we driving the cost down by also driving the work out.

MR. SAENZ: We will prepare that. We have a lot of that information, we just need to piece it together.

MR. WILLIAMSON: Sorry, Robert. Did you have anything else?

MR. NICHOLS: That's it.

MR. SAENZ: The type of projects that I would describe as a typical large design project, such as a $40 million interchange, with this approach we're not depending on one prime to subcontract all the work, however many parts they choose, but TxDOT decides up front how many component parts and consultant firms we will use in the project.

There would be, obviously, an increase in the time required for the various solicitations. There would be some issues with working relationships among team members and ultimate accountability for final work product.

Under our current scenario, we hold the prime provider accountable regardless of the components. Under the proposed scenario, we would have to work something out to make sure that everyone would be responsible for their own part and we would be the ultimate decision-makers as to what needed to be done if something did not go right.

In the ideal scenario under this thing here, the district office would have the resources for TxDOT to act as the project manager and manage the component parts and put the final design package together.

In fact, some of this is currently already happening. I remember in Pharr, when we were doing some of the design in-house, we would contract out simply the traffic control for the project and ask a consultant to give us a traffic control plan. We would then incorporate that into our plans.

If we needed bridge detailing or bridge design or structure design, we would do the same thing. That would be brought in and it would be incorporated into the plans the department was putting together.

Yes?

MR. HOUGHTON: What percentage of our contracts are -- what do you consider large? What's considered large?

MR. SAENZ: We don't have a set definition, but almost 89 percent of our contracts fall under the evergreen type and on the evergreen contract the maximum is $5 million for metro districts and border districts and some divisions, and $2 million for all the other districts. So those are small contracts; we're doing a lot of work with these evergreens.

We can work on coming up with some definitions, maybe looking at some of our past history to identify how projects would fall out for you.

Another idea is to have more evergreen contracts in smaller amounts. This would enable more providers to be selected within a series. Some districts are already using this.

Another idea discussed centers more on enhancing opportunities for small firms or firms new to the process. TxDOT can continue to provide and improve on opportunities to educate these firms in doing business with TxDOT.

And of course, several of our districts are conducting workshops that let the consultant industry know what projects are coming up, what types of projects, what their needs are going be.

Our Business Opportunity Office conducts the seminars and conferences across the state to let people know what does it take to do business with TxDOT. Our Design Division people attend those conferences and try to get people interested in getting on.

The whole key is to try to go and get more people to get into our pre-certification process so that they can do more business with the department.

We've even had some of the smaller companies that have formed and we use them as our poster folks to go out there and help us promote and get more people involved. And the whole key is we're trying to get more firms to want to come and do business with us.

Another idea that we discussed is letting firms know that TxDOT does allow joint ventures. A joint venture is a partnership formed for a limited purpose, in our case, one particular contract.

The joint venture comprises of two or more firms that would join together and basically propose on this prime contract. Each one of them is independent, but together they use their resources are now able to do more of the work as a prime.

The requirement is that all joint venture parties sign the contract and they all take equally 100 percent of the responsibility for the contract.

We would allow probably only one project manager that would coordinate among the joint ventures, but they could have sub project managers.

A joint venture arrangement can provide an opportunity for smaller firms to participate and gain experience through the process as a prime.

As for pre-certification, we don't have joint ventures pre-certified, but if each firm is already certified, then the joint venture itself would also be certified, so they don't have to go through another process.

With respect to the distribution of work, a consistent concern we have is with the possibility of firms winning more work than they are capable of successfully delivering.

As you can imagine, we have 25 districts, each district has a budget, each district is going out and soliciting firms, so we could wind up having enough of an overlap of the same firms being selected statewide that we could have some of the resources of the firm basically be stretched.

One idea that we're considering to address this formally is that we would request the availability and commitments of key staff as part of our evaluation and selection process.

If you're proposing a project manager for this project, we'd like to know how committed is this project manager, to what projects and what percentage of his time, not only on projects that he is currently working on but what projects are currently ongoing as far as the selection process across the state.

That would be for project manager and key staff. We would need to know that the project manager or key staff leader is not over 100 percent committed to other work or proposed work.

There are some districts that ask for this information already, but not all of them are doing it. We're looking at making this a formal part of our selection process and our evaluation process.

The concern of too much work prompted additional discussion to look at another idea that will focus on evaluation of the volume of work that each firm has under contract.

The idea involves identifying a threshold of eligibility for submitting a letter of interest. The threshold would be based on the dollar amount of contracts the firm has with the department.

In other words, you would basically look at their firm and assign a cap to that firm, and when you reach that cap, you would not be allowed to propose.

MR. WILLIAMSON: So this method would suggest that we say to the engineering world there's a limit as to how much of our work at any one time you're going to have.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: That's one way of forcing more work to more people.

MR. SAENZ: Right.

I will caution that while this appears initially that it might be a way to go to increase the number of firms that are doing business with the department, we've got several issues that we're still looking at and we'd like to have a little bit more time to review this and bring this back to you.

Finally, the third goal was to increase the number of minority --

MR. NICHOLS: Go ahead. I've got some but I wanted him to go all the way through it. I thought he had stopped.

MR. SAENZ: I'll stop right here.

MR. NICHOLS: No, I'm fine. Go ahead.

MR. SAENZ: The third goal was to increase the number of minority- and female-owned firms competing for contracts with the department. And as I mentioned earlier, competing means that they would be competing for prime contracts.

The objective of this goal, as understood by staff, are to increase HUB and DBE participation as prime and sub-provider level and increase the number of opportunities for these firms to compete for work and gain experience in the department working for TxDOT.

An important point to mention related to HUB firms is that meeting the requirements of HUB certification no longer has a revenue cap or a revenue limit on it.

You can now be considered a HUB and there is no revenue limit as there used to be in the past. You can earn as much money as you can and you'll always be considered a HUB.

You will recall in our March discussion that staff had been asked to look at the total number of pre-certified firms in the department's database and provide a breakdown for the number of minority or disadvantaged businesses.

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

For today's discussion we took a look at the numbers a little bit further. Of the 25 pre-certified HUB firms, 89 only have one person pre-certified, and 33 only have two people pre-certified.

In other words, roughly half don't appear to have the technical depth to realistically prime a project and that would have some difficulty even being considered as a sub because they're very small and they're probably working on just doing very specialty work.

MR. NICHOLS: But if they can get some that specialty work as a prime, then they can gain more experience, bring more people into the firm and grow.

MR. SAENZ: Right. And that's what we identified as our goal is to try to get that to give them more of that opportunity.

Within the other half, 23 are environmental area firms, 16 are dedicated to materials testing, 10 are survey firms, 7 are architectural firms, and 4 others deal strictly with bridge inspection or design.

This leaves only about 68 HUB firms with three or more people that are pre-certified in the range of work groups that include the core engineering categories that are required in the majority of our engineering contracts.

These numbers give us a clear indication of what we're dealing with. Our goal still remains to increase HUB primes and overall HUB utilization, but our initial expectations need to be realistic, given the current pool of HUB providers.

What this tells me is that we need to focus our efforts on attracting HUBs into the transportation industry and to do what we can to provide opportunities for these small existing firms to gain experience and grow.

MR. NICHOLS: Have we ever considered having almost like a meeting or a session just bringing all these firms in on engineering type stuff and find out from them what it is that we might could do to encourage constructive primary contracts?

MR. SAENZ: At one time our Business Opportunity Program Office out of Construction had a group of some of the DBE firms that were providing advice to them. I think that has gone away, but I think that would be a good idea to look at that. Now that we recognize what we have, to go back and look and work with them to see how we can initiate to try to get them.

MR. NICHOLS: If they know that there's going to be a strong emphasis on working to get primary contracts in this area and they understand what it is we're trying to do, what our problem is in contracting with them, they may be able to adjust some of their business plan or team up. You know, some of these one-person teams, three or four of them may get together and form an entity.

MR. SAENZ: A joint venture type.

MR. NICHOLS: Yes.

MR. SAENZ: And that's one of the things that we have identified that many of the ideas that I mentioned earlier in goal number two really apply to goal number three.

For example, since HUB firms are not large and many might be considered speciality work, the development of more discipline-specific support contracts may better fit their abilities.

If I have a lot of contracts for environmental work by themselves or contracts for surveys -- which we already do -- or some of the other functions, we might be able to get them as prime, they learn more working with TxDOT, and they're able to now hopefully grow and be able to then compete much better in future contracts.

Also, the idea of breaking down a contract into design components to be managed by another firm that's under contract as a project manager provides additional opportunities for these firms to have prime contracts for their component of the work that they're assigned to.

In our previous goal we also talked about letting firms provide form joint ventures. I think that is a perfect opportunity for these firms to team up as a joint venture and propose on a project as a prime contractor, whereas, they don't have that opportunity right now because they're so small.

We also plan to look at the possibility of increasing our HUB goals, where possible, above our 20 percent department goal for professional services.

We're currently working with our Business Opportunity Program Office in Construction to look at what realistic goal can we set out there based on what's out there in the industry.

Another factor that must remain part of our ongoing process is also education, like I talked about. Opportunities must be provided for HUBs to learn about the process, have opportunities to network with other larger firms and other small consultant firms that are out there, and have a forum with TxDOT about upcoming consultant work.

I think, Commissioner Nichols, this is almost what you were talking about.

These opportunities to educate are good and the firms that are currently doing business, we can use them and also try to attract new firms.

So I think your idea is something that the group had already come up with, and we'll pursue that.

The ideas presented here have been generated by staff based on goals that you, the commission members, had previously discussed. Many of these changes would not require changes to the Texas Administrative Code, some may require minor changes.

As these ideas are further evaluated, some will show themselves to have greater benefits than others, and we will be bringing those back to you.

As I stated at the beginning of my discussion, administration would like to take the opportunity to evaluate these ideas individually, and where appropriate test them, as we're doing some right now, before we make them part of our standard process.

That concludes the first part of the presentation that dealt with the goals that you all set for us in the area of consultants.

The final topic that you requested additional information on relates to the allocation of hours among primes and subs for the projects and how payment of those hours by the team members is monitored over the course of the project. How do we negotiate and how do we oversee the contract.

I'd like to discuss with respect to this issue with respect to the four different payment type contracts that we have. The four types are: Cost Plus Fixed Fee, Specified Rate, Lump Sum, and Unit Cost.

For each payment type there are two stages of the process where the scope and hours or the units of work area addressed. First they're addressed during the negotiation stage, and then of course they're addressed during the invoice-review stage as the project is getting developed.

During the negotiation stage of a Cost Plus Fixed Fee contract, the scope of work is broken down into discreet tasks and deliverables at a reasonable level of detail for determining the level of effort required for the prime.

For each task, hours are identified for each staffing category that is anticipated to be utilized. There is a negotiated rate associated with each staffing category.

So we have the prime would be task number one, we have a project manager, we have an agreed rate not to exceed. These are just numbers we're using, not actual numbers.

$35 per hour is what we're willing to pay for the project manager, and task number one requires ten hours of the project manager. We have a engineer one, a technician one; there's the fee allowed and the number of hours that we estimate.

The number of hours multiplied by the rates provide the total direct cost. There is typically a spreadsheet representing this exercise specifically for the prime provider's share of the work.

The negotiated overhead rate is then multiplied by the total direct cost. You can see that in the purple. We have a total direct labor cost, the overhead in this case was 150 percent.

MR. NICHOLS: When you're using the term "fee" you're referring to the profit.

MR. SAENZ: Yes, sir.

MR. NICHOLS: Why do we use fee instead of profit?

MR. SAENZ: Cost Plus Fixed Fee, under that contract type we agree that we will pay the consultant the fixed fee that we determined at the time of negotiation.

MR. NICHOLS: Every time we say fee, it's profit.

MR. SAENZ: It is profit. And if you look at it, of course we multiply by the overhead and get the overhead cost. Those two are then summed up and then we apply the fixed fee which is the profit -- in this case was 10 percent -- and that's added on.

For the prime, then we add the non-labor direct costs and that's like mileage, printing, things like that. That would be the total of what the prime would be getting as part of this contract. Then we would add and subtotal the different sub-consultant work that was going to be done.

For the sub-provider we basically go through the same exercise. The costs are developed exactly like we did for the prime: we identify the hours that we will allow for each task, we look at the people that are going to be working and assign a number of hours for each different person that will be working on this project, and do exactly the same thing.

The total that's assigned for that sub would then go back as Sub-provider A, that's the total that we negotiated.

So that's how we do the Cost Plus Fixed Fee.

One other requirement that's required as we put this thing together is we require an H-2 form which identifies the dollar amount committed to each respective sub-provider and includes signatures from the prime and each respective HUB or DBE or sub-provider.

So at the point we get that form that says okay this is what they have agreed they will be paying each of their subs and whether they're a HUB or DBE, and all members of the team sign this form.

These commitments are tied to the HUB, or on rare occasions, DBE goals identified for the project, and all this occurs at the negotiation stage of the contract.

MR. NICHOLS: That's what we have been doing?

MR. SAENZ: Yes, sir, this is what we've been doing.

MR. NICHOLS: Okay. So we do know in the contract what overhead the sub gets and we know what profit the sub gets.

MR. SAENZ: Yes. For the prime and every sub, we know what overhead rate we have approved for each one of them and normally we use the same profit rate, but sometimes there have probably been occasions there has been a different one, but normally we use the same profit.

MR. NICHOLS: And is that actually what the sub receives, or is the profit split?

MR. SAENZ: All of these spreadsheets become part of the contract and we have the H-2 form.

MR. NICHOLS: But we may negotiate and bill on that form, we write the check to the prime, and the prime writes the check to the sub. My question is are we then assured that the sub gets that overhead rate, the same overhead rate and the same profit percentage, or do they get a lesser profit percentage?

MR. SAENZ: We don't know. We do know as they submit an invoice, as the project develops and they submit an invoice, we have now called an H-3 form, and on the H-3 form the prime submits his commitment to the subs as well as how much he has paid them to date and how much he is paying them out of this invoice.

So we could back out the numbers.

MR. NICHOLS: I would just like to verify that because I keep hearing different things.

MS. THOMASON: I was going to add -- and he's got some comments still to go -- that the prime invoice that we receive for a Cost Plus Fixed Fee --

MR. WILLIAMSON: Have you identified yourself?

MS. THOMASON: No, sir. Camille Thomason, director of the Consultant Contract Office with the Design Division.

I was saying for the Cost Plus Fixed Fee, when we do receive the prime invoice, it does have detailed information that actually has copies of the sub-consultant or sub-provider invoices, so we actually see the detailed invoice that comes from the sub-provider to the prime. So we do have the opportunity to see that.

MR. NICHOLS: Okay. We get to see it. Is that what they receive, that's what we're saying? So if the prime is getting 150 percent overhead and a 10 percent profit, all the hours billed by the sub is also getting that same 150 percent overhead plus 10 percent profit?

MR. SAENZ: No. The overhead rate for each one is applied to their work. So we had them in the contract, we had them when we negotiated, prime was 150 percent, sub was 175. When the billing comes in, the billing hours that come from the sub, we have the 175 overhead rate applied to those, the billing hours that the prime did, we have the 150 percent applied to those.

MR. NICHOLS: Okay.

MR. SAENZ: And then we have the H-3 form that basically shows the actual how much has been paid to date to the subs and how much is being paid out of this invoice. And you can correlate the H-3 form back to the invoice that you received.

When the monthly invoice is submitted by the prime for the Cost Plus Fixed Fee contract, it will include the following: an invoice summary sheet identifying the direct labor being billed for the prime; associated calculations of overhead and fee based on the rates negotiated in the contract plus other non-labor direct costs associated with travel, production, supplies; and total costs associated for each sub-provider and a breakdown of each sub-provider's invoice.

The summary is then followed by all the documentation required to back up the costs identified.

Before continuing, let me add that all the documentation is subject to audit and review by TxDOT at any time. Our offices review every invoice that comes in and approve the payment to the consultant.

Continuing back on the documentation, backup documentation from primes includes hourly time sheets for each employee with the attached rates, and of course they're not to exceed the maximum rate that we negotiated as part of the negotiation.

For non-labor direct expenses receipts include copies of everything that was non-labor such as bills paying for phone calls, maybe some documentation that would show about the units for producing copies and such and so forth, and all that's there.

Backup documentation required associated with a sub-provider includes invoices that the sub-provider submitted to the prime so that we can verify everything that comes in.

An invoice is also not considered complete unless we have two additional items that come with it:

One is a detailed progress report that describes, in a format very similar to our scope is set up, the progress that has been completed on this project and it corresponds to the costs as they're being billed.

The other is, of course, as I mentioned, that H-3 form that identifies each sub-provider, an indication of whether that sub-provider is a HUB or DBE, the respective dollar amounts that are committed for them as they were documented in the contract, and the dollar amounts paid to them to date to each one.

One H-3 is submitted with the invoice and a copy is also submitted to our Business Opportunity Program Section of the Construction Division for them to review and track the DBE commitments.

As you can imagine, for large projects these invoices can be quite large. They take a lot of consultant time to prepare and they also take a lot of TxDOT time to review, but provide the greatest level of detail.

The detailed invoices enable TxDOT staff to evaluate actual hours billed versus what was negotiated. They can see who from the consultant team actually performs the work. They can also see the detailed components of what each sub-provider billed the prime, and the H-3 form is intended to track back the actual payments from the prime to the sub-provider.

I'll now turn over to the Specified Rate prime proposals. For Specified Rate contracts, having just described Cost Plus Fixed Fee, I can explain this, hopefully, a little bit more simply.

During the negotiation stage, the primary difference is from the Cost Plus Fixed Fee contract is the way the rates are identified.

Tasks and associated hours are developed in the same manner but the rates used for calculation purposes are different. For each staffing category, the base rates are negotiated. The negotiated overhead and profit rates are then applied, resulting in a loaded rate for each staffing category. These loaded rates are what are called specified rates.

So the specified rate that we have up there of $9,625 was based on the base rate that we had, multiplied by the overhead and then also the profit. So now, instead of having to deal with overhead and profit, we have agreed to a specified rate for that particular person.

The total of all these costs which are the prime direct labor costs, including overhead and profit plus all the other direct costs including sub-providers, represent the total cost of the contract -- in other words, the maximum amount not to exceed for the scope of work.

When a monthly invoice is submitted by the prime for a Specified Rate contract, it includes the same detail that I described in the Cost Plus Fixed Fee, and so we're able to process it very much.

The backup documentation is also the same, and the requirements for the H-3 are also there. So these two are pretty much the same, the only thing is we don't have to go out there and be verifying overhead rates and fees.

Lump Sum contracts, this is one of the contracts that we kind of evolved to. For Lump Sum contracts, the negotiation stage is basically identical to Specified Rate contracts. Specified Rates are negotiated and are used for developing the total cost.

There is no separate calculation for overhead or profit. The other direct costs are calculated as I described before; the costs for the sub-providers are also developed in the same fashion as done before.

So the total of all these costs, the prime labor rates including overhead, profits plus overhead direct costs including the sub-provider, represent the total cost of the contract -- in other words, the lump sum agreed to be paid for in full upon completion of the work.

So for lump sum, we agree really, based on a task, that number on the far right is what we agree to pay for the completion of that task.

We're not really interested in the number of hours. We use hours to estimate and come up with a total, but we agree to pay for task number one $2,613 when that task number one is completed.

The Lump Sum contracts one other item that is not included. It requires the contractor to provide us a payout schedule or a payment schedule so we can see how he's going to process his work. And the payout schedule should cover from zero to 100 percent completion of each of the work items.

So every month as the invoice comes in, they give us a status of the work done. And so for example, task number one is 50 percent complete, we would pay 50 percent of the $2,613, and task number two and task number three and so on. So if the total project averages 50 percent complete, we would pay 50 percent of the total contract.

One thing that we do here is the H-3 form also comes in and we get the information on what they're paying the subs. The other thing that we do is we have the opportunity to ask the consultant to give us a work product so that they can substantiate or verify the work that they've done.

If I'm asking for a bridge schematic and they say they've completed 50 percent, I would like to see that work product so that I can compare that 50 percent of the work has actually been done.

MR. WILLIAMSON: Nothing like construction contracts.

MR. SAENZ: Construction contracts we usually use a unit item so we know put in 500 feet of pipe.

MR. WILLIAMSON: You can see that.

MR. SAENZ: Yes, we can see that. And that's what we're trying to do with the Lump Sum. Because we have agreed to pay for $2,613 for task number one, and if he says or she says that they've done 50 percent, we'd like to see a work product that would show that 50 percent.

MR. WILLIAMSON: I think that would be an excellent idea.

MR. HOUGHTON: What's the amount of Lump Sum contracts?

MR. SAENZ: Lump Sum contracts vary.

MR. HOUGHTON: I mean how many Lump Sum contracts do we have out of the total, if it's 20 percent of the total?

MR. SAENZ: About 28 percent of our work is being done by Lump Sum.

The thing with a Lump Sum contract is you have to have a pretty defined scope of work because at the negotiations stage you're going to have to know exactly what you're willing to pay.

MR. HOUGHTON: Right.

MR. SAENZ: And you agree on what you're willing to pay.

If it's something that has a lot of unknowns like a lot of public involvement that may require meeting after meeting after meeting that you don't know how many you'll have, you tend to go back to the Cost Plus Fixed Fee.

MR. NICHOLS: When you say 28 percent, is that 28 percent of the dollars or the physical number of contracts?

MR. SAENZ: 28 percent of the contracts.

MR. NICHOLS: Not necessarily the dollars.

MR. SAENZ: But we can get you the dollars.

MR. HOUGHTON: Do they tend to be bigger contracts or smaller contracts?

MR. SAENZ: Probably some of the smaller ones. The smaller the contract, the more known the scope of service is so it's easier to negotiate that way.

The last payment type is a Unit Cost, and this is the one that's used the least in comparison to the other three.

Unit Cost contracts are more appropriate for work with repetitive tasks. It is used most often for commercial lab contracts that include repetitive testing, or also maybe for bridge inspection.

During the negotiation stage of a Unit Cost contract, the scope of work is broken down into discreet tasks and deliverables. Rather than hours, we then identify how much we're willing to pay for this test, and we agree to that up front.

So we have Test A, B and C, we know how much we're willing to pay, and we have an estimate of the number of tests that are going to be run, so we track that based on the work product.

As the work gets done, we get the reports and then we can pay for that test. As the bridge inspection reports are done, the report is submitted, we're able to say we have this number inspections done, we can now pay for them. That's how those are done.

As mentioned in our March meeting, for contracts over the last five years, 17 percent were Cost Plus Fixed Fee, 24 percent were Lump Sum, 28 percent were Specific Rate, and 13 percent were Unit Cost, and 18 percent were identified as various or included a multiple of either one of these.

MR. NICHOLS: And you're going to take all those categories and break them down by dollars?

MR. SAENZ: Yes, sir.

MR. NICHOLS: I don't mean the actual dollars, percent by physical contracts and then percent by dollars, just approximate.

MR. SAENZ: I think as I've explained, each one of our contract management processes that we have is a little bit different and we have extensive documentation to ensure that what we're paying on these consultant contracts for the work performed is well documented.

Some of them take a lot more work than others, and some of them require a lot better in the negotiation arena than others when we're agreeing to pay for something up front. But staff has been working and our people across the state have been working hard to make improvements in that area.

We are looking at setting up some training to help our people in the area of negotiation, as well as contract management. Camille has taken that on so that's something that's coming to help give our people some additional tools so that they can do a better job at what they're doing.

This concludes my presentation. I trust that staff has provided some thoughts about future enhancements that we're looking at as well as some of the things that we're doing. We're here to answer any additional questions you may have.

MR. WILLIAMSON: Who's first?

MR. JOHNSON: I just have one question, Amadeo.

Several times during the presentation you mentioned the time element involved and that some of the recommendations for change might extend the time period.

As everyone is aware, project delivery is a very sensitive issue for the commission, for the department and the traveling public.

In our view, is there an impact to our ability to deliver projects, given the changes that are recommended?

MR. SAENZ: There may be some. I think what probably will outweigh, we can always take care of time by planning a little bit further in advance, but I think by trying to incorporate and get the innovation and get the best approach to the development of the project will allow for that project to be developed faster up the road and hopefully get us a cheaper project faster.

We might have to invest some time up front, I guess is what I'm getting at, but we can address that by starting the process sooner internally, but in the long run I think we will get much better designs that will save us both time and money in the future.

MR. JOHNSON: Thank you.

MR. NICHOLS: Three things. One is I know we talk about the emphasis to increase primary contracts in areas of DBEs and HUBs and that, but I know we've also discussed literally just trying to spread the business out better.

And I'm not trying to take Commissioner Houghton's words, but trying to have some more in the small business category, medium business category, as well as large business category, trying to literally spread it out in more categories, makes it healthy, I think, statewide.

And I know we've had a lot of requests from the legislature, whenever possible on any type of contract work we do, try to spread that work out the best we can.

So when we're talking about emphasizing getting more primary contracts to HUBs and DBEs, let's don't forget the small and medium size businesses that don't fall in those categories.

Number two, I liked a lot of the things you were talking about recommending. I think rewarding for innovation is something I think is extremely important. I like some of the other ideas you had.

As Commissioner Johnson was saying, I think you had indicated incrementally working in that direction. We've got to get the work out, we're in a big ramp-up period, so advanced planning, trying to get those projects going earlier, identifying the projects and getting that process going earlier would be real helpful.

One thing -- I know there were some comments made in House Transportation as Turner's bill was coming up -- that is something that's always concerned me and I've had a number of communities as well as legislators ask about, and that is the ability if there's a good consultant in a particular area, why do we always so often go outside that area to get a consultant to do a job inside an area when there's businesses there.

In other words, if we were going for it and the best happened to be outside that area, I understand that. But all things being equal, I think it's important to try to use businesses that are inside a particular area.

And in that transportation thing, I think the term they used that could be considered would be mileage could be considered. I took that to be a geographic preferredness.

But you don't want to get somebody that's not good, I understand that.

MR. SAENZ: Local knowledge of the area by the firm could be another criteria that we could use.

MR. NICHOLS: Or close proximity to the job which is local knowledge, I guess. But I didn't hear that mentioned anywhere.

The third one, I guess I just need to do a little more investigating on this. When I was asked some questions about is the same overhead and profit going to the subcontractor that's a DBE or HUB, and the answer kept coming back yes, it is.

Maybe I need to go back and talk to some of the firms I've talked to that weren't DBEs or HUBs that said they felt like they've been really squeezed as a subcontract. And if they're getting the same overhead and profit, I don't understand how they would say that.

So I'm going to go back and do some checking.

MR. HOUGHTON: I am too, because I hear the same things.

MR. NICHOLS: How can they be squeezed if they're getting the same profit and overhead?

MR. JOHNSON: It might be volumetric.

MR. SAENZ: It may be that what it is they may not be getting all the work that they maybe projected that they were going to have because of maybe changes.

One of the things that we've heard is sometimes -- and that's the reason that we started the process that we want to have a very definite known scope when we initiate the project.

MR. WILLIAMSON: Amadeo, I want to be sure that Robert's question and your answer match up.

What I heard Robert say was I talked to people who play primarily the sub game and they don't indicate to me that they're being paid the same overhead and profit as the prime is being paid for the prime's work. That's what I heard Robert say.

Now, what I heard you say earlier in the presentation is that we know what the sub's proposal is and the sub gets paid at the rate that he or she proposed.

MR. SAENZ: That's exactly right.

MR. WILLIAMSON: That's not necessarily what the prime is being paid for the contract. So maybe we need to revisit the answer, Camille.

The question was if I'm the prime on High-5 and if Robert is the water engineering sub, Robert didn't propose to TxDOT, he probably proposed to me.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And whatever system Robert and I use for me to pick between him and Ted is my business, not the state's business. But whatever Robert did propose to me as a cost, as a product, as an overhead, as a profit, I then turned in with my proposal to you, Amadeo.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: I didn't necessarily take all of my subs, Ted and Hope and John and Robert and Mike and Steve, and roll all that up and say therefore my overhead is X.

MR. SAENZ: No. We calculated your overhead based on --

MR. WILLIAMSON: My share of the contract.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Robert, I think you're hearing it right. When I turn to you as a sub and say I want you to do the water engineering but all I can stand is $45 an hour and 6 percent overhead and 9 percent profit, and if you don't like that, well, then I'll go deal with Ted.

MR. HOUGHTON: That's what I'm hearing. I'm hearing worse than that, though.

MR. SAENZ: What we get from the prime, we get his proposal and his rate schedule, his overhead rate for his company that's applied to his work. We also get the information for each sub-provider that includes the hours that they think, this is their rate schedule, this is their overhead, and this is the profit.

What we normally do, across the contract we use the same profit, but overhead rates are used depending on the individual firm.

And of course, we get all that information and we also get that H-2 form, and that H-2 form, all the parties that are part of that team have signed that, that this is what we are submitting.

What I'm thinking, Commissioner Nichols, is what may be happening -- and I'm hearing some of this -- is we go out and we say for this contract we're going to have 15 percent surveying. So the prime will go out there and hire a DBE or HUB surveyor and says there's going to be 15 percent of this $2 million contract is going to be yours because there's 15 percent surveying.

As we go through the project development, instead of 15 percent surveying, things change and there may only be 5 percent surveying.

MR. NICHOLS: That's volumetric, though.

MR. SAENZ: That's volumetric. So now instead of getting 15 percent of $2 million, he's going to only have 5 percent of $2 million.

One thing we may want to do, and I think we can do, is maybe we can, as we go out to promote and get more HUBs into our business, is we can get some information from them to see how they think things are running and see what improvements we can make based on what we hear from them.

MR. NICHOLS: There's still a disconnect there, but we'll get it resolved. We won't get it resolved here today but we'll get it resolved.

MR. WILLIAMSON: Members?

MS. ANDRADE: Amadeo, thank you and your staff for bringing forward some good ideas to be more inclusive of women- and minority-owned businesses.

I have to tell you that I have to salute our San Antonio office. I think out of six evergreens, they gave four out to women- and minority-owned businesses, so we'll watch that.

But hopefully this discussion will also prompt the prime to not squeeze out the subcontractor because we're now watching them.

The other thing that I want to mention is that we may recommend to our Business Opportunities Office to partner up with chambers of commerce and professional associations that can help us communicate this message that we're indeed open for business for small and minority- and women-owned businesses.

So again, thanks for your hard work.

MR. SAENZ: Thank you. Staff are the ones that did most of the work. I get to stand up here. They figure that you won't ask too many questions if I'm up here, you'll ask more questions of them, but I think it's the other way around.

MR. WILLIAMSON: Anything else, members?

(No response.)

MR. WILLIAMSON: Two things. Do we ever have a situation where Maribel goes out with a letter of intent and the engineering section of the Dallas District responds?

MR. SAENZ: No, sir.

MR. WILLIAMSON: Why not? Or more to the point, do we ever have a situation where the Childress District goes out with a letter of intent and the Fort Worth District responds?

MR. SAENZ: What we have tried to do in working with our districts, we have tried to take work -- for example, Childress and Odessa were doing design work for Laredo, and we discussed that with our district engineers, to let us know if they can handle some work because we'd like to make sure -- it does two things: it allows us to do the work in-house and it allows us to improve our level of expertise in that different area.

So we do have several districts that do work for other districts.

MR. WILLIAMSON: Do big cities and big counties have their own engineering staff?

MR. SAENZ: Some do and some have small firms and they consult most of their work. But we do have some cities that have engineers in-house and they have performed some engineer work for us.

MR. WILLIAMSON: So we do invite other units of government.

MR. SAENZ: Now, they do not propose on our contracts, we normally work that through the city, where the city, in case they're doing a project that's really on their system -- they're going to have to pay for it anyway -- what they say is we will give you the set of plans at no cost.

MR. WILLIAMSON: Well, maybe we need to develop the habit of asking districts across the state if they have available engineering time that they would want to propose to respond to other districts who need engineering work. That's one thing.

The second thing is maybe we want to start asking Houston and Dallas and San Antonio and Austin if they want to start proposing on some of our narrow, environmental, hydrological, those kinds of things where we know the city and the county does have some expertise.

MR. SAENZ: That's two good ideas we will pursue.

MR. WILLIAMSON: You know, in any effort to change things, to bring innovation in, to drive down costs, to expedite product delivery, there's a certain amount of pain involved in all of this, and the pressure to default to inertia is intense.

I noticed throughout your presentation words or phrases such as: we want to study a little bit more, we'd like to think about this, we'd like to research that.

Here's what I want, Mike. I want, beginning tomorrow, changes made. Changes that are quick and make sense in the districts, let's get about it, and advise each of the commission members in writing as each of these changes are implemented.

The changes that need to be studied, tell us how you're going to study them. The changes that require administrative or commission approval, please interface with OGC and begin to draft the appropriate changes and begin to have the public hearings as necessary.

I don't want to sit on this. We are commanded by our leaders to build projects faster, cheaper and better, that's the only way we can do it in an era of limited resources, and I don't want to waste any time, I don't want to drag this out.

I know it's going to be painful, it's painful for all of us. So let's get about it.

MR. SAENZ: We will do that, yes, sir.

MR. WILLIAMSON: Okay. What else? Let's move on.

MR. SAENZ: Thank you.

MR. BEHRENS: We'll go to agenda item number 7 under Traffic Operations, and this will be a recommendation to work with Texas Municipal Power on a railroad track that's going to intersect our highway system. Carlos?

MR. LOPEZ: Good morning, commissioners. My name is Carlos Lopez and I'm director of the Traffic Operations Division.

MR. WILLIAMSON: Do you need us to raise that podium for you?

MR. LOPEZ: No, it's just fine. It's already set on the highest level, I think.

MR. WILLIAMSON: Well, I was just wondering if following Amadeo that you might need it to be raised some.

MR. LOPEZ: Amadeo has grown recently in stature.

(General laughter.)

MR. LOPEZ: The minute order before you authorizes the department to enter into agreements with the Texas Municipal Power Agency for construction of a spur track that will intersect the state highway system at several locations.

The spur track would cross future State Highway 6 frontage roads at the State Highway 6 and FM 2154 intersection and under existing grade separations at State Highway 30 and FM 244. Lights and gates would be placed on the State Highway 6 frontage roads.

The Texas Municipal Power Agency is operated jointly by the cities of Bryan, Denton, Garland and Greenville.

The track will connect one of the agency's existing power plants to rail lines currently operated by the Union Pacific. This will allow coal to be hauled to their Grimes County power plant. The spur track would typically be used by about three trains per week.

TMPA has agreed to fund 100 percent of the cost associated with these improvements.

We recommend approval of this minute order.

MR. WILLIAMSON: So Carlos, if one or two or three of us up here were in the natural gas business, why would we want to help coal get to this plant any faster?

MR. LOPEZ: It would be to help the overall economy of the state.

MR. WILLIAMSON: I guess we would want to put our personal interests behind the public's interests. Right?

MR. NICHOLS: Do you need a motion?

MR. WILLIAMSON: You bet.

MR. NICHOLS: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: For the record, note Mr. Houghton is absent.

I a 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. LOPEZ: Thank you, commissioners.

MR. BEHRENS: Agenda item number 8 concerning the Trans-Texas Corridor, this is the recommendation to appoint some additional members to the Trans-Texas Corridor Advisory Committee.

MR. WILLIAMSON: Wait. You babysit all morning long and you walk up here without bringing your daughter.

MR. RUSSELL: That's my adult supervision, Chairman.

MR. BEHRENS: I was assuming that was his bodyguard.

MR. WILLIAMSON: What's your name?

MR. RUSSELL: That's Koryn. She's coming up today seeing what an exhilarating job dad has today. She's pretty darn excited so far.

(General laughter.)

MR. WILLIAMSON: How old is Koryn?

MR. RUSSELL: Koryn is nine. She went over and visited Commissioner Nichols last summer, thoroughly enjoyed his office. She thought it was Mutual of Omaha's Wild Kingdom.

MR. WILLIAMSON: And honey, that is not typical rural Texas. Come to Weatherford, we'll take you out to Adell; me and Mark Riley, my judge, we'll take you out to Adell, that's rural Texas.

(General laughter.)

MR. RUSSELL: Thank you, Chairman. Good morning, commissioners and Mike and Steve.

For the record, I'm Phillip Russell and I'm the director of the Turnpike Division.

As you will recall, last month you appointed the first 21 members of the Trans-Texas Corridor Advisory Committee.

The purpose of the advisory committee, of course, is to provide recommendations and advice to the department as we develop the corridor.

The minute order we bring to you today would add two additional members to the advisory committee, and they'll be representing the Tarrant County area and they're included in Attachment A in your packet.

I'd be happy to address any questions you might have.

MR. WILLIAMSON: Phillip, are we aware have the commissioner and former mayor been notified, or do we know?

MR. RUSSELL: Not to my knowledge.

MR. WILLIAMSON: Questions or discussion or comments about this, members?

MR. HOUGHTON: Move to approve.

MR. NICHOLS: 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.

MR. RUSSELL: Chairman, do we want to recognize those two individuals, or what would be your preference?

MR. WILLIAMSON: The two individuals are current Tarrant County commissioner, Glen Whitley, and former Fort Worth mayor, Kenneth Barr, both of whom have been active in transportation matters and interacting with the state for many years, and representing the western part of the Metroplex which probably was not as well represented as it might have been under other circumstances when we made our first decisions.

MR. RUSSELL: Very well. Thank you.

Agenda item 9(a). Commissioners, back in December we initiated a request for qualifications to begin a CDA process for the development, design and construction of our toll collection system statewide. We call it a toll integrator.

We received five firms who have responded to our RFQ. We've since short-listed those to three, and in the intervening time we've spent some time working through the contract documents, working with those three firms. And we anticipate going out for request for detailed proposals in May.

As you all remember, before we can do that, or in the request for proposal we are required to state what the stipend would be for that proposal.

So this minute order would authorize a stipend that would allow us to pay up to $100,000 to the unsuccessful proposers for that particular stipend.

And I'd be happy to address any questions you might have on that one.

MR. WILLIAMSON: Members, are there questions or comments in this regard after hearing the information?

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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. RUSSELL: Commission, item 9(b) relates to LBJ I-635 in Dallas.

As you all I'm sure know, LBJ I-635 is a highly congested facility in north Dallas. The district has been working diligently on this project for many, many years. It was a critical project when I was there in the '80s and '90s.

The district has done a very good job in building community consensus. They've achieved environmental clearance on that project.

And so this minute order would allow us to essentially initiate a CDA on that particular project which would be the reconstruction and adding additional tolled main lanes essentially from North Central Expressway back to 35.

Matt McGregor, the project manager is here. I think Bill Heald and his staff have done a very good job again of building that consensus. They've worked closely with Michael Morris from the MPO and others in the area who would support a concession type CDA on this particular project.

So again, at this time we would recommend approval to begin a request for qualification CDA process for this project.

MR. NICHOLS: So moved.

MR. WILLIAMSON: Would you withdraw that?

MR. NICHOLS: I'll withdraw my motion.

MR. WILLIAMSON: Phillip, is this the first time since the old TTA days that we've gone out and requested a CDA?

MR. RUSSELL: No.

MR. WILLIAMSON: Other than the toll collection booths?

MR. RUSSELL: Toll integrator and toll booths, I think were solicited. I'm trying to think on the 130.

MR. WILLIAMSON: But that was TTA.

MR. RUSSELL: Chairman, most of those, if not all, have been unsolicited proposals. This is clearly a large project. If it's not the first -- I think it probably is the first.

MR. WILLIAMSON: Correct me if I'm wrong, but I'm thinking this is the first time that the agency, the department has turned to the private sector world and said, we want a CDA on this project. I think this is a pretty important day.

Well, you know, I'm always on the lookout for normal personal language versus engineering language. You're an engineer, are you not?

MR. RUSSELL: Yes, sir.

MR. WILLIAMSON: In addition to being a lawyer.

MR. RUSSELL: Yes, sir.

MR. WILLIAMSON: Is the word "split" in the engineering term, is that like -- in the context of transportation, is that an engineering term?

MR. RUSSELL: That would be a highly technical engineering term dealing with the interchange at 35E and Loop 12.

MR. WILLIAMSON: I'm just curious. Do we really refer to the convergence and divergence of two lanes of traffic as a split?

MR. RUSSELL: I think that's in the interest of making this in real people terms so that everyone can understand what we're talking about.

MR. WILLIAMSON: So this is in the context of a real person's terms as opposed to engineering terms.

MR. RUSSELL: Yes, sir, that would be correct.

MR. WILLIAMSON: Questions, members, comments?

MR. HOUGHTON: Do you have a suggested synonym?

MR. WILLIAMSON: We all use that in our vernacular but I don't think I've ever seen it in a TxDOT proposal. The I-35E/Loop 12 split with a lower case "S."

I'm waiting for that motion.

MR. NICHOLS: 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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. WILLIAMSON: Thank you, Chairman.

MR. WILLIAMSON: How much money is that going to be?

MR. RUSSELL: Oh, depending on estimates, somewhere between a billion and a billion-and-half.

MR. WILLIAMSON: This is a big deal and the room is not even full. I'm hurt.

MR. RUSSELL: It's a huge deal and it's a critically important project for the state.

MR. HOUGHTON: Routine around here, billion-dollar deals.

MR. RUSSELL: It's a highly complex project that will take a lot of effort, particularly oriented towards the CDA type project development.

MR. WILLIAMSON: Yes. This will be fun.

MR. BEHRENS: Go ahead, Phil.

MR. RUSSELL: Item 9(c) relates to transportation projects here in the Austin area.

Commission, as you know, the department, the district with Bob Daigh at the helm, working very closely with Mike Heiligenstein at the CTRMA, have been working trying to provide some relief to congestion here in the Austin area.

Back in July of last year, the CAMPO board approved the transportation plan, the 2025 Transportation Plan, and it identified several projects which might be good projects to be developed as a toll road.

This minute order would essentially request the RMA, working closely with the department, Bob Daigh's staff, to begin analyzing five of those projects as to their viability as toll road projects.

And again, we would recommend your approval for this minute order.

MR. WILLIAMSON: Members, we have two witnesses; let's hear from them first.

Mike, do you want to go first?

MR. HEILIGENSTEIN: Yes, sir, Mr. Chairman. Chairman Tesch had to go over to the Capitol for another meeting, so his is set aside.

MR. WILLIAMSON: We'll show Chairman Tesch was prepared to come here and say this is something we're for.

MR. HEILIGENSTEIN: He expresses his regrets.

Again, as Phil said, we are excited about this next round of projects, and let me emphasize that they are MPO approved.

MR. WILLIAMSON: Mike, identify yourself.

MR. HEILIGENSTEIN: Oh, I'm sorry. Mike Heiligenstein, executive director Central Texas Regional Mobility Authority.

And again, these are the projects that were Phase 2 projects already approved by the MPO.

As you know, we've gone through a lot of community input on those projects and we feel like it's incumbent upon us to move quickly and make sure we don't disappoint the MPO and keep those projects moving forward.

The feasibility on these will be paid out of some of the funding that we received in our first bond package. Many of you sat through meetings on those packages and noticed that we had feasibility monies in there. That's exactly what that money was for is to do T&R studies on these facilities.

So we will move forward. We actually have an RFP on the street right now for the traffic and revenue studies.

MR. WILLIAMSON: Questions or comments, members?

(No response.)

MR. WILLIAMSON: Thank you, Mike.

Do you have a recommendation, Phillip?

MR. RUSSELL: Yes, sir. Our recommendation is to approve this minute order.

MR. WILLIAMSON: Members, you've heard the presentation of the minute order and testimony by our good buddy Mike. what's your pleasure?

MR. NICHOLS: 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. RUSSELL: Commissioners, my last agenda item today is item 9(d) which is acceptance of the General Engineering Consultant quarterly progress report on the Central Texas Turnpike Project.

As you know, PBS&J is our general engineering consultant. This is for the period between December 1 and February 28.

The progress on the CTP continues to be very positive. Bob and Tim Weight and the guys are doing an exceptional job of developing and managing this project.

On the traditional side, the Loop 1/45 which are traditional design-bid-build, of course all the design is complete, utility adjustments have been completed, and all right of way parcels are available for construction.

There are seven individual construction contracts and they continue to make excellent progress, even through the very wet year we had last year.

Again, a couple of years left before those are slated to be completed, a little more than two years, in September and December of '07, but right now elements of that project are as much as a year to a year-and-a-half ahead of schedule. So certainly good news from our standpoint.

As to State Highway 130, the department's first billion-dollar project, completion of the design now ranges between 77 to 98 percent between those four individual segments, stretching from Georgetown to south of the airport.

There are a total of 407 parcels of right of way that will be required to construct this project. Offers have been made as of February 28 on 329 parcels -- and again, that's a critical element when the department gets to the point of actually offering a price for those individual parcels -- and out of that amount, the department, again as of February 28, had 245 parcels available for construction.

And so all four of those segments, the first three are slated to be completed by September of '07, the fourth one, Segment 4 is slated to be completed by December of '07, and all are on schedule.

Lastly, just as far as a budget overall, the project still continues to be well under budget. Current estimates, again as of the end of February, was about $383 million under budget. So very good news with some of the other discussions that we hear sometimes.

MR. WILLIAMSON: Members, you've heard the information. Do you have questions or comments?

MR. NICHOLS: I move we accept the report.

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. RUSSELL: Thank you.

MR. BEHRENS: Agenda item number 10 under Finance, we'll recommend that you accept the Quarterly Investment Report for the Central Texas Turnpike Project.

MR. BASS: Good morning again. I am James Bass, director of Finance at TxDOT.

And as Mr. Behrens stated, agenda item number 10 is the sister report to the one that you just heard from Mr. Russell. It is the Quarterly Investment Report for the second quarter of Fiscal Year 2005 which ended on February 28, 2005.

At the end of February, after accounting for construction expenditures and interest payments to bondholders, as well as interest earned, the balance of invested funds stood at $1.56 billion.

The details of these investments have been provided to you in the quarterly report.

Staff recommends your acceptance of the report, and I will be glad to answer any questions you may have.

MR. WILLIAMSON: Members, you've heard the presentation and the discussion of the information. Do you have questions or comments?

MR. JOHNSON: Move acceptance.

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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. BEHRENS: Agenda item number 11(a) and 11(b) pertain to pass-through toll agreements with two communities in Texas.

MR. BASS: Agenda item 11(a) seeks authorization to begin negotiations with the City of Port Arthur on a pass-through toll agreement. If negotiations prove to be successful, we would come back to the commission for final approval at a later meeting.

The city has submitted a pass-through toll proposal providing for the city to make improvements to FM 365 and in their proposal the city listed pass-through tolls of $21 million to be repaid based upon actual traffic on the project.

Your approval today in no way would be an agreement to those specific terms but would allow the department to begin negotiations with the city to arrive at mutually beneficial terms which would then bring back to the commission for your consideration.

Staff recommends your approval of this minute order.

MR. WILLIAMSON: Members, we have three witnesses, all in favor of this project.

I always try to make the right guess about the right order, and I think maybe we'll begin with the mayor, if that's okay. A mayor we've seen before.

MAYOR ORTIZ: Yes, sir. A little over two years ago.

Ladies and gentlemen, it's really an honor and a pleasure for me to be here and to have the opportunity to come before you on this project, a project that I personally have been working on for some three years plus.

A project that was started, as I said, some three years plus, with Senator Bernsen, myself, Commissioner Hallmark and some of the other people who saw the possibilities down the years that we would have a great development on Highway 365 in the Port Arthur area.

As you know, over the past couple of years we've also had the misfortune of having six fatalities and we just had our sixth one about two months ago. That's the tragic part of it.

The good part of it is that in the process of trying to get this highway widened, we've had some tremendous development.

Just two weeks ago we had the governor's wife down there speaking for the opening of the $100 million hospital down there. We also have a medical center that has broken ground and will be completed in about six months.

Much to my joy, I also had the pleasure of announcing that day that we are now going to construct a cancer center there. The cancer center will break ground in two months; it will be completed six months after that.

So that's great news for Port Arthur. You know, all the other developments, the Super Wal-Mart, the Lowe's, the Applebee's Restaurant and so forth have been a great shot in the arm for the city of Port Arthur.

As you know, we have tremendous unemployment in Port Arthur with the tremendous amount of minorities that we have, almost 60 percent in the city of Port Arthur. We have one of the highest unemployment rates in the state of Texas at about 14 percent.

But I feel that with this project coming on line, it's going to serve a dual purpose: not only ensure the safety of our people but the safety of those people coming out of that hospital -- which will be about a thousand people now hitting that highway and about another 3- to 500 coming out of the medical center, I don't really know how many coming out of the cancer center because I haven't had any negotiations with them yet as far as what they're going to want to construct that facility there -- but the concept of having that highway widened is going to definitely give people the feeling of security out there on our highway.

Because right now it is so narrow and so dangerous that people even hesitate to go on it, they'd rather go around. But the fact that we're having so many people now in that area, in that 150-some-odd acres that is being developed now, forces people to use that highway.

I know every evening when I travel that highway, it's blocked all the way from Highway 69 West to West Port Arthur Road, it is just bumper to bumper. And of course, when that happens, people get antsy, they want to pass somebody, they want to go on the right off the curb.

And of course, some of the accidents have been because people have tried to pass on the right, they lose control of the vehicle, and they have head-on accidents, and that of course creates the problem we've had over the last couple of years with the six fatalities.

But again, I'm not going to take up your time. I know you know the need for this project and all I can do is look at you and say please help us here in Port Arthur, we need your help, we need this construction project because it will ensure the safety of our people, plus it will guarantee some jobs down there for this tremendous amount of unemployment that we have.

So again, I thank you so very much for taking up this issue. It's been my pleasure to come before you the last couple of years.

I'm hoping that we see ground breaking because I step down as mayor in 2007 so I'm hoping we see ground breaking by at least 2007.

MR. WILLIAMSON: Questions for Mayor Ortiz, members?

MR. JOHNSON: I have an observation. Mayor, it's great to see you.

This project originally a delegation came that you led and Senator Bernsen -- or former Chairman Bernsen, as I call him -- was here, and I want to salute you and I see the Jefferson County judge back there, and John Barton.

This is one of the attributes of the beauty of this pass-through tolling. Clearly when you bring a delegation, it's a high priority to the community or the region, and it still has to get in the funding queue, and recognizing how important it is for your community and to utilize this approach whereby in essence you're going to pay for its building but will be reimbursed, I just salute you for being here.

It typifies one of the things that we've been preaching, you know, you can go one way and you sort of have to get in the line because we do have limited resources.

MAYOR ORTIZ: Yes, sir, I realize that. And as I said, I believe the City of Port Arthur and Jefferson County have put their money where their mouth is. We've already invested $1.6 million into this project between the city and the county.

I think that this would cap the highlights of my time in office as mayor of the city for the past seven years. I've got two more years to go, as I said, and this to me would be the best thing that ever happened during my administration, despite all the tremendous advances we've done with all the other projects. This would be something that I could look forward to.

MR. JOHNSON: Great.

MR. WILLIAMSON: Okay. Thank you, Mayor.

Waymon D. Hallmark, Jefferson County commissioner. Welcome.

MR. HALLMARK: Thank you very much. I'm Waymon Hallmark, county commissioner of Jefferson County.

And I won't repeat a lot of the things that the mayor has said, but we are definitely behind this project, all the commissioners and the commissioners court. Hopefully we can do this.

And thank you again for sending us Mr. John Barton and Mr. Jack Mosher for the help that they have been to us in that area. They're very great to work with and they're very dedicated, and we appreciate them so much. And hopefully you'll find that we can have this project.

I know we've seen Commissioner Nichols down there many times and Commissioner Johnson on some of the things that they've had helping us on access roads on Interstate 10 and on Highway 69 between Beaumont and Port Arthur, and of course on Highway 87 and 82 leaving out of Port Arthur to Sabine Pass and to Louisiana to keep that highway from falling into the ship channel.

We need the fuel coming in so we can't gripe about it very much, but thank you very much.

MR. JOHNSON: I thought Highway 69 ran between Beaumont and Jacksonville.

MR. HALLMARK: Well, it goes there too.

(General laughter.)

MR. JOHNSON: Thank you, Commissioner.

MR. WILLIAMSON: Thank you, Commissioner.

Judge Griffith. County Judge Carl Griffith, Jefferson County judge.

JUDGE GRIFFITH: Mr. Chairman, members. I really appreciate your taking this under consideration. The vision and wisdom that I think -- and I'm not sure who to credit it with -- this commission to recommend to the legislature to allow these pass-through tolls is visionary for Texas.

And you have done some great things for Texas and I know very little funds to do that with. I've worked with several of you and I think you do a tremendous job.

And we appreciate your consideration on this. As the mayor said, there's a tremendous amount of growth in that area. It is a bright spot in Southeast Texas and it is desperately needed.

But without the vision that you had to send this to the legislature, the opportunity wouldn't be here for us to do this. And so we would appreciate your consideration of this, and thank you very much for your time.

MR. JOHNSON: Great to have you here.

MR. NICHOLS: That's kind of what I was going to say. We very much appreciate all of you taking the time to come here. It's a long way to get here and it's a long meeting sometimes.

JUDGE GRIFFITH: Well, I do it like you, you know, I brought those three with me.

MR. NICHOLS: We appreciate it.

JUDGE GRIFFITH: Thank you very much.

MR. WILLIAMSON: Thanks for coming.

JUDGE GRIFFITH: You get so little credit, I think, and take a lot of beatings for having so little money and everybody wants it.

So thank you so much for what you've done, and tolling is a great thing for Texas and I know it came from this organization.

MR. WILLIAMSON: Thank you.

MR. HOUGHTON: Thank you, Judge.

MR. WILLIAMSON: County Commissioner Hallmark, I wanted to thank you for pointing out Mr. Barton and our employees. We always appreciate when someone comes out and publicly thanks one of our 14,732. We appreciate it.

James, do you have a recommendation for us?

MR. BASS: Yes. Staff would recommend your approval.

MR. WILLIAMSON: Members, you heard the information and you've heard the testimony.

MR. HOUGHTON: So moved.

MR. JOHNSON: 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. Thank you, gentlemen.

MR. BASS: Agenda item 11(b) is a story of a good news/bad news minute order.

The good news is we have a strong and aggressive transportation partner in the City of Weatherford who is committed to solving transportation in their area to the point that they are willing to initially finance a number of projects in their area and then seek reimbursement over time based upon traffic for $52.4 million of that expenditure.

The bad news is that I need to extend an apology to the commission and to the City of Weatherford in that we ended up with a drafting error in the agenda item, and that amongst all of the projects that they aggressively are trying to tackle in their area, in trying to streamline that minute order, we omitted one of the projects.

We have visited with our general counsel and we think the best thing to do so there's no question going forward is that we bring this minute order back to you next month for final approval.

But if you will, I would like to describe the terms of the tentative agreement that we have reached to see if you might have any comments or concerns on that tentative agreement before we come back next month.

As I mentioned, there are several projects in the --

MR. WILLIAMSON: Before we go too much further, let me ask, are the three citizens from the Weatherford area just now finding this out?

MR. BASS: No, sir. They discovered it earlier this morning, unfortunately.

MR. WILLIAMSON: So they didn't just get caught by surprise. I'm not going to have to go pick my mayor up off the floor and take him to the cardiac unit, am I?

MR. BASS: No. I believe they are aware of the oversight on our part.

MR. NICHOLS: It's not something we can amend from the dais?

MR. BASS: We checked that. Unfortunately, since the omission occurred in the agenda item, we cannot do it. If it had merely been in the minute order, it would have been something we could have corrected here from the podium.

MR. HOUGHTON: We can't approve this and add that item on the next month's agenda?

MR. BASS: I think we will bring it back for official final approval next month.

MR. HOUGHTON: In other words, no. Right?

MR. BASS: What I would like to do, if I may, is lay out the tentative agreement that we've reached and then welcome any comments or concerns that you might have with those parameters.

There are a number of projects that the city would initially finance and be responsible for constructing, and then once they are open to traffic, the state would reimburse the city at a rate of 15 cents per vehicle mile for actual traffic.

And each year that all the roads were open, we would have a guaranteed minimum payment of just under $3.5 million and a maximum payment of $5.244 million, guaranteeing that the payback of this $52.4 million will occur sometime between 10 and 15 years from opening to traffic.

Having said that and the unfortunate nature that I described before, I would welcome any concerns or comments that you might have on that tentative agreement.

MR. JOHNSON: One question I have, James, is they're reimbursed on a vehicle mile fee. Our one existing agreement with Montgomery County on the numerous improvements they made, is the calculation there for reimbursing also on vehicle miles or is it just on vehicles?

MR. BASS: It's on vehicle miles as well.

MR. JOHNSON: Thank you.

MR. WILLIAMSON: Mr. Monroe, are we authorized to take testimony on this or comment?

MR. MONROE: Richard Monroe, general counsel for the department. Yes, sir, certainly.

MR. WILLIAMSON: I have Mayor Tison. I guess, Mark, you didn't want to speak?

Mayor Joe Tison. This is the school superintendent I was telling you about. All three of my baby girls got educated under this guy.

Joe, first of all, I apologize. That was the first I'd heard about this, and I hope you won't come back down, I hope that you'll say what you need to say and let us take care of it next month because we will take care of it.

MAYOR TISON: Thank you. Joe Tison, mayor of the City of Weatherford.

It is indeed an honor to be here because this is a day that we have long anticipated. We've anticipated it so long, in fact, I don't think we mind waiting another 30 days -- if I don't have to come back down and do this again.

I do want to thank the members of the commission, Chairman Williamson, Mr. Behrens, Mr. Simmons for all the work that you all have been doing with us over the past at least 18 months that I can recall.

Since I became mayor five years ago, the number one priority in the city of Weatherford was traffic, and we've done little about that in five years and it's been a constant concern of all of the citizens.

During that time, and effective this summer -- in fact by the end of July -- we will open just south of the interstate where all of this traffic is now going, a half-million square foot shopping center with over 3,000 parking spaces, and right now cars can't even get out there about 12 hours of the day because of the backup of traffic that exists.

The City of Weatherford does not have the means to take care of this type project, and fortunately, through legislation that occurred in the last legislative session, we found out about the pass-through tolling opportunity.

And when I learned of that, I immediately contacted Commissioner Williamson at the time and asked him if he could update us on what the possibilities of this project would be, and needless to say, we were excited about the opportunity to participate.

In doing this project, the city of Weatherford has about 23,000 residents, Parker County is nearing 100,000 residents, and I think every one of them come down South Main at some time during every day, seven days a week.

And out of frustration, we have been pursuing every opportunity that we can and anticipated even being on the agenda down here, I believe it was last May.

That being said, I appreciate all the comments, Mr. Johnson, and others that I'm hearing today using the word to expedite projects, et cetera, so that we can move the travelers' needs forward, and I appreciate that attitude coming from this commission.

I want to personally thank Mr. Behrens, members of your staff. Amadeo Saenz has been working with us for over a year on this project. Maribel Chavez has been at our call every time we need to meet, we go meet with her, she comes to meet with us. And we cannot say enough about the efforts of TxDOT members in working with us on this project. And we do understand that new legislation takes a lot of time to implement.

It was our dream and our goal, Chairman Williamson, to be the first in the state of Texas to do this because personally I wanted to honor the vision that I know you have had for the state of Texas as a state representative, a member of Parker County, the city of Weatherford, a long-time friend.

This was a personal thing with me to participate in this project with all of you to highlight that vision, and I thank you. And it is an honor for me to stand today before you.

That being said, we'll wait another 30 days. We look forward to your approval.

I cannot again say enough about how much I appreciate the commission initiating this method of getting some things done that would not have happened in Weatherford in my lifetime -- I sincerely mean that. Thank you very much.

MR. WILLIAMSON: Members?

(No response.)

MR. WILLIAMSON: Thank you, Joe. It's good to see you. Thanks for those nice words.

Judge Riley, Parker County Judge Mark Riley.

JUDGE RILEY: Thank you, Mr. Chair. You know how dangerous it is to invite a politician to a microphone, especially one that's been in radio. But thank you very much.

Again, I just want to support Mayor Tison and the City of Weatherford, and the great County of Parker supports the great City of Weatherford in doing what it's doing for the citizens because we want not only our citizens but those in the surrounding counties to be able to spend their money in that new retail development and make it much easier to do so.

And we thank you for your consideration and your work with the city, and again, for what this commission is doing across the state and being innovative and making it easier for all of us to begin projects that before we wouldn't have been able to do.

So I thank you very much and appreciate your work for all of us.

MR. WILLIAMSON: Thank you, Judge. Questions for the judge?

JUDGE RILEY: I think your road is being paved while you're gone today. That's a local joke. He has an order that says do not pave the road in front of my house. It's a county road.

MR. WILLIAMSON: I may be the only state politician who has requested no pavement in front of his house. I figure the worse it gets, the slower they'll drive.

We can't take any action on this but let me take a moment to tell you the dilemma and we'll move on.

The interstate, when it was designed and constructed, bypassed Weatherford, and I wasn't there at the time but I'm told we were one of those communities that didn't particularly use that as a negative. The interstate was a pass through highway and we didn't see that it was any big deal for us.

And over the years we just kind of stayed stable and grew a little bit, slowly but kind of like we wanted it to, but eventually we did grow to the interstate.

Five or six years ago, seven -- I think it was after Joe retired -- the school district decided to build a high school -- as you're looking at the page, at the bottom left from the blue circle -- on the interstate on some dedicated land, donated land.

And shortly after the high school, Lowe's and who else -- Target, all the big box stores decided to just go right down the road and go ahead and build some big box stores. And so suddenly, within an eight-year period, with no planning opportunity for the city or county at all, our high school was on the same road as all the big box stores.

And the 100,000 population figure the mayor used sort of understates the problem. Just on the other side of Tarrant County but as close to us in some cases as they are to Fort Worth are another 40- or 50,000 people.

So suddenly all these people are going through this one intersection and it was two lanes, undivided, soft shoulder as it left the interstate going by this store area. It is just an impossible situation.

So if I'm able to convince you to support this over the next 30 days, I'll be grateful. And if I'm not, that's the way it goes.

MR. JOHNSON: You might be a permanent resident here.

MR. NICHOLS: Yes, you might find out just how much pull he has.

(General laughter.)

MR. HOUGHTON: For the record, where do you live on this map?

MR. WILLIAMSON: I live 9.7 miles straight north of that left blue circle. I live on the other side of town.

MR. HOUGHTON: North of 180.

MR. WILLIAMSON: Yes. You're looking at the downtown intersection. I live 3.2 miles further north from that.

MR. WILLIAMSON: Well, if I'm looking for the Ponderosa, do I go up Highway 51?

MR. WILLIAMSON: You go up 51.

MR. JOHNSON: Or do you live at South Fork?

MR. WILLIAMSON: No, I don't live at the Ponderosa or South Fork. The north side of Weatherford is the less income side of town.

MR. HOUGHTON: Less affluent?

MR. WILLIAMSON: In Weatherford, yes, less affluent side of town. That's okay, it's no problem. I love it out there.

MR. NICHOLS: We do very much appreciate you coming all the way down. We know that's a good ways.

MR. WILLIAMSON: And thanks for bringing my stuff; I needed these papers. We'll correct things next month, I think.

MR. BEHRENS: We'll have it on the agenda next month.

Agenda item number 12, our State Infrastructure Bank.

MR. BASS: Item 12 seeks final approval of a loan to Hidalgo County in the amount of $1.38 million to pay for right of way for the reconstruction of Farm to Market 1015.

Interest will accrue from the date funds are transferred from the SIB at a rate of 3.75 percent, with payments being made over a period of eight years.

Staff recommends your approval.

MR. WILLIAMSON: Members, you heard the information.

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 number 13 is under Right of Way and this is the recommendation to authorize negotiation for options on purchasing right of way along US 290.

MR. CAMPBELL: Good morning. 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 agenda item 13 to authorize the use of option contracts for the potential future purchase of right of way required for US 290 East.

The minute order provides the authority for the Austin District engineer to negotiate the execution of option contracts and to expend funds for option fees and related expenses.

The timely execution of option contracts to effectively purchase development rights during the interim prior to scheduled right of way acquisition provides a strategic opportunity to realize lower acquisition costs, less complicated negotiations, and thereby a more efficient acquisition process.

Staff recommends your approval of the minute order.

MR. WILLIAMSON: Members, you've heard the information.

MR. JOHNSON: John, do we have some transactions that we anticipate -- have we identified some specific transactions that we anticipate doing?

MR. CAMPBELL: Yes, sir. There has been some interest shown by the public.

MR. HOUGHTON: That's good news. So moved.

MR. JOHNSON: 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. Thank you, John.

MR. BEHRENS: Agenda item number 14 is our contracts for the month of April on maintenance contracts and also highway and building contracts. Elizabeth.

MS. BOSWELL: Good afternoon. For the record, my name is Elizabeth Boswell. I am the Construction Section director for the Construction Division.

Concerning agenda item 14(a)(1), authorization of this minute order provides for the award or rejection of highway maintenance contracts let on April 7 and 8, 2005 whose engineer's estimated cost are $300,000 or more.

Staff recommends rejection of one project as follows. This project is located in Bexar County and provides for slope repair work on IH 37 in the vicinity of Fair Avenue.

Staff recommends rejection of this contract due to insufficient competition as only one bid was received on this project and the bid submitted was approximately 23 percent over the engineer's estimate.

Staff recommends award of all remaining projects as shown in Exhibit A.

MR. WILLIAMSON: Members, you heard the information. Are there any questions of Elizabeth?

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.

MS. BOSWELL: Concerning agenda item 14(a)(2), authorization of this minute order provides for the award of highway construction contracts let on April 7 and 8, 2005, as shown in Exhibit A.

Staff recommends award of all projects as shown in Exhibit A.

MR. WILLIAMSON: Man, oh, man. We're kind of getting consistently over now, aren't we? I guess the prices of steel and oil and gas are starting to hit home.

MS. BOSWELL: Just a little.

MR. HOUGHTON: So moved.

MS. 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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MS. BOSWELL: Thank you.

MR. WILLIAMSON: Thank you.

MR. BEHRENS: Agenda item number 14(b), we have two contract claims that will be presented recommending approval. Amadeo.

MR. SAENZ: Good afternoon, commissioners, Mr. Behrens, Mr. Simmons.

For the record, I am Amadeo Saenz, assistant executive director for Engineering Operations, also chairman of the Contract Claims Committee.

The minute order that you have before you for item 14(b)(1) approves a claim settlement for a contract by W.W. Webber, project IM 10-8(146) in Chambers County in the Beaumont District.

On March 10 TxDOT's Claims Committee considered this claim, made a recommendation of settlement to the contractor; the contractor has accepted.

The committee considers this to be a fair and reasonable settlement of the claim and recommends your approval.

If I could answer any questions concerning this claim.

MR. WILLIAMSON: Members, you've heard the presentation. Are there any questions of Mr. Saenz?

MR. NICHOLS: 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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. SAENZ: Thank you. The second minute order before you approves another claim. This time the claim is for a contract by Rosiek Construction Co., Inc. for Project BR 98(430) in Trinity County of the Lufkin District.

Again, on March 10 the Contract Claims Committee considered this claim, made a recommendation of settlement to the contractor; the contractor has also accepted.

The committee considers this to be a fair and reasonable settlement offer and recommends your approval.

I'd be happy to answer any questions you have on this claim.

MR. JOHNSON: I have a question, Mr. Chairman.

MR. WILLIAMSON: Please.

MR. JOHNSON: Is this crossing the Trinity River on Highway 19?

MR. SAENZ: Yes, it was on State Highway 19 in Trinity County, and we had a slope failure on part of that project while the project was under construction. We had to go back and remedy that and that extended the contract.

We did settle the portion of the extra work as a result of the slope failure. The contractor, after the project was completed, submitted a claim for overhead costs that were not part of the original change order, and that's what came to the claim for us.

When we looked at the delays of the extra work, we could not see as much as the contractor had said he had been delayed, so this is what we thought was a fair and equitable amount.

MR. JOHNSON: Thank you.

MR. HOUGHTON: So moved.

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: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. BEHRENS: Agenda item number 15 concerning Building Construction, this will be for conditional approval for a lease with option to purchase to do improvements to our Houston District office complex. Steve.

MR. SIMMONS: Good afternoon, Chairman, commissioners, Mr. Behrens. For the record, my name is Steve Simmons, the deputy executive director of the department.

This has been a very long process, starting back at last legislative session by House Bill 7 in the 78th Legislature which authorized us to move forward with a lease-purchase arrangement with a private entity for the construction of the new Houston District headquarters complex.

Most of you know that the Houston District complex is composed of several buildings in several campuses that does not allow for maximum efficiencies in operation.

The buildings are between 40 and 50 years old and they're separated by highly traveled roadways that prevent good movement of our staff between the buildings.

This allows us to build and finance the essential project with a lease with option to purchase, or what we call LWOP, and I'm finding more and more that LWOP stands for more things than just lease with option to purchase.

We also use it here in TxDOT as leave without pay, and I was just dealing with Representative Keel the other day, and it's also life without parole. So when we go before the Bond Review Board for life without parole, I hope they use the right terminology.

(General laughter.)

MR. SIMMONS: The selection of the developer started with an RFQ in January of '04, with a request for proposal in April of '04, and three firms submitted their proposals in July of '04.

At your commission meeting in September you approved us to move forward to negotiate a contract with Gilbane for this process, and in January of this year '05, you authorized the department to go forward to the Bond Review Board for this bonding ability.

Phase 1 of the project will provide for the construction of a new office building and lab and parking structures, and Phase 2 will renovate the existing buildings on the existing campus at Washington Avenue and Katy Road.

The proposed schedule design and the plan specifications and estimates will be completed in September 2005, and Phase 1 of the actual construction will be completed in March 2007 and Phase 2 in May of 2008.

We have an estimated cost of the project of $37,105,749, and this amount does not include the finance cost. The amortization for the financing, we are seeking 20 years with an estimated interest rate of 4.4 percent with an any time call option.

The developers propose financing through the issuance of certificates of participation, or COPs, and TxDOT's annual rent payment of $2,910,000 will be distributed by the trustees to owners of the COPs. TxDOT rental payments will be made twice a year in October and June.

This is a conditional approval and is necessary for the commission, before the Bond Review Board approval, to demonstrate the commission's commitment so that marketing and pricing efforts for the COPs could occur while pursuing BRB approval and commission final approval.

Subject to BRB approval of the lease with option to purchase, TxDOT will finalize pricing, financial terms and all agreements and then will present final transaction documentation to the commission for approval next month in May.

If the commission approves final lease with option to purchase documents, then it will be presented to the Office of Attorney General for their approval, and subject to approval by the Attorney General, final closing with the developer is anticipated one week thereafter.

And before I recommend approval, I want to recognize the staff from our Maintenance Division, our Finance Division and our Office of General Counsel. You can imagine that this is the first time we've done this and we want to make sure we do it right, and I want to commend the staff for their hard work.

And with that, I recommend approval of this minute order.

MR. WILLIAMSON: Members, you have heard a presentation on the proposed "Steve Simmons Office Building."

MR. HOUGHTON: I thought it was the "Commissioner Johnnie Johnson Office Building."

MR. WILLIAMSON: Maybe it was.

MR. JOHNSON: The "Bald Eagle"?

(General laughter.)

MR. JOHNSON: A question, Steve. You mentioned that there were some instruments that were callable at any time. Which instruments are those and who are they callable by?

MR. SIMMONS: I'll ask John Munoz to come forward. I also have John Warwick back there from the Maintenance Division with any particular answers.

MR. MUNOZ: For the record, my name is John Munoz. I'm the deputy director for the Finance Division.

The debt instruments that we are going to finance --

MR. JOHNSON: Was this question too tough for the Finance Division director?

MR. MUNOZ: James has been working on some big picture stuff. This $37 million is a half day's work or breakfast for James these days; he's working on some bigger projects than that.

(General laughter.)

MR. MUNOZ: But anyway, the certificates of participation, they'll be callable by TxDOT at any time. We'll be able to make some prepayments, partial or complete on those.

MR. HOUGHTON: With no penalty. Right?

MR. MUNOZ: With no penalty.

Any other questions?

MR. JOHNSON: Good answer.

MR. NICHOLS: I was just going to say that I think this whole process from the idea, the approval from the legislature, the way it was handled, is just great. So hats off to everybody. And I hope we're trying to repeat this on some other building projects or something similar?

MR. SIMMONS: We do not have the authority but we are seeking it, or there is some legislation that we're tracking that would give us this authority.

MR. NICHOLS: Well, I think we're going to have something of a very positive nature to show them as to what we did with it last time or this time.

MR. BEHRENS: And I think, like you suggested, Commissioner, we could maybe look how we can consolidate several smaller building projects together under the same process.

MR. NICHOLS: There's a lot of maintenance offices.

MR. HOUGHTON: Who gets to sell the excess property, our excess property when we abandon those other buildings?

MR. SIMMONS: Well, in the Houston case there will not be any abandoned property. When the original concept was provided out there, we knew we had to buy additional right of way in order to make it fit, and fortunately it came up across the street from our existing complex, and so we purchased that. But all the existing right of way will be utilized.

MR. JOHNSON: But aren't we in some leased space further down?

MR. SIMMONS: Yes. And thank you, Commissioner Johnson, for that reminder. We are in lease space and we've been in lease space for, I believe, almost 20 years at 8100 Old Katy Road, and we also have a 99-year lease on another piece of property for a dollar a year. So we're maintaining that piece of property.

MR. NICHOLS: When we move into this piece, we'll be able to get out of the other?

MR. SIMMONS: We'll get out of the lease.

MR. NICHOLS: How much are we paying on that other lease?

MR. SIMMONS: We can check into that and get back with you.

MR. NICHOLS: That's all right. But that will help make the payments.

MR. SIMMONS: Yes.

MR. HOUGHTON: Congratulations. Move to approve.

MR. JOHNSON: 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 number 16 is our routine minute orders. They're all listed and outlined in your book, they were all duly posted as required, and we would recommend approval of the routine minute orders.

MR. JOHNSON: Could I bring up one issue or question?

MR. BEHRENS: Yes, sir.

MR. JOHNSON: I noticed that one of these is the sale of some surplus right of way on Interstate 10 on the westbound frontage road just east of Katy.

I assume that when we go through the exercise of what is surplus and what is not, we also review the way and from whom a parcel was acquired. I mean, where I'm going here is if we had a dispute on value and even a long hard negotiation or an eminent domain proceeding, and then we turn around and sell a property right back to the same person or group that we purchased it from, that issues like that are taken into consideration.

Am I on the right track?

MR. BEHRENS: You're referring to 16(d)(7)?

MR. JOHNSON: Well, I'll have to look on my notes here. Correct.

MR. BEHRENS: This is actually a sale of access rights where they're requesting a driveway. And you know, we've had our previous discussions about access, and this is one where you appraise it with and without access to come up with the value.

And Steve mentioned also before there was a railroad track there so there was no access to that abutting property on the north side.

MR. JOHNSON: Generically, is what I'm saying or suggesting done? I mean, we try to look at all aspects?

MR. BEHRENS: Of course, usually when we're involved in surplus property, say if it's 40 years after we originally purchased it, we're dealing with current prices and current appraisals to make sure that we get the highest and best value for what we're turning loose of.

MR. JOHNSON: Have we ever engaged an attorney to represent us, an outside attorney? I'm being a little facetious here.

MR. BEHRENS: We use our attorneys and also the AG's Office to help us in these negotiations.

MR. JOHNSON: Thank you.

MR. WILLIAMSON: Anything in the remaining items that would affect any of the commissioners personally that you're aware of, Mike?

MR. BEHRENS: Not to my knowledge, Chairman.

MR. WILLIAMSON: Okay, members. You heard the explanation. Questions or comments?

MR. JOHNSON: So moved.

MR. NICHOLS: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

Do we have open comment matters, Mike?

MR. BEHRENS: We have no one that has submitted any cards to speak in open comment.

MR. WILLIAMSON: Do we have any reason to consider an executive session?

MR. BEHRENS: No, sir.

MR. WILLIAMSON: Is there any other business to come before the commission?

(No response.)

MR. NICHOLS: I move we adjourn.

MR. JOHNSON: I 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. First time we finished this early in a while. It is 12:31 p.m. and this meeting stands adjourned.

(Whereupon, at 12:31 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: April 28, 2005

I do hereby certify that the foregoing pages, numbers 1 through 176 inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Penny Bynum before the Texas Department of Transportation.

__________05/03/2005
(Transcriber) (Date)
On the Record Reporting, Inc.
3307 Northland, Suite 315
Austin, Texas 78731