COMMISSION MEMBERS:

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

STAFF:

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

PROCEEDINGS

MR. WILLIAMSON: Good morning.

AUDIENCE: Good morning.

MR. WILLIAMSON: It is 9:06 a.m., and I would like to call the March 2006 meeting of the Texas Transportation Commission to order. It is a pleasure to have each of you here this morning with us.

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 4:13 p.m. on March 22, 2006.

Before we begin today's meeting, I would appreciate it if we would all take a moment to grab our pagers, cell phones, Blackberries and all personal electronic devices, please reach into your pocket or purse and put those on the silent or vibrate mode so that we won't be interrupted by an important communication event.

(Pause.)

MR. WILLIAMSON: Thank you very much.

Before I turn to my fellow commissioners for opening comments, I would like to call your attention to the upcoming Texas Transportation Forum which will be here in Austin on June 8 and June 9. This will be the first of an annual event that the department, the Association of General Contractors, and other private sector industry partners will sponsor to offer the opportunity for transportation affiliates of all types to meet, talk and share information about the future of transportation in our state and what's going on in the rest of the country and the world that we might can learn from. Each of you are invited to attend; we would look forward to that.

There are postcards with more information about the forum located out at the registration desk in the lobby. I urge each of you to pick up a card and come attend with us.

Now, as is our custom, we will open with comments from each of the commissioners, and we'll start with Commissioner Houghton. Ted?

MR. HOUGHTON: Good morning, everybody. Welcome. Looking forward to a full agenda, it's going to be a lot of fun today. We had a lot of fun yesterday, Mr. Chairman, announcing a significant rail project.

But good morning. Should I leave it up to you to recognize an old associate? I don't mean old, O-L-D, but old associate.

MR. WILLIAMSON: We'll do that in a moment, yes.

MR. HOUGHTON: All right, very good. Thank you.

MS. ANDRADE: Good morning. I'd also like to welcome everyone to our March meeting, and thank you for caring so much about our transportation needs in the state of Texas.

MR. JOHNSON: Well, I'll echo what my colleagues have said. It's a delight to have you here and it's impressive to see the number of people who have a great interest in transportation matters of this state. We do have quite a varied agenda today which I find to be more the case than the exception. We're extending our area of concern and what we have to deal with over a lot of different areas, and to me, that's a sign of progress.

I think I now see who Commissioner Houghton was referring to, and this is sort of like playing Where is Waldo, but I'm going to leave that up to the Chair to recognize a great friend and a former colleague.

MR. HOUGHTON: Commissioner Johnson, what is the over and under today on the length of this meeting?

MR. JOHNSON: Well, since it's not daylight savings time yet, I'll shoot 2:30 out there and then let you take a side.

MR. HOUGHTON: All right.

(General laughter.)

MR. WILLIAMSON: You guys, I tell you. I echo the comments and associate myself with the comments of my fellow commissioners. Thank you for taking the time out of your life to be with us and help participate in the forming of transportation policy in this state.

Before I go any further, I need to call your attention to our registration system for testifying or offering comments to the commission. We have two postcards out at the registration table in the lobby -- that's the same table that our Transportation Forum cards are located on. If you're going to testify on an agenda item, I need for you to fill out the yellow card and tell us which item you intend to testify on. If you're going to testify in the general comment period at the end of the meeting, I need for you to fill out a blue card, and again indicate which item you wish to speak on.

In any event, because our meetings are long and we do want to hear from everyone, those who agree with us and those who don't, we would appreciate if you try to limit your remarks to three minutes.

I want to start the meeting this morning by welcoming a group that is visiting with us specially, but I don't want to recognize just yet the transportation fellow associated with this group. Would the Jacksonville Leadership Group stand up, please?

Now, Jacksonville, the last time I heard, that's over on the western side of Louisiana, or is that the eastern side of Texas? I can't ever remember.

(General laughter.)

MR. WILLIAMSON: Jacksonville is an upper East Texas community that is -- is Gretchen Wilson from Jacksonville, the country-western singer? Lee Ann Womack. Anyway, the home of Lee Ann Womack and the home of what will soon become one of the finest transportation senators the State of Texas has ever been served by, Robert Lee Nichols. And Robert, would you stand up? Robert Nichols, former commissioner.

(Applause.)

MR. WILLIAMSON: And if we're real lucky, he'll tell us a few jokes here in a minute and it will seem like old home day.

We do have an important meeting today. To launch the meeting -- I'm catching Amadeo by surprise, I hope he can answer my question -- to launch the meeting, I'd like Mr. Saenz to come to the microphone, I want to ask you a couple of questions. And if you need to help him, Mr. Behrens, that's okay.

In either fiscal or calendar year -- I don't care which, whichever one you feel comfortable answering in -- 2000, about how much money did the state and it's regional and local partners, as far as we know, spend on constructing new capacity on the state highway system? An approximation is good.

MR. SAENZ: 2000 new capacity, probably we were spending, I was thinking, like $300 million, $400 million.

MR. WILLIAMSON: Three to $400 million on new capacity. And new capacity reduces congestion enhances safety, improves air quality, extends economic opportunity to all of our citizens, and prevents us from driving on potholes. Correct?

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: In either fiscal or calendar year 2007, what will we likely be spending on new capacity in the state?

MR. SAENZ: I think in 2007 we will be spending between $800,000 and a billion dollars, because we're using the new tools.

MR. WILLIAMSON: $800,000 or $800 million?

MR. SAENZ: $800 million. I'm sorry.

MR. WILLIAMSON: Between $800 million and a billion on new capacity.

MR. SAENZ: I've given you a wide range.

(General laughter.)

MR. WILLIAMSON: And was that the case in '05 and '06 and will that be the case in '08 and '09, as far as we can tell?

MR. SAENZ: In '05 and '06 we've been able to accelerate our mobility projects through the use of the new tools, the Mobility Fund as well as the Proposition 14 bonding authority where we can bond our gasoline tax fund, and of course, some of it is new money. We're using up the new money. We're going to run out of the Mobility Fund, and of course then we can't use Mobility Fund because the money that's coming into the Mobility Fund will pay the debt.

So we've in essence kind of created a bubble between '05 and '08. In '09 we'll be able to accelerate the program, but after '08 and '09, we're going to go back to really less than what we were letting in the 2000 and 2001 and 2002.

MR. WILLIAMSON: Unless, of course, the Texas metropolitan mobility plans that we invested in in the past four years kick in and projects like 36 and 288 and 121 across the state are on their way, in which case we'll go past that $800- to a billion dollars.

MR. SAENZ: Yes, then we will do more than that.

MR. WILLIAMSON: Thank you. Mr. Chase?

MR. HOUGHTON: Mr. Chairman, may I ask a follow-up question to Amadeo? Does that include what the RMAs are doing in the state?

MR. SAENZ: No, sir.

MR. HOUGHTON: Let's say if you take CTRMA.

MR. SAENZ: CTRMA, their project, I didn't include that in our numbers because the CTRMA project 183 is not an on-system project, that's separate and apart.

MR. HOUGHTON: But when you talk about total mobility in Texas, you could add those, layer those on top.

MR. SAENZ: Yes, sir, you could add those. And again, they're utilizing the new tools that we have been given.

MR. HOUGHTON: Right, the legislation that was passed.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: I would apologize for catching you off guard, but after five years, you should be prepared for these things.

Mr. Chase, we'll see if you're prepared.

MR. WILLIAMSON: Now, I just took Mr. Saenz through a quick discussion about the difference in 2000 and 2006 on the amount of money we were helping supervise across the state in new capacity. Is it the case that we are at the end of building our Strategic Plan for transportation in the state?

MR. CHASE: I apologize.

MR. WILLIAMSON: Is it the case that we are near the end of building our Strategic Plan for the next few years for transportation in the state?

MR. CHASE: The staff is dangerously close to being finished with it.

MR. WILLIAMSON: And does the Strategic Plan match our legislative appropriations, legislative agenda as much as possible, our operational plan, the UTP?

MR. CHASE: Absolutely, and we're working closely with the Finance Division to match it up.

MR. WILLIAMSON: And what are the goals that that Strategic Plan will be focused on?

MR. CHASE: Reduce congestion, enhance safety, economic opportunity, clean air, and increasing the value of our transportation assets.

MR. WILLIAMSON: And what strategies have we adopted to support those goals?

MR. CHASE: We have adopted --

MR. WILLIAMSON: I'm sorry -- identified. We've identified private sector investment, that's one of our strategies?

MR. CHASE: We'll use our new financial options to build transportation projects, like private sector partners. We will empower local and regional leaders to solve local and regional transportation problems. We will increase competitive pressure to drive down the cost of transportation projects. And we will demand consumer-driven decisions that respond to traditional market forces.

MR. WILLIAMSON: And then the last thing that this body needs to identify and then we need to adopt in our Strategic Plan will be the tactics that will underlie those strategies.

MR. CHASE: Yes.

MR. WILLIAMSON: And those tactics are the legislative tools. And what sort of time line are we dividing those tactical decisions out over: short-term?

MR. CHASE: Short-term, mid-term, and long-term solutions. For example, the problems match up with the type of solution.

MR. WILLIAMSON: An example of a short-term tactic would be?

MR. CHASE: An example of a short-term tactic would be -- an example of a mid-term tactic would be the pass-through tolling, pass-through financing agreements; long-term would be the Trans-Texas Corridor; short-term -- and my memory is coming up a little short.

MR. WILLIAMSON: Would be that be when we redefined our categories from 36 to 12?

MR. CHASE: Exactly.

MR. WILLIAMSON: And quit telling the districts which projects and instead gave them a budget allocation?

MR. CHASE: Exactly, and allowed the regions to match resources with projects and not make all of those decisions have to occur here at this level.

MR. WILLIAMSON: Thank you very much.

Members, the reason I needed to take us through this, Mr. Jackson, one of our great lawyers in the department, reminds me that we had talked about this plan now for a year and we have it in various phases of implementation, but the commission itself has never formally spoken about the Strategic Plan, matching it to the legislative appropriations request, matching it to the operational plan.

And when Mr. Chase presents our plan to us -- which actually was started under the leadership of Mr. Johnson six years ago -- we'll need to be prepared to formally from the dais tell the State of Texas this is our plan by 2030 to reduce congestion, improve safety, provide economic opportunity, enhance the value of our assets, and improve air quality in the state. We are doing some significant things today that exactly match that Strategic Plan.

We take you through this because it's important -- we have to say everywhere we are that between now and 2030 the state will be $86 billion short of the investment necessary to have a transportation system that really will reduce congestion and improve air quality, enhance safety, bring jobs to this state, and prevent us from driving on potholes, and we have a plan to address that shortfall and be done with it by 2030.

If everyone will focus on that plan, if we'll work together as a team, we can make some significant improvements in the transportation system in this state over the next 24 years.

Often in government, words are used but thoughts aren't put into how those words are converted to action. The members of this commission and the employees of this department have a plan to address this problem, and we intend to carry it out.

Mr. Behrens, do you have anything to add?

MR. BEHRENS: Well, certainly I can assure you that the employees of the department are behind this plan and have helped develop the plan under the direction of the commission, and I guess having sat up here a while and been with the department a long time, we all know what the need is in the State of Texas and we know that we have to do some of these things to continue to enjoy what we have had back in the history of transportation in this state.

So we're all excited that we have these opportunities that we can deliver on this plan, and again, like the chairman says, we do need to partner with all of you. We need all of your help to help us move forward as we present these new ideas around the state.

MR. WILLIAMSON: Thank you, Mr. Behrens.

Okay, members, the first item on our agenda is the approval of our meeting minutes from the last meeting. 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?

MR. BEHRENS: We'll go to agenda item number 2 which is our discussion items for this month. We'll have four of them; the first two of them will be led by Amadeo. The first one is a status on where we are on the Trans-Texas Corridor 35 procurement process, and also the environmental clearance part of that corridor; and then he will lead the discussion on using CDAs and coordinating with our MPOs and RMAs in using some of these new tools, particularly the public-private partnerships in developing projects and getting those projects on the ground sooner rather than waiting for years and years if we would use our traditional funding.

Amadeo?

MR. SAENZ: Thank you. Good morning, commissioners, Mr. Behrens, Roger. For the record, Amadeo Saenz, assistant executive director for Engineering Operations.

Agenda item number 2(a) is a discussion item to kind of give you a status report of where we are on the development of the 35-TTC project.

Of course, the project involves two processes that we're running parallel. On one side we were doing an independent process of clearing the environmental for a corridor that stretches from the Rio Grande River to the Red River. And we're moving forward on that process and we're very close to being able to put out the draft environmental impact statement corridor which is basically we'll reduce the study area from the 50- to 60-mile wide study area to a 10-mile further study area where the corridor will eventually lie.

It is still in draft. Once that is posted out as part of the environmental impact statement requirements, the Federal Highway requirements, we will have a series of public hearings throughout the state, collect some additional information. Then we take all that information, as well as any other studies that are going on at the same time, and then we look at what we had proposed as draft, and if there's changes that need to be made, we will then make those changes to the draft EIS and send them to the Federal Highway Administration as a final environmental impact statement, and then they will allow us to then post it as a final. And that will allow us to now have identified the 10-mile corridor.

As far as time frame, we're in the draft phase right now. We figure once we get approval to move forward, it will take us somewhere about a year to get through the second phase of tier one where we will have a final environmental impact statement on the location of the corridor, the location of the refined study area. I need to continue to say that because the Trans-Texas Corridor is not going to be ten miles wide. We've refined the study area to ten miles, and then within those ten miles we will identify where the roadways are going to go, where the railroads are going to go, where the utility lines are going to go, and such and so forth.

So that's where we're at on that part of it.

The other side of it that's running parallel, as you may recall, we entered into a comprehensive development agreement with Cintra-Zachry. That agreement was executed on March 11, 2005. Their fast task, as part of that agreement, was to basically put together and finalize a master project development schedule or a plan, as well as a master financial plan.

From the business side, they were going to identify projects that they would determine to be near-term, mid-term, and long-term, and they would then tie the financial of how those projects could be developed.

Basically, the original CDA sets a general framework of how we would work with Cintra-Zachry and what was required of them and when it would be done and how it would be done. For example, as we move forward through the project development process, either one of us, we will first review their master plan. And as they're developing their master plan, if they identify a project that is a potential good project that they feel is ready for development, they would send us a letter -- very similar to what we got yesterday for the railroad project -- that says we've identified a project and we feel this project, based on the early work that we've done, is ready for development; it's a project in our master development plan, it's in the short-term portion of that plan, and we think that it has merits and we'd like to further study or further move forward with this project.

And that basically triggers a process. That submittal comes to the department, we evaluate their submittal, we agree whether the project is in the master development plan, we agree that it is a near-term project and there's a need out there, and then we respond to them. And then what comes into place was we had the original CDA that identified the original scope of work like I talked about that had the master development plan and the master financial plan, and then from that, those projects are identified, and projects can be identified by them or be identified by us.

Once they've come to us -- like they came yesterday on this railroad project -- that we've identified a project, we think it's ready for development, then we get into the next box of our funnel which is to develop a facility implementation plan preparation agreement. And basically what it is, we now start looking at that project from the development side and the financial side, and identify how the project is going to be paid for, is the project going to be done through a self-performance mode or is it going to be competed out. We will then look at all the risks and allocate those risk factors between ourselves and the potential developer, and we do that in this agreement.

And this agreement may require that we collect additional data to be able to make those decisions, and we will put in place a structure where our developer will go out there and collect additional financial data, additional project development data, cost data for the project, different methodologies for financing the project, and then present those to us so that we can make a decision whether we want to continue with this project. That's under that agreement.

And of course, we're going to require them to do some work so we would set up a structure that we would be able to compensate them for the work that we're asking them to do.

At the same time, on the environmental side, now we know that we've found a project and if we feel that it needs to be carried further, we would then be doing the environmental work to take that and finish the environmental work for that project. So we would then start doing what I would call the tier two, or the necessary environmental work to clear the actual location of that project. So again, we'll continue with the two-pronged approach.

As we get that agreement in place and we start collecting that data, if we think that the project bears merit, we will then move forward and ask the developer to put together a facility implementation plan. And for this facility implementation plan then, in essence, he's developing a work plan of how this project could be rolled out. He would include the schedule the budget for the project, some of the preliminary engineering numbers, the facility procurement terms, the business terms that we could use to develop this project.

From all of this, and at any time, the department would determine whether that project would be done as a self-performed project by Cintra-Zachry, or we would go out and compete that project. So we will be coming back to the commission with our recommendation as this project would come forward and make a recommendation whether we would move forward as a self-performed project under the original CDA, or that we would open it up for competition.

Of course, let's say and if we were to continue -- and I'll use the example of continue under self-performance, but it would be the same process. If we go out to compete it, we would have an inner step here, we would go out and compete the project and bring onboard the best value developer to develop this project for us in the future.

But once that's done, then the development work begins, where under the separate contract or under the self-development contract, the developer would basically put together the complete work plan, and then we would, in essence, close the project for financing, and then we could start basically building the facility.

And that's kind of the process that we follow for all projects.

Yes, sir?

MR. WILLIAMSON: I want to stop while you've got that up on the wall and ask a few questions that I know the answer to but for clarification for those who might be watching either live or via the ozone.

Be sure and tell us what NTP means.

MR. SAENZ: NTP means Notice To Proceed.

MR. WILLIAMSON: And that's an engineering term. In simple person's terms, what does that mean?

MR. SAENZ: In simple person's terms is we review their facility -- we put in place a facility implementation preparation agreement, it is executed, and now this is your authority to proceed with doing the work that we've outlined under this agreement.

MR. WILLIAMSON: So a thing called Notice To Proceed is in writing?

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And it's a letter from us to the developer that says you may continue.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: So it's like a work order, similar to a work order.

MR. SAENZ: Right. It is a work order for them to start work.

MR. WILLIAMSON: Now let's talk about this notion of self-performance versus compete because that's always a confusing matter for some people. Self-performance, under the terms of our contract, means the developer is going to put up all the money, take all the risks?

MR. SAENZ: Yes, sir. Under the minute order that approved the 35-TTC CDA, there was a requirement in the minute order that said if there was any public money applied to this project for things other than environmental studies, I believe some of the right of way and some of the environmental mitigation, then those projects would have to be competed out, the developer could not self-perform any of those projects.

We still have the flexibility that even if the developer plans to finance the project 100 percent with private money or private equity, we still have the authority to be able to determine whether we want this project to be self-performed or competed out.

MR. WILLIAMSON: So for example -- because one of the criticisms, and I think it's a legitimate criticism we often hear, is well, this Spanish firm -- which is actually a partnership between a Spanish company and a Texas company -- this Spanish firm has a monopoly on all these assets, they're going to own all these assets in Texas. Are they going to own any assets?

MR. SAENZ: No, sir. We will own the assets. The right of way is purchased in the name of the state, the road will be built as TxDOT's. They will have a right to operate that facility, maintain that facility for the period of time of this CDA.

MR. WILLIAMSON: And if we think we can get a better deal, even though the individual construction project is offered to us self-performing, we can say, Well, we don't care that it's self-performing, we think there's a better deal out there on the marketplace, we're going to go to the marketplace and get competing bids.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: So we have the best of both worlds. We have a contract that permits us to let this Spanish-Texas partnership build assets on their own nickel, available to Texas citizens if they wish to use it, but they're not forced to use it, or we can choose to not let them build it on its own nickel and instead put it out for bid and let the entire world compete for that asset.

MR. SAENZ: That's correct.

MR. WILLIAMSON: I think it's very important to clarify what self-performing and compete means.

MR. SAENZ: That is exactly right.

MR. WILLIAMSON: And one more question, and I'm sure the other commissioners have questions. At every step in the process of this reverse triangle or upside-down triangle I'm looking at, are there people other than TxDOT employees watching this process?

MR. SAENZ: Yes, sir. We very closely have been working with, one, Federal Highway Administration, and we have Federal Highway Administration as our partner and included in everything that we're doing. And in fact, almost everything that we do needs to have Federal Highway Administration clearance because what we're trying to make sure is that even though the project is funded with 100 percent private equity, in the future some other work may need to be done to this project -- some expansions, for example -- and we may want to use federal funds, and we don't want to jeopardize the ability to be able to in the future leverage federal funds to do more work on projects of this type.

MR. WILLIAMSON: So an example of that instance that you just described would be that the Trans-Texas Corridor passenger car lanes are built and open between Dallas, Fort Worth, Austin, San Antonio and Laredo, and we decide that we would like to add four exit points for a particular reason to the corridor that Cintra-Zachry, a Spanish-Texas partnership, doesn't wish to add, we might want to add it on our own nickel for reasons not related to the toll road but related to local economic development.

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

MR. WILLIAMSON: And that would be one of the reasons that we would have the Federal Highway Administration reviewing everything that we did.

MR. SAENZ: Right, so that we have the opportunity to use the federal dollars which we leverage at 80 cents.

MR. WILLIAMSON: And as you know, the third most repeated concern about this process is that it's all done in secret and how do we know that it's not a back room deal. Well, the answer is there are people and organizations, other than TxDOT and a partnership of a Spanish and Texas company known as Cintra-Zachry, making these decisions.

MR. SAENZ: That's correct.

MR. WILLIAMSON: And one of those groups is the Federal Highway Administration.

Is there anyone else that's involved in this process?

MR. SAENZ: Of course, it's TxDOT, Federal Highway Administration. Federal Highway Administration oversees all our programs anyway, so it's those two people for Trans-Texas Corridor.

MR. WILLIAMSON: And to what extent do other agencies get involved? Do we ever ask, for example, the attorney general to be involved? Mr. Jackson, could you answer that question?

MR. JACKSON: Yes, the attorney general's office has always been involved in all CDA negotiations.

MR. WILLIAMSON: And do we ever ask the Public Finance Authority to participate in any of this, or is that not necessary? I don't know, I'm just asking the question.

MR. SAENZ: We haven't yet. Of course, just to follow up on Bob on the attorney general, the right of way acquisition process, even though at the beginning the developer will use their resources to go out there and procure the right of way, they have to follow the federal and state requirements, and should that parcel of land not be able to be acquired under the normal process that it has to go to eminent domain or condemnation, then that is done by the attorney general's office.

So the attorney general's office is in there because they want to make sure that all of the work that was done prior to having to take it to eminent domain followed the federal and state process.

MR. WILLIAMSON: And then one more question. With regard to the portion that's moving along the fastest -- I'm going to get to the rail in a moment, I want to talk about just the asphalt or concrete or limestone roadway, whichever it's going to be -- is it the case that the financial arrangement between the state and a partnership of a Texas and Spanish company known as Cintra-Zachry -- is it the case that all of those revenues will go to the partnership, or is it the case that any revenues collected from the use of that road at a certain point will be shared with the taxpayers of the state of Texas?

MR. SAENZ: In the negotiations that we have been working on right now, the negotiations is we are looking to get a concession payment up front, but we also want to be a partner and be able to get a revenue share of every car that uses the facility.

MR. WILLIAMSON: So my questions then can be boiled down to this: Notice To Proceed is a written letter from us to the partnership that says move to the next step; self-perform means the partnership pays all the cash and bears all the risk, the State of Texas, the citizens of Texas are not on the hook for anything.

MR. SAENZ: And we still have the say-so as to whether we want to let them self-perform even under those conditions.

MR. WILLIAMSON: And every step of the way, organizations, other than TxDOT and the partnership of a Texas and Spanish firm known as Cintra-Zachry, are present and watching and approving what we do.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And at no point will any asset we're talking about now -- which is the road -- not include some revenue sharing for the citizens of the state of Texas.

MR. SAENZ: That's correct.

MR. WILLIAMSON: So we know that the things people are concerned about and frequently say publicly is the truth are not always the truth.

MR. SAENZ: That's definitely correct.

MR. WILLIAMSON: And even though they will probably continue to say those untruths, we're establishing for the record one more time the difference between fantasy and reality.

MR. SAENZ: That's correct.

MR. WILLIAMSON: Members, do you have any questions you wish to probe Mr. Saenz about at this time? And please do.

MR. JOHNSON: I have a follow-up. Amadeo, we've talked about the negotiation and the process and the oversight of the Federal Highway Administration. At what point in time does the contractual understanding become a matter of public record? Where in the process does that occur?

MR. SAENZ: Of course, the CDA, the master CDA, the initial CDA is part of public record right now. As we move forward on these facility agreements -- and let's say self-performed because I think that's what spurs a lot of the concern is that this is a negotiation between Cintra-Zachry and TxDOT and no one knows -- once the agreement has been executed, it then becomes public record. And it will define every single term and condition of the project that is being developed, and it's that one facility project that's being developed will have to abide by.

It will identify what the toll rates are going to be, it will identify if there's any non-compete clauses, it will identify the revenue sharing system we're going to be using, it will identify what the toll escalation is going to be set at.

And that's one area where people are concerned, that this toll escalation rate they'll be able to charge us the maximum amount every year. Really, it goes back to one of our strategies, it's market-driven. If you can go out there and you can raise the price on something so much just because you can and you raise it above a limit that people will not use it, guess what, no one comes, so you don't make any money. So the price on the toll road that will be charged over time will be based on what the market deems that they are willing to spend to use that facility.

MR. WILLIAMSON: That, of course, is a toll road which is parallel to an existing tax road.

MR. SAENZ: It's a toll road that is parallel to an existing tax road.

MR. WILLIAMSON: Which drops down to the second of our four strategies which is consumer choice, permitting Texas citizens to choose every day, every minute of every day whether they wish to use the road that their direct taxes partially paid for or whether they wish to use the road that they pay for when they use it, that being the toll road.

John, your question raised an interesting issue that needs to be brought up again. The self-performing facility, that means the partnership of a Texas company and a Spanish company called Cintra-Zachry, is bearing all the risk and putting all the cash into it. The citizens of the state of Texas have zero risk and zero cash in the deal.

MR. SAENZ: That's correct.

MR. WILLIAMSON: But if they say we want the State of Texas to put money into it, we're almost certainly going to go compete it because that's what the law is.

MR. SAENZ: That's what our minute order that approved the CDA.

MR. WILLIAMSON: But what your question highlighted is anything that requires that Doug Peacock's gasoline taxes were used for this road will automatically trigger a competitive process which will, of course, be exposed to the public at every step because that's what a competitive process is.

Because we are spending money to clear the environmental because we have to clear that independent of the consortium, so we are allowed to spend the money we need for environmental clearance, environmental mitigation and a few other things that we can put in there that will not trigger the requirement of compete.

MR. WILLIAMSON: But we do that because we anticipate that we will be clearing more than the footprint for a particular facility, we'll be clearing the footprint for facilities to come -- which ties to directly into this rail thing we'll talk about in a moment.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: I'm sorry.

MR. JOHNSON: No problem. And one other question, Amadeo. At any time during the process, either negotiation or when a final contractual understanding is executed, can the partnership, the Cintra-Zachry partnership, utilize any of the authority, either statutory or not, that the Texas Department of Transportation has, for example, the right of eminent domain?

MR. SAENZ: No, sir, not until we have a project that we've identified that they are going to go out there and acquire.

MR. JOHNSON: But in that case, the partnership does not utilize the right of eminent domain, the state still does.

MR. SAENZ: Yes, sir. It's always the state.

MR. JOHNSON: Thanks. That clarifies my two questions.

MS. ANDRADE: Amadeo, I have two issues. One is with our public hearings. I'm not sure that in the manner that we hold our public hearings it's the most effective, and I'm wondering if we could take a look at that, and perhaps also try to contact the chambers of commerce in each community that we're going to go into and give smaller group presentations. I don't think that when we have a public hearing we get all the right people at that public hearing. It's in the evening, they're crowded, there's a lot of conflict going on, and sometimes people will not attend.

So can we look at the manner that we hold our public hearings and try to do a better job, or try to contact more people in those communities that we're going into and educate them on that?

MR. SAENZ: Yes, ma'am, we can do that. Now, the actual public hearing that is required for the project, when we get the draft -- the approval from Federal Highway to proceed with posting of the draft environmental impact statement and we go out and post it, we're required to hold a series of hearings. Those hearings need to follow a set procedure that's in place, and a lot of times people feel that I come, I have a question, but you can't answer it. Well, that's part of the requirements. We're there to collect the information, we take it back, and then we will provide a written response.

But sometimes people feel that I'm asking you something real simple, it's a yes or a no, why can't you tell me. Well, we have to make sure we follow the process.

MS. ANDRADE: And I want us to abide by the process but I want us to do plus, more.

MR. SAENZ: And that's what I was getting to. There is no reason that we cannot have some additional informational meeting-type or workshop-type deal to be able to put more messages outside of maybe upcoming hearings and provide information so that the public is as educated as they can be before they go to the hearing, and we can do that.

MS. ANDRADE: I'd like for us to look at that.

And the second issue that I've got is when we say market-driven, I think that that's what makes people uncomfortable, the ones that don't know what market-driven means, and so I hear all kinds of stories as I travel throughout the state of incredible amounts of money. So if we could establish a guideline or just something to better explain that, I think it would help, it would appease the public on, you know, it's going to take them $9 every trip -- that's what I'm hearing.

MR. SAENZ: Right. And of course, again, as I mentioned earlier, a lot of people associate that maximum toll rate is what's going to be set automatically, and that's not the case. What's going to be the case is what actually people feel comfortable paying to use that facility. Because you can overprice yourself and no one comes, you can underprice yourself and everybody comes, and if you keep your toll rates much lower and more people come, you probably will make more money. And that's a business balance that needs to be done.

But sometimes it's not the market-driven but it's people thinking that automatically they're going to go to the maximum amount because they're a private company and they're out there to make the maximum profit. Well, I can almost assure you that if they go to the maximum amount and if they overprice themselves, they will wind up making less money at that time.

MS. ANDRADE: I think we understand that, those of us that are involved in transportation.

MR. SAENZ: We need to maybe get the word out better.

MS. ANDRADE: And maybe we can say market-driven with limits, just something to make people feel more comfortable that they're not going go be overcharged.

MR. SAENZ: Yes, ma'am.

MS. ANDRADE: Thank you.

MR. HOUGHTON: Well, Amadeo, you and I are intimately involved in the process of the negotiations and I think we glossed over something that is very important is the participation that we will have for every transaction -- that means every car that hits the gantry -- we will have a piece of that revenue coming back to the Texas Department of Transportation.

MR. SAENZ: Yes, sir, that is correct.

MR. HOUGHTON: And in fact, the $86 billion shortfall that we are facing will get whittled away by that transaction. That's new revenue to the department. I think that is extremely important that we articulate that to the public that are participating, we have not turned over this, we get some up-front payment depending upon what asset we're talking about.

And then that begs the question on -- not the question, but the subject matter on assets like SH 121, 1604 in San Antonio, and others that people want to use our facilities to expand or put toll facilities on where we will, in fact, get a fee or an up-front payment for the use of that asset or right of way which will then, again, whittle away at the $86 billion.

So there's a recurring revenue stream coming in on Trans-Texas Corridor, and soon to be 5 and 6, that will, again, address the $86 billion.

So I don't really have the question because I've been involved in the process with you, but I think we've got to articulate to the public that we are participating in these projects.

MR. SAENZ: Yes, sir, we are participating. In fact, one of the things that we have been doing is to put in place what we call programmatic business terms, that the TxDOT toll program will be guided by these business terms. And one of the key business terms is that we want to make sure that we retain the ability to be able to get the revenue share for every car that uses any facility.

MR. HOUGHTON: It's a good business practice -- when we hear about the demographers, we hear from this dais on the 64 percent anticipated growth in the state -- we want to participate in that new revenue source and those new people that will have a choice and will probably drive on the fast roads.

MR. SAENZ: One thing that I think we've talked about but we might have glossed over it a little bit is on any toll project, and let's say a project that's 100 percent financed by the private sector, they are taking all of the risk. The business terms that we're putting in place allows us to take advantage of up-front cash that's based on what they project the traffic will come, but the revenue-sharing will allow us to make sure that if more people drive on that facility, we get a piece of that also. If it's more than what they projected was going to come, we get a piece of that.

And the way that we're structuring it, the larger that amount, the more people that come, the higher the percentage that we will get. But on the contrary, if the people do not drive on the facility, we have no risk.

MR. WILLIAMSON: Now, we've adopted this forum, this public discussion forum precisely to have this opportunity to talk with each other and with our staff on the record about public policy decisions we'll have to make at some point in the future. I love it that one of the unintended consequences of this is our conversations sometimes take us into areas that we didn't intend for them to and permit us to share information with our partners from Tarrant County, for example, or with ourselves about aspects and things that we think about and never say publicly.

I think the commissioner's suggestion to have more information meetings up and down the footprint of TTC-35 is a good suggestion.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Frequently we get caught up in the public hearing process because we know that's what is required of us by law and we don't want anyone to accuse us of shortchanging the law, and we don't realize that probably our House and Senate supervisors would appreciate it if we would have more informational meetings and the public themselves would learn.

And then the other thing in Ted's conversation with you that it triggered in my mind needs to be fleshed out here. Now, I'm going to catch you off guard again on this one, but we can only hope the answer is the answer I desire.

There is a theory in some parts of the state that if you build a tolled asset, you ought to set your toll rate according to what is acceptable to the leadership, business, community, civic leadership of the area. Is it the case, or would you think it's the case, as a traffic engineer and a lifelong employee, that that was the same thought process that set the gasoline tax rate at 15 and then 20 cents? That was what the political, civic, business leadership felt like was an acceptable level of tax?

MR. SAENZ: This is what we're willing to pay, to put into this pot so that we can get roads built.

MR. WILLIAMSON: And is it the case that that tax rate has generated, all the other market forces considered, population growth, numbers of cars per person in the state, miles per gallon, cars driven, is it the case that that tax rate has generated sufficient cash flow to maintain and expand the system with its use?

MR. SAENZ: The money that we're collecting from the gasoline tax -- I guess at the time when the gasoline tax was set and the system was much smaller, we did a good job and we built some good roads, and that led to people moving to the state of Texas, businesses moving to the state of Texas, more cars, more people. I've got four cars at home, I've got five cars at home -- I've only got four drivers, I don't know what the fifth one is for but it's still there -- it's a standby car, so my wife tells me.

(General laughter.)

MR. SAENZ: So that the tax of those cars driving on our system are forcing us to spend more and more, in fact, almost all of our gasoline tax, just to maintain it.

So in essence, we grew it as much as we could with the money that we had, that led to more people, and now we can't afford to build any more but more people are still coming and we're spending it all with maintenance.

MR. WILLIAMSON: So it is the case that tax rates and toll rates are similar in that if you set that tax or toll rate at an artificial level to admittedly accomplish one good thing -- which is encourage people to use the asset, don't overtax citizens in the state, encourage businesses to move closer to the asset -- you might at the same time, in setting that rate artificially at a certain level, you might also be preempting yourself from improving and expanding that system at some point in the future when more people locate next to the asset or start using it.

MR. SAENZ: Yes, sir. It takes more to maintain our asset.

MR. WILLIAMSON: So I think, Commissioner Andrade, when we speak of market-driven, we need to find a different term to describe market-responsiveness or use-responsiveness. Because I wouldn't want us to communicate to the public that the rates aren't influenced by the amount of use. I mean, that's our key strategy to solving this problem by 2030 is to associate truthfully what it costs to consume a public asset with the consumption of that asset.

And I think there's a growing body of political leadership in this country on both sides of the aisle which recognizes it's in none of our best interest to mislead the citizens we represent about the actual cost of doing business with their assets. If it costs a dollar and a quarter a gallon, that's what it costs; if it costs 21 cents a mile to operate a toll road, that's what it costs. Don't set it artificially low or artificially high, set it where it needs to be in order to match the use and the consumption of the asset with the revenue you're generating for the asset.

MR. SAENZ: I want to touch a little bit on what Commissioner Houghton talked about is the toll roads and our strategies on revenue-sharing that will basically put in place a revenue stream available to build more assets. And we have statewide assets like the Trans-Texas Corridor, like the interstate system, roads that are statewide, the trunk system. Those projects that are on the statewide system that are developed, like TTC, the revenue that we can generate from that can be used to build more of that asset much quicker, as he mentioned, can be used to address some of the connecting roads that we need, the connecting roads that we need, very importantly, to connect back to 35 and the 35-TTC model. Because we need to be able to have an avenue for people to go from one to the other so they can have their choices and have a good, smooth transition.

Now, as we get into toll roads in the regions, like the Dallas-Fort Worth or the San Antonio area, you all have said that the revenue that is generated from those same tolls, in surplus money and in concession fees, stays in the region for the region to identify how they can solve more of their transportation problems with that extra revenue source.

That's very important because the region needs to look at themselves as a whole and say, Okay, if I do this toll road and that toll road and this other toll road, this extra money that's generated, I can then go out there and address these other transportation needs that I couldn't get to under my traditional gasoline tax fund.

And that's one of the things that we're working on and we'll probably talk about that in the next item a little bit, but that's one of the guiding principles behind the whole toll system: the regional toll roads, money stays in the region; statewide facilities, we can use it for the statewide facilities and to address statewide needs and connectivity needs.

With respect back to 35-TTC, where are we now, I kind of outlined the process in general. The CDA allowed them to identify projects that they could use as connectivity projects, and those are very important, as well as projects that may be needed to help finance the remainder of the corridor. And one of the projects that they outlined very early on was the extension of 130, 5 and 6, the extension of 130 from the airport where it's kind of been built to today down to Sequin.

They followed the same process they followed for this rail proposal that they sent us. They submitted that project as we think this is our project, we identified it as a near-term project in our original proposal, we've looked at it, you have already done environmental clearance, we think it's ready for development. And of course, we went back and we agreed with them and we have been working on that project, developing the facility implementation plan as well as the business terms.

And of course, being the first project, it's taking us a little bit longer because we're learning as we go. But we want to get to the point of having a facility agreement which is this is the agreement that's going to build this project with them hopefully in the next three to four to five months. But it followed the process which is a very similar process that will be done for all the other projects.

The beauty of it is that most of the business terms that are general in nature or program related will have already been put in place for the project, and we don't have to go back and start from square one to develop them.

Now, will they be different, can they be tweaked? Yes. We want to be able to have that flexibility because every project has its own merits and its own good points and bad points, and we may have to change what the toll rate or the revenue-sharing rates are going to be depending on the project. But we have now basically the guiding principles of how we're going to negotiate any type of facility agreements or any type of projects.

MR. WILLIAMSON: So we've invested -- we being the department's staff -- we've invested a considerable amount of time and treasure to build a template we can negotiate from, not only with Zachry-Cintra, a Texas-Spanish partnership -- I've got to say it 100 times to get it through people's heads --

MR. JOHNSON: You're at five so far.

(General laughter.)

MR. WILLIAMSON: But we can use that template for any public-private partnership or public-public partnership. For example, anything we would do with NTTA or HCTRA, we could use those business terms.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: One of the criticisms we hear from our construction-engineering community is that we take too long to make up our mind, and our response is well, we're learning a little bit about how to do this and we want to do it right from the start, so if we're taking a little bit longer right now, it's because we are building a knowledge base that will permit us to move faster in the future. This is what you talk about developing standard business terms.

MR. SAENZ: Yes, sir. And then, of course, the beauty of it is that these business terms that we're developing, that we're using, we've been making presentations basically to all the potential developers that are out there to get some feedback, and we'll have those and they're open to the public, so the public knows kind of what is it that we're using as guiding principles and general business terms as we develop CDA projects across the state.

MR. WILLIAMSON: So for example, if we choose to move forward on your recommendation to design-build a project in northern Texas and to solicit a CDA, a different project in northern Texas -- both of which now are more important because of the rail proposal yesterday -- the citizens of those affected communities can know that we're able to move much faster on those two projects than we have moved on some other public-private partnerships before because of what we've learned in that process.

MR. SAENZ: Yes, sir, most definitely. And some of the policies and business terms and technical terms and technical provisions that we've been developing that we're trying to use as we roll out the first CDA, you might say, now those become more standards, and so we've, in essence, gone through a learning curve to have those in place so that future projects can process much, much faster.

MR. WILLIAMSON: Please continue.

MR. SAENZ: Okay. Continuing on the negotiations, we continue to negotiate segments 5 and 6. Our original CDA -- in fact, it was in our request for detailed proposals -- allowed the opportunity for the successful developer to have the opportunity to self-perform up to $400 million worth of projects as part of the 35-TTC. That was one of the things that we put out there to make sure that we enticed people to submit proposals to us.

So the 5 and 6 project was submitted by Cintra-Zachry -- I keep on thinking Zachry-Cintra but it's Cintra-Zachry -- as a project that they wanted to do as a self-performed project, and we are treating that and we are moving forward with developing the project as a self-performed project. But at the point even before we finalize the facility agreement, when we get their final numbers, if we think that they are not giving us the best deal possible -- and the way it was proposed, this deal is still going to be a deal where they are funding all of the project, 100 percent their cost, no cost to the state -- if we feel that based on the work that we've done -- and we have a lot of financial advisors and legal counsel onboard -- if we feel there is still a better deal out there, we still have the right to take that project and compete it.

And of course, everything that we've said, all these business terms would be the same business terms that we would put out so that the remainder of the private sector has an opportunity to submit a competing proposal so that we can look whether we have that.

And that's going to be on every project, and that's very important for people to understand is that this is not just a deal that's done behind closed doors and it's only with them, we always have the flexibility that if we feel that there's a mechanism that through competition we can get a better deal, we're going to take advantage of that.

Any questions on this?

MR. WILLIAMSON: Go ahead, John.

MR. JOHNSON: I have one. I wanted to go back briefly to the discussion about economics. Do we have any studies -- Phil Russell might have more information on this -- about the elasticity of toll rates? I mean, it occurs to me that -- maybe I'm missing something -- that toll rates are probably pretty elastic, that people have a choice and you've priced them out of their zone, they're going to look for an alternative which would be a corresponding path that there was no toll.

Just as if you were driving between here and somewhere and there was one filling station, that filling station charged $5 a gallon for gasoline, you would stop there if you were about to run out of gasoline, but otherwise you wouldn't stop there. I know that Judge Eckels has told me that the Harris County Toll Road Authority has a study, a poll that people would pay 75 cents to avoid two stop lights. Would they pay a dollar, would they pay a dollar and a quarter? Who knows the answer to that unless they're asked.

So I'm wondering do we have any studies or sense of just how elastic toll fees are.

MR. SAENZ: And Phil, you can jump in if you'd like. Every project that we are working on as part of a toll project, one of the studies that we do is we get our financial folks and our traffic and revenue folks to do an elasticity analysis because every project will be a little bit different than the other.

So for example, I think one of the projects that we have been working on in the Dallas-Fort Worth area on 121, the elasticity analysis for that project is that the travelers would be willing to pay I think it was up to 25 cents a mile. And of course, as soon as someone mentions 25 cents a mile, people say What?

But the study showed, and it was done through -- and Phil can probably clue us in as to how they're actually done -- but they're done through a lot of surveys, I believe, and a lot of data that's collected to show that people would be willing to pay that much because it's of benefit to themselves.

So every project we will do an elasticity analysis, and that's what we'll use to kind of start setting potential toll rates.

MR. JOHNSON: There is no certainty, however, that that number is in excess of the continued maintenance cost of a particular road somewhere. I mean, pick one. Twenty-five cents sounds like a lot of money, and it probably is in excess of the maintenance cost at the origin, but as these things age, the maintenance cost goes up. But there is certainly no certainty on all roads everywhere that are considered being tolled, whether it's added capacity or new roads, that that number will exceed the maintenance cost. Is that a fair statement?

MR. SAENZ: That's a fair statement, yes, sir.

MR. JOHNSON: Thank you.

MR. WILLIAMSON: Well, your question and Amadeo's response sort of reinforces the point that needs to be made continually which is in our effort to provide the absolute best transportation system in the world by 2030, we have to remind ourselves, and hopefully our successors will remind themselves, the closer you can get to a market-sensitive consumer-driven system which exactly matches the cost of consuming an asset with the use of that asset, the better served the public is because then the public never has the congestion problems that they've been forced to live with the last 20 years, the air quality problems related to automobiles that they've been forced to deal with the last 20 years, the loss of jobs that have left the state because of the transportation system, the admittedly disagreed about level of safety, and the cracks in the roads. When you match up the consumption of the asset with the cost of using the asset, the system balances itself out.

I want to take the discussion, Amadeo, to the letter we received yesterday.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: There's some things I know that staff needs to hear from the commissioners about how to proceed and how fast to proceed.

I want to establish, once again for the record, the process as we do these things leaves the decision about whether or not this asset is a good thing for the state of Texas in the hands of the professional staff at this point. Is that the case?

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: It's not the case that the political appointees at this point have any role to play in approving or not approving that concept.

MR. SAENZ: That's correct.

MR. WILLIAMSON: It is the case that according to the terms of our Trans-Texas Corridor 35 contract with Zachry-Cintra, a partnership of a Spanish and Texas company --

MR. SAENZ: I think the formal name for that one is Cintra-Zachry.

MR. WILLIAMSON: I'm going to say Zachry first because I'm a bit tired of hearing about a Spanish company only. The Zachry family has a proud tradition of investing in and building assets in the state for generations, and it needs to be emphasized that they are partners in that business.

But it is the case that Cintra-Zachry could not have sent us that letter were they not ready to build that asset.

MR. SAENZ: That's correct.

MR. WILLIAMSON: And they, in all likelihood, although we don't know this, but in all likelihood they already know who some or all of their probable partners are in the building of that particular asset.

MR. SAENZ: Would make that assumption, yes.

MR. WILLIAMSON: So we wouldn't have received the letter in such detail as to things such as the Tower 55 problem in Fort Worth, and recognition of the Union Pacific transfer facility that's being expanded in the Wilmer-Hutchins area, and recognition of the BNSF facility over on the west side of the Metroplex, and recognition of the RTC's preferred freight corridor around Dallas-Fort Worth, we wouldn't have received that letter and they wouldn't have gone into such detail about those matters had they not been sensitized to those matters and prepared to deal with them.

MR. SAENZ: Yes, sir, that's correct.

MR. WILLIAMSON: And in fact, if you read the letter correctly, without saying what they can't say because of environmental laws, soon-to-be County Judge Whitley, they basically have said the rail corridor would be the freight corridor that the RTC has preferred.

MR. SAENZ: Just in the little review that we've done of the letter, and in comparison to what the RTC had put in place as their rail plan, it pretty much matches.

MR. WILLIAMSON: Because one of the concerns we hear out of North Texas leadership, from county commissioners in Dallas County to city council members in Fort Worth, from transportation planners at the COG to county commissioners in Hill County, one of the things we hear is you don't appear to be listening to us and our local and regional desires about where the corridor lay and along what process. And we continue to say we are listening, you are our partners, we know this has to be done as a partnership.

The letter would indicate that what we're trying to communicate to our partners at the local level and the regional level is, in fact, is the case, we understand what they're saying.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: We understand that a direct rail connect to Dallas-Fort Worth Airport is very important. We understand that not forcing expansion of residential construction away from the core of the city centers before we're ready is important. We just have to balance, respectfully, that the RTC's and the individual constituency of the COG's interests against the state's interests and figure out where that balance is for the best interests of both of us.

MR. SAENZ: That's correct.

MR. WILLIAMSON: Did you see anything in that rail proposal that would suggest to you we should not immediately move forward with analyzing and responding?

MR. SAENZ: In my personal reading of it, I did not see anything major that worries me. I think I need some more information and I need information with some additional financial information so that I can look at is this going to be a 100 percent privately funded project. They did mention the possibility of using some of the tools to handle some of the additional costs, because the corridor that was submitted in the letter is a corridor that's grade separated -- that means there's no at-grade crossings -- and so they talk about application of some possible state and federal monies. There's federal loan programs under the Federal Railroad Administration.

So I think what my recommendation -- but I want staff to look at it and really hash it out -- is we need to maybe get some additional clarification with respect to financing, with respect to how the project would be developed, the time frame for the project, I want to see how it fits with the environmental, and then from that we go back to our funnel, we can come back and reply to their letter that says yes, we agree, or we don't agree.

And let's say we agree that the project is a good project, it is in your master development plan, it is in your near-time projects of the master development plan, but I need some additional to make my decision whether this project would be a self-performed project, or for the commission to make the decision whether the project is a self-performed project or a competed project. And we want to also sit down and discuss some of the risk allocations that would be associated with building a rail.

And then at the same time we can learn about what the environmental requirements are going to be that we can then pass on to them so that they can make sure that they've taken that into account with respect to their timing, and then we can determine which direction to go. This will not take that long.

MR. WILLIAMSON: Now, sometime in the next month or two months or weeks or two days, or whenever it is, we anticipate that we will be given permission to proceed on the environmental impact statement for the Trans-Texas Corridor 35 original road route.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: The letter states that all or a portion of this proposed rail facility needs to be in the same study area, but it also states that, to address the Tower 55 problem, it may be that the concentration for the rail project starts west first.

My question is if it's the staff's recommendation that we move forward with this rail proposal, because the entire freight corridor proposed by the RTC lies within our initial TTC study area, will it then be comfortable for us to instruct you to proceed with the right of way clearance if it goes around the west side and the north side of the Metroplex, even if the environmental impact statement on the road portion is in a different direction around the Metroplex?

In other words, to simplify it, if I lived in Dallas-Fort Worth and was concerned about the state not moving or the private partnership not moving fast enough to bring vehicle and rail transportation to my part of the Metroplex, should I be less concerned today knowing that the department will begin clearing the right of way the minute that we make sure that just the rail piece by itself is supportable?

MR. SAENZ: That's exactly correct. Really, the way the 35-TTC CDA is concerned, we have additional work that we can do on connectivity projects within the study area, projects that are needed for financial needs for particular projects on the Trans-Texas Corridor. So this allows us the flexibility to do exactly what you say, where we can do the environmental as a separate environmental document for something that falls out of the immediate area that's needed as a connectivity project -- you can do a separate environmental for that.

So I'll use the example that if the corridor were to go east towards Dallas, and it could be the same example if it were to go west towards Fort Worth, we can do a separate environmental study for the rail elements as a separate project.

MR. WILLIAMSON: And then proceed the same way as we have proceeded on the original TTC-35 footprint which is clear the environmental and begin the right of way work for the entire corridor, not just the passenger lanes or the train lanes or the water line lanes. Because the original vision of the corridor was once you've made a decision that one asset can help you pay for the entire right of way and environmental, go ahead and do that and reserve that pubic corridor for the expansion you know will occur.

MR. SAENZ: That's exactly correct. And that's really the purpose and the reason for having this master development plan up front that identifies all the projects that will be built on the corridor so that you don't wind up clearing something and then having to come back and re-clear for something else. We can clear for all of them and be able to protect the right of way and protect the whole corridor.

MR. WILLIAMSON: Somewhat like perhaps cities and counties do now.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Members? Any questions, members?

MS. ANDRADE: Amadeo, I have a question. Let's assume that we proceed, what time line do you see this getting done, in the next ten years, five years?

MR. SAENZ: I hope it's not ten years because I'll be retired by then.

MS. ANDRADE: Okay. Just give me an idea.

MR. WILLIAMSON: Hey, don't say stuff like that.

MR. SAENZ: I'm talking about 20 years.

(General laughter.)

MS. ANDRADE: Just give me an idea.

MR. SAENZ: Well, I'm going to take a perhaps example that this follows the Trans-Texas Corridor. Under our Trans-Texas Corridor process that we have right now, we are in the draft of the tier one corridor portion of the environmental, we think that if we're released to move forward within a year, we'll have the tier one completed. That triggers that we can start doing the tier two portion which is actually determining those alignments, and that's going to take us probably between a year to two years.

So I would say that from today, three years we would have environmental clearance for the entire corridor, we could then start purchasing right of way and construction could start. So I could start, let's say, as early as three to four years from now. And I didn't have in their proposal what it is, but in their short-term projects, the Cintra-Zachry proposal, they were identifying those projects to be built within the first ten years, so we would say if this is a near-term project, it would be done within the first ten years of the process.

MS. ANDRADE: How many trucks do we think this project will take off our roads?

MR. SAENZ: We haven't done a detailed study, but some of the early and very preliminary numbers that we've looked at, a possibility of taking, I would say, from 8- to 10,000 trucks off the 35 corridor that could use the rail. And of course, it always is going to be a business-driven process.

MS. ANDRADE: And I think it's very pro business and it certainly addresses all our goals. Have we talked to the trucking industry about what we're doing with this?

MR. HOUGHTON: Yes.

MR. SAENZ: Well, we have been talking to the trucking industry about the corridor from the inception. In fact, we even had them as part of the original teams and got feedback from them. But I would imagine that the developers would not have brought us something unless they've already talked to the trucking corridor, just like I'm sure they've talked to rail people, I'm sure they've talked to business people that are using one mode and looking into the possibility of other modes.

MR. HOUGHTON: Did Bill Webb leave? I think he did.

MR. SAENZ: So I would imagine, yes, all of those people have been included, and the developer would not bring us something that they're willing to put their own money to move a project forward unless they were prepared to do so.

MS. ANDRADE: Thank you.

MR. HOUGHTON: Of course, Amadeo gives the engineering perspective. The private sector perspective is that the rail asset could be utilized today. Without disclosing anything to me, they believe they have the commitments to make it work today. So what's the constraint, obviously, Amadeo, is the environmental process.

MR. SAENZ: The environmental process.

MR. WILLIAMSON: I think an additional constraint, Ted, that has been expressed to me is we wanted to be sure you guys (a) were serious, and (b) can pull it off.

MR. HOUGHTON: Right.

MR. WILLIAMSON: And I think now they realize the governor is serious, the legislature is serious, we've gone through three legislative sessions where the serious public has had the best of all opportunities to refashion and recreate and it hasn't changed much.

You know, we're all four independent business people and we all know the most important thing in our business is surety, knowing what the rules of the game are, not that the rules might be against us or for us, but just what they are so we know how to compete.

Well, I think that the truck and the railroad guys and gals are the same way: as long as they know what the rules are going to be, then they're ready to invest and risk their money and compete, and I think that's had as much to do with it as anything.

MR. SAENZ: And I think that this project, the little that we've looked at it, and looking at this thing as part of the proposal, they talk about addressing major issues/problems in the metropolitan areas, and one of the things that we've heard lately is getting rail out of the big metro areas, that has been one of our goals, one of our strategies. And so this project as a whole is a tremendous project, but some of the projects within it would also make a tremendous impact.

For example, if you can address the Tower 55 problems in the Metroplex by putting in that section, that section could stand alone and could be done very quickly and be operating very quickly, as you continue building your corridors out. You can go out there and look at what can you do around Central Texas, in Temple, what can you do in San Antonio. So I think it's something that is very important.

One thing that we've also had, I had the opportunity to make presentations in Mexico in the last three or four months, and one of the proposals that's out there from the state of Nuevo Leon is they're looking at building a rail bridge and extending a rail corridor into Monterrey that they're considering, so that has some potential impact on this. I mean, it's something that we all need to look at.

MR. JOHNSON: Let me mention an observation. I didn't have any questions, but you know, first blush, the view from aloft, if we look at our meaningful and measurable goals, I think this project, this proposal, if brought to fruition, has huge impact -- and I'm guarded when I use words like huge. But when you think about the impact that it's going to have on mobility, on safety, on the environment, on what I refer to as the quality, maintaining and improving the quality of our transportation system, I think the numbers are going to speak for themselves and they are going to be huge, the impact will be. And if you add all that together, the economic impact is going to be even greater because it's synergistic, it's larger then the sum of those parts.

So I think this has great meaning, and you know, if it happens, it's not going to happen soon enough, but it's going to be a tremendous benefit to not only the Metroplex but the main artery of our state and it's going to set a template or an example of what can be done in a lot of other areas, and I would say that a lot of others are going to follow suit.

MR. WILLIAMSON: Mike, I know we have several citizens from North Texas who have to catch a plane and I know that they want to hear the discussion item on 2(b) as well as see our action on some of the other things. So if you don't mind, Amadeo, if you've gone through most of 2(a) that you feel like we need to go through, if we could proceed to 2(b), I would appreciate it.

That's okay, members?

MR. SAENZ: I think I pretty much have covered 2(a). I guess just in moving forward, going back to the 35-TTC current project on Segments 5 and 6 of 130, we're moving forward and we hopefully will have a facility agreement and facility implementation plan approved so that we can determine the actual process of proceeding probably in the next two months. And that project is moving forward because it's been our learn-by project is kind of what I'm calling it, and I think we've covered a lot of ground in getting to where we're at but it's going to simplify our projects in the future.

MR. WILLIAMSON: That's good news for the San Antonio Rose.

MR. SAENZ: Moving forward to item 2(b), this is kind of a follow-up to a discussion item that we had, I think last December, concerning how would we work or coordinate with our regions in the development of CDA projects.

Some of our regions, like San Antonio, have a regional mobility authority, and the regional mobility authority has basically the same authority and powers as TxDOT, and they can develop comprehensive development agreements. Some of the other regions that don't have RMAs, and we work directly with the metropolitan planning organization. Some of the regions have a county toll road authority -- of course, the Dallas-Fort Worth area has the NTTA.

And so one of the things we talked about is how do we develop projects and include them in the project development process for CDAs within the region. One of the things that you told us to look at is see how we can make sure we do that, and we have been working on that. And one of the things that we have been working on -- and it was mentioned a little bit earlier -- is working with them to identify the business terms and the technical terms that they want toll projects in their area to follow.

And I'm going to use the Metroplex because of the 121 project because it presents some challenges. We have been working with the RTC -- which is the MPO for that area -- for them to go through and identify and recommend to us what business terms they want to use in the development of toll facilities within their area. For example, what toll rate would they recommend: do they want to go with 10 cents a mile, 12 cents a mile, 14 cents a mile, 25 cents a mile? What escalation rate do they want to use? Do they want to use a value pricing where they can have variable toll rates depending on the time of day?

And we have been working with them directly with the MPO, and Michael Morris, as the MPO director, has been leading the charge. In fact, they've had public meetings to solicit public input as to see what the public would kind of consider to be good business terms.

And in their April meeting, April 13, the RTC is scheduled to adopt what they think are good terms and make recommendations to TxDOT for what business terms they want to include in the project. And these business terms will include the toll rates, they'll include the toll escalation methodology, the timing of the payments, do they want their money up front, do they want their money over time. And these recommendations would be made and provided to TxDOT, we would look at them, and then use them and develop the request for detailed proposals that we would bring to the commission for you all to accept the recommendations and proceed with the CDA procurement process.

So that was one area that we identified that was important for them to have a say-so, for them to have input into the terms and conditions of our comprehensive development agreements that we're developing in their area.

The second area that we're looking at in trying to get input from them and recommendations from them has to do with the evaluation criteria that we will be using to evaluate these comprehensive development agreements. And by evaluation criteria or the evaluation process that will be used, again, we're working with them where they can make some recommendations to us, and we're including them in helping us come up with these recommendations so that we can set all those, again bring them in, include them in the request for detailed proposals, and bring them to the commission so that you all can accept our terms and conditions, and then the developers will know under what terms they will be submitting projects within the area.

What we're trying to do here is up front knowing the business terms, up front knowing the technical terms that were developed, and everybody knows about it is, in essence, trying to ensure that it is a transparent process. Everybody knows what you're going to be weighted against.

The third thing that we've identified that we want to use is we want to allow the opportunity for the RTC to have some of their members, some of their staff to be part of the committee structure that we use to evaluate those proposals as they come in based on the same terms and conditions that were submitted before so that, in essence, it's a verification of the process.

We think that using these three scenarios or these three processes will ensure that they feel comfortable that the process that we have out there is transparent and that they were included in helping put together the process as well as the implementation of that process.

So far we've used this model, we started it in San Antonio with the Alamo RMA. You may recall we had some very lively discussions about coordination, but it's worked very well in San Antonio and I don't see why it would not work in other regions of the state. As we tweak it, this will be the same process we could use as we develop projects in other metropolitan areas.

Again, the whole key is we give them the authority to go out there and have input in the local project selection, in local priorities, and then of course, they put together their plans, and those plans will then come to the commission for final approval or concurrence. So this is just one more step to keeping with the same process or the same philosophy that the locals have an input into how they're going to develop their transportation systems, and what we've identified is we want your input, go out there and do it, we will measure your success by the five goals that we've identified. And so that's kind of where we're at on that.

The second thing that we're doing, because the Dallas-Fort Worth area, we do have the North Texas Tollway Authority, and we are working with NTTA to develop a memorandum of understanding on how they can participate, maybe not as a separate proposer but where they can participate in providing services or have their services available to any of the CDA proposers that are proposing on a CDA project.

By law, they can't propose directly, it has to be in kind of an indirect or a separate evaluation, and that's one option of doing it, but the other option is for NTTA to be able to provide the services or have their services available so that if the CDA developers want to use them, they certainly can.

And we have been working with NTTA over the last couple of months, we have a memorandum of understanding pretty much in place. The framework provides for them to provide the services for future CDA contracts within the region, it outlines the process and what services they will provide as well as the prices, it outlines the process that they will use in communicating with the separate developers and the requirements, and hopefully they will be acting on this memorandum of understanding at their April 19 meeting.

So we will have basically a process where if we're doing a CDA, we have the availability to be able to say okay, there is a toll operator that can provide you these services so you're welcome to use them if you want. And the other alternative would be that if NTTA says no, I don't want to serve as a toll operator, of course they don't have to, and if they want to submit a project, we're kind of working on a process so that we can then evaluate or have an evaluation and comparison of an NTTA proposal that would come versus what a separate CDA procurement would bring to the commission. And I guess it goes back to our strategy that we want to make sure that we have competition in everything that we do.

Pretty much, that's where we're at on that. April 13 we hope to be able to get the recommendations on the business terms from the RTC. The terms on the evaluation process are falling a little bit further behind, we hope to get them soon afterwards. And then on the MOU, we hope that April 19 when NTTA has their meeting, they will adopt our memorandum of understanding. We will then bring this to you all at our meeting, and we will then know how we move forward with projects in the Metroplex. And this could be pretty much of a model we could use for developing projects in other metropolitan areas of the state.

With that, I'll be happy to answer any questions.

MR. WILLIAMSON: Members, I'll have several but I'm willing to defer if any of you have some you need to ask first.

MR. JOHNSON: I had one or two. Amadeo, the RTC, are they enthusiastic about their role, the way this is going to play out?

MR. SAENZ: I'm going to ask Bill to answer that because I haven't been at any of their meetings, but I know that he has been working with them.

MR. HALE: I'm Bill Hale from Dallas. Yes, they are enthusiastic about the role they're in. What we had gotten into, though -- and it came to a head in February -- was that there was some education and some information we had to get back and forth between both the RTC and NTTA board members and people like that. It became very evident at that time that we needed to work with the region.

But it had gotten into simply a toll or not-toll situation on all the roadways -- 161 was that way, 121 in Collin County was that way -- but when we got to Collin County after Denton, it became a delivery method, and we never had had a delivery method problem in the past, in fact that whenever we were asked to build a roadway, no one ever said you can build this roadway if Zachry builds this roadway or if Granite builds this roadway. But here we were in a situation where they were saying, Well, NTTA has to build this roadway.

We had to stop and look back because we were going down our plan, delivering our plan and I wasn't listening to the people out there as well as I should. When I got to looking into it, what needed to be done -- and then the region was saying how is NTTA in here, are they going to build and deliver projects or work on the projects or what, and I didn't deliver this to Michael Morris as well as I should have at the time.

So I discussed with him, and after that February we had discussions, and what we needed to have happen is we needed to have education from each entity: NTTA, RTC, and TxDOT. And we got to having a meeting with Michael Morris and with Allan Rutter and we determined that we needed to have a way that they could actually compete against or be on the CDAs, and we worked out the details.

And Michael has worked very well to get these things going and the region is coming together now on that and I think you're going to see, especially at the April 13 meeting right there, that the RTC is coordinating it, that the delivery method is being determined but it's being determined between me and Allan so they can go talk to their board members and we can make this thing happen in the region.

And I think you're going to see that there are projects in our region that will be good projects for NTTA to work with us on because the CDA may not want to get involved, but there are projects like 121 that is very good for a CDA for all the reasons we talked about. The method has been set up by Michael that NTTA will be competitive on all of them. There's competitive ways so we can make sure we get the best bang for the buck for what we're doing, with whoever does it. And I think you're going to see in the next few months -- and it's being spurred by Michael Morris -- that the region is beginning to come back together. We fought like little brothers and sisters out there, but they're beginning to come together now, I think, and I think it's going to work well.

MR. JOHNSON: Bill, I'm glad that you brought up the relationship or the role of NTTA. Amadeo talked about they're certainly going to hopefully have an opportunity to perform an operations function, and I believe statutorily they don't have the right to submit a CDA. In our memorandum of understanding with them, will there be a mechanism where they can make a proposal to, in essence, be the project provider?

MR. HALE: Yes. Well, there's actually two things we worked on. First is the ability to compete, and they can't compete heads-up, by law, with a group, and that's because in every case if you do it that way, then the public would always win out because the locals are familiar with that group. But there is a way to do it, and people didn't understand it. They thought we'd go to a meeting, like we did in February, and they'd step up in front of us and they'd say here is NTTA and here is this one, and then everybody vote now. Well, that's not the way it's going to be.

We have these terms set up that we've been working on, we explained to them that's how it will work, you'll have definite criteria so everybody is on a level playing field. And then once they see that, then they will understand who got what and why and that everybody is on the same terms.

You know, go to a Subway and you go into a Subway and they're franchise owned and they all have to live by certain rules, whoever does it, and most of them are owned by somebody different or they're operated by somebody different, but then you go in there and you have the same menu and everything else.

That's no different than we're doing with NTTA and with the CDAs in our region right now, and they can actually do that process and they can compete with them in a legal way, or they can actually compete on the CDA's team as the operator which NTTA is one of the best operators in the nation, they're recognized worldwide for their operation abilities.

And with that, we've had CDAs come to us and say why can't we use them as our operator, and we're seeing with this MOU that we may get -- it's going to the board and I talked to Allan about this, they may have that ready in April -- if that happens they may decide they want to work that entire section of 121 as the operator for these people.

They will have to compete because you don't want to create a monopoly. They want to be able to say our terms, our rate may be per transaction, say 25 cents a transaction, we know that a good transaction is 10 cents a transaction, but they have to have a little competition there to know that they have a good rate on that so they can compete on those CDA. Or they can compete separate with them in competition with them so that we all know that they have the same terms that the CDA people have and live by that. So yes, there's two ways of doing it.

MR. JOHNSON: Thank you.

MR. SAENZ: Thank you, Bill.

MR. HOUGHTON: Bill, don't leave. I want to talk about -- which seems we're glossing over something -- is the asset that is owned by the State of Texas Department of Transportation and realizing the value of that asset for the region. We continue to talk about this toll rate and elasticity and limits, but we know embedded in the toll rate is the cost of capital to finance that and whatever that number is. And we'll just talk about 121 in this case, or any other asset in the state of Texas that if we do not recognize there's significant value in that asset, then we may in fact be shortchanging the region, and that's concerning me that we keep kind of glossing over.

I understand we're trying to hold hands and be happy, but at the same time we have to realize if there's an $86 billion shortfall -- I don't know what it is, Bill, in the Dallas-Fort Worth area.

MR. HALE: $55 billion in Dallas.

MR. HOUGHTON: $55 billion -- that we've got to maximize the value of these assets.

MR. SAENZ: And I think, Commissioner, the value of the asset is included. It will become part of the procurement process where the value of that asset will be taken into account by all of the developers as they prepare a proposal for us so that we make sure we're not going to go out there and give them the facility and not expect anything for it.

But that will be one of the things that we will look at is that value of that asset that they're taking, that piece of land or that piece of land with a highway on it they will be using has value and they need to incorporate that and they submit it back in the proposal as either a concession fee or a concession fee with revenue-sharing.

MR. HOUGHTON: Plus a revenue share, right.

MR. SAENZ: Yes, sir. And so that's basically inherent and one of our guiding principles.

MR. HOUGHTON: I can't express that enough, I cannot express that enough when you talk about $55 billion in the Dallas Metroplex that what we saw originally --

MR. WILLIAMSON: It would be Dallas-Fort Worth Metroplex.

MR. HOUGHTON: Yes, Dallas-Fort Worth. Pardon me, I apologize. What we see is it was all based on a toll rate at one time and discarding the value of the asset and not recognizing the $55 billion gap.

MR. SAENZ: Yes, sir. That is the goal and the goal is just like in any project: if I am going to provide money for this project, in essence I own a share of that project. Well, the value of the right of way, the value of the road that we're providing also has value, and both of those together, any toll equity and any land equity, basically will be something that is used, and then we will make sure that that value is included in what we get back.

And of course, as I mentioned earlier, being a regional project, it's going to stay in the region for the region to take that and apply it to other projects that they have identified.

MR. HOUGHTON: And it should spur on other communities to understand, whether it's Houston, El Paso, San Antonio, and to recognize and look for these assets that you can in fact convert and go a long way to solving the gap in those communities.

MR. SAENZ: I guess one thing, you mentioned the word convert, and that's also a word that in our everyday world nowadays people start to shrivel.

MR. HOUGHTON: No, not convert.

MR. SAENZ: That's what I want to make sure it is not convert, because what we are tolling is something that doesn't exist today.

MR. HOUGHTON: Right, something new.

MR. SAENZ: Something new. We're tolling the added capacity, something that you do not have today, it's something new that is being built or will be built, and that is where the toll, so that is part of the market-driven.

Going back to a little bit of what Bill was talking about -- don't leave, Bill, because I may need some clarification -- what we did is we, in essence, have two processes in place. Because NTTA is there and they have been very successful in the past in the development of toll roads, they may want to have the opportunity to submit a proposal to the department -- and you all told them that, that you welcome a proposal from them -- that we could evaluate and compare it to any of the CDA proposals.

They can't compete head-to-head but we can have the NTTA proposal that is based on the same terms and conditions that were put in place for all of the CDAs, and that is very important so we can have an apples-to-apples comparison. If they're based on that it's toll rate, this toll escalation rate, if the region has identified and we have concurred with their recommendation to ask for 50 percent up-front money or 100 percent up-front money and no revenue-sharing, then all proposals need to be made on the same baseline or the same requirements so that later on we can then compare to find out which is the one that brings the best value to the region, and it's going to be very important.

They won't compete head-to-head, but we're looking at a process where we evaluate the CDA proposals under the CDA process independently, and once we have a CDA best value, then we can compare to what NTTA and what the Texas proposal is so that we can see which one provides the best for the region.

MR. WILLIAMSON: Mr. Houghton brought up a good -- I'm sorry, go ahead, Ms. Andrade.

MS. ANDRADE: I just have a comment, Amadeo. You said they're taking our asset. They're not taking our asset, they're maximizing our asset.

MR. SAENZ: That's correct.

MS. ANDRADE: Okay. And Bill, I'm glad to hear that Michael Morris is involved in this because he seems to have a real knack for bringing people together. So I'm hoping that he's going to continue working with that until it all comes through.

MR. HALE: And let me address that tolling issue about the rates and stuff, and this came up. But with the public hearings that we've had, and we've had public meetings that have been very informal, we've had people asking questions and we've bantered back and forth with the issues that we had there, but at the meetings it became very evident and this spurred on after the December meeting, we had a long discussion about how much rate would be, and at one point in the discussion there was a paraphrase that we're in this for -- the agency, we need to have it market-driven as much as we can, that's what we're interested in, and the comment came out, well, it could be a dollar or two dollars.

Well, that little excerpt got sent around the whole region up there but they didn't see the rest of the excerpts, so we had to go back and educate a lot of the people there. And Michael, and at those meetings we were able to show that, that we did say we would like on the TxDOT side a dollar, two dollars, that's what it is, that's what the market drives, but we know there is a political and a governmental issue up there that wants to keep it as low as possible, and somewhere in between there -- and we stated in the commission meeting -- somewhere in between there is what the region needs to make the decision on.

And that wasn't ever getting out there. When we told them, they said, Oh, we have the ability to make that decision? We said, Yes, you do; here's the biggest bang for your buck, here's the most money you can make, here's the least money you can make, and somewhere in between there the region can decide how you want they want to do it because you have all these needs that need to be met. And when they started hearing that, they started coming around to it, and they began to realize there's more to the story than the excerpt from one little saying. If you listen to the whole story, the whole story tells you that the region is making this decision.

And we've had to educate them that they have the ability to make the decision, they have the ability to set the toll rates, they have the ability to escalate the rates, and whether they want the money up front or over time, and when people have heard that, they got excited about that thing.

And now Michael has worked with a system, and maybe even like your cell phone, during your peak hours you have a 17 cents a mile rate but in off-peak hours you might have a 12 cents a mile rate, and he's doing that with the region up there and they're beginning to hear that and understand that. And the average would be somewhere in between, of course, but with that, the region is beginning to look at it and the plan is put into action and working on it up there, it is beginning to come together.

MR. WILLIAMSON: I want to talk to Amadeo in a second about the point Mr. Houghton made, but I want to give you a chance to correct something I don't think you meant to say. You didn't mean to say the unfunded gap in the Dallas District was $55 billion, that's the total need.

MR. HALE: That includes maintenance. That's unfunded but that includes the maintenance part of it.

MR. WILLIAMSON: The unfunded gap for construction, I think, is considerably less than $55 billion.

MR. HALE: $23- or $24 billion.

MR. WILLIAMSON: So the point still needs to be made, right now looking at just the Dallas District, if we don't adopt a plan and stay true to that plan which includes using the tools the legislature has given us, reaching out to the private sector for investment in our assets, adopting a consumer-driven approach to pricing the assets, and using competition -- and that even means competition between TxDOT and the private sector, between NTTA and the private sector, between engineers, between construction companies, wherever that competition can be encouraged -- to drive down the cost of the asset to the consumer.

If we don't stay focused on those four strategies and stay hooked up to the plan, then we will not by 2030 reduce congestion, improve air quality, enhance safety, attract jobs to the state, and avoid driving on potholes. Those are the choices.

And the Dallas District's portion on that gap is about $24 billion on the construction and capacity side.

MR. HALE: And Fort Worth. And yes, we're mapping the plan with Michael, and he's understanding that that's what he's doing right now is doing.

MR. WILLIAMSON: Thank you. A couple of questions, Amadeo.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: If the gas tax rate was a dollar and a quarter a gallon, would we be needing to build this toll road?

MR. SAENZ: If the gas tax was a dollar and a quarter and it stayed like that for the next 25 years, we probably would not need to build this toll road.

MR. WILLIAMSON: So one way to contextualize these decisions we all have to make -- Bill, you can sit down, you don't have to stand up -- one way to contextualize these decisions is to understand the relationship between the tax rate, the toll rate and the consumption of the asset.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: The higher the tax rate, the less toll rate or the less tolls you need; the lower the tax rate, the higher the toll rate and the more toll rates you need.

MR. SAENZ: You could build all the assets that were needed and if you didn't want to toll, you'd have to set a certain tax rate.

MR. WILLIAMSON: With regard to State Highway 121 in particular, there has been, I think, a considerable amount of perhaps emotionally charged words and phrases used as we work through this. One of the things that's probably been most egregious to this body is the statements by some that the department doesn't like North Texas or doesn't like a part of North Texas or is trying to punish individuals in North Texas.

Are we approaching the 121 project any differently than we approached the 1604 project in Bexar County?

MR. SAENZ: No, sir. In fact, we enhanced what we were doing on 1604 for 121 because we learned how to get it done faster, but we are basically treating them the same.

MR. WILLIAMSON: And when anyone says we are not permitting local and regional leaders to make the final decision about this matter, we recognize that the state has the constitutional and statutory authority and responsibility to make decisions about the state's and the nation's road system, and while we can't avoid that at the commission level, what we have adopted with regard to RMAs and what you're adopting locally in the districts and we're now telling you from this podium to adopt, is a system of recommendations that local and regional government to make to our district engineers and to this body that we will accept, we will follow.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: While the final decision is ours by statute, we can't avoid that, that shouldn't be confused with the fact that if the RTC says our recommendation, TxDOT, is we do it this way, that is what we're going to do. And if there's any confusion between us and you about that or between us and Maribel and Bill, we'd want to make it clear there shouldn't be.

MR. SAENZ: Not with me.

MR. WILLIAMSON: The county judges in Denton and Collin and Dallas and Tarrant counties are duly elected state officers, and we respect their authority and their leadership, and if they say through the RTC this is the way we recommend it being done, that's what we're going to do.

And we don't view NTTA as our enemy and we don't believe we're at war -- I can't believe someone would use that term about civic matters -- we're not at war with any of these counties or any of these officials. But this body does recognize that there is an $86 billion deficiency in what needs to be spent and what's available to be spent in this state in the next 24 years, and we're going to discharge our responsibility by closing that gap where we can.

MR. SAENZ: The whole goal of our process is we want to make sure that it's efficient and it's transparent so that there is no question on anybody's mind that the group that we calculated provides the best value to the state and the region is exactly that.

MR. HOUGHTON: Efficient, transparent, and maximize the value of our assets.

MR. SAENZ: Yes. And that's the whole goal so we have business terms that are known up front, that they're recommended by the region, and by law they have to be approved by the commission, and we've heard exactly what you've said, the process, the evaluation terms, same thing. So that it would be apparent that these are the business terms, this is the process, the process was followed to the letter, there is no question that Company A provides the best value over Company B, or NTTA provides the best value.

MR. WILLIAMSON: And this is the same process we'll use for every old asset in North Texas, not just 121 but whatever we do on the south side of Dallas, whatever we do on the west side of Fort Worth, whatever we do in Weatherford, Texas, whatever we do in Benbrook, wherever we are involved in this type of approach, it will be exactly the same process.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: So that every citizen that lives in that COG will ultimately be exposed to the same market pressures as are the citizens of Frisco, McKinney, North Dallas, Denton, Flower Mound, Grapevine, and on and on, on this particular project.

MR. SAENZ: That's correct. In fact, this process can be used in any metropolitan area of the state.

MR. WILLIAMSON: So we either think like a region and execute like a region, or we don't.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Members, we have some guests from North Texas who have to catch a plane and who wish to speak about things other than item 2(b). With your indulgence, I'd like to lay 2(a) and 2(b) to the side for a moment and move to -- it item 7? We're going to move to item 7 right now then.

MR. BEHRENS: We're going to move to agenda item number 7(a), and this will be under Comprehensive Development Agreements, or CDAs, as we've ben calling them. The first one deals with Tarrant and Dallas Counties, and this would be to recommend to the commission to go out for request for qualifications on projects on Interstate 35W, Loop 820 and State Highway 183.

Phil, if you would lay that out, please.

MR. RUSSELL: Happy to, Mr. Behrens. Again for the record, my name is Phil Russell, director of the Turnpike Division. Good morning, commissioners and Roger.

As Mike just laid out, the agenda item before you relates to a project over in Tarrant County. And again, just to quickly provide a bit of historical background, as you recall, we received an unsolicited proposal a couple of years ago for a section of 183. That project had several issues, several challenges. One of the critical issues was getting the environmental clearances; funding was an issue; the project ran between not only two counties but two districts; there were some priorities that we were having to work through.

And the bottom line, at the beginning of this year we elected to terminate that procurement. We short-listed four firms down and we elected to terminate it. But we did that with the promise that we would bring it back at an appropriate time and re-energize that procurement. And so from a staff level we think it is the appropriate time. We've had some close discussions with the district, with Maribel, and the MPO, and we've kind of re-geared this procurement. The project that we're conceiving right now would be a section of 183, a piece of 820 and then up 35W.

Maribel and her staff, working with the MPO, have really cobbled together significant amounts of money to build this project but there still are significant funding shortfalls, and so we think by opening this up to a comprehensive development agreement now gives us a fighting chance of hopefully attracting some private capital into developing this project.

I would also say that there's always a little bit of misunderstanding. We still have some environmental work to do on these projects, the 183, 820 and 35. I think the district has an idea that those environmental clearances will be achieved probably mid next year to the end of '07, and so always the environmental process is the critical path. There's nothing that a CDA would do to accelerate that environmental process, although the district and Federal Highways will do everything they can to accelerate that, but that's kind of an independent process, as Amadeo laid out this morning.

And so the minute order before you is seeking approval to begin to initiate that process for a CDA, again, a two-step process. Today's minute order would allow us to launch the request for qualifications for a CDA for this project on 183, 820 and as it connects to 35W.

I'd be happy to address any questions you might have; Maribel is here as well.

MR. WILLIAMSON: Members, what we're going to do is ask questions as we need to of Phil and Maribel and we're going to leave 7(a) pending and do 7(b), and then we're going to have some testimony from the audience. So questions on 7(a) or discussions on 7(a) with Phil or Maribel?

(No response.)

MR. WILLIAMSON: Okay. Then we're going to leave 7(a) as a pending matter, and Mike, if you would, 7(b).

MR. BEHRENS: Phil, if you'll now introduce 7(b), and this is in Tarrant County, and this would be to authorize staff to go out with a request for qualifications to help develop, design, construct and potentially finance, maintain and operate what we call in-house the Funnel which is State Highway 114 and State Highway 121 north of DFW.

MR. RUSSELL: Thanks, Mike.

Again, agenda item 7(b), as Mike pointed out, is for the Funnel. And again, Chairman, I know you're very familiar with this project, but for those of you all that might not, it is a very complex area. As Mike pointed out, we call it the Funnel but really you have State Highway 121, very much a regional roadway coming out of East Texas through Collin, Denton, Dallas counties, through Tarrant and on through Johnson counties; you've got 114 coming out of Northwest Texas going through this area; 360 coming up from DFW; other state and farm roads. It's a very, very complex project. It's a project that the area has been working on for a number of years.

And as Mike pointed out, we are asking for approval, permission to go out again for a CDA starting the request for qualifications. I would contrast this project, though, with the former project in that I think Maribel and her staff and the MPO probably have sufficient dollars now available out over the next three or four years to construct this project. We think that a CDA will really make sense on this project for a bit of a different reason. It is so complex that the idea of having a single group that will do design and construction, the design-build format, we think will save considerable construction time. I think it will be easier on Maribel as she oversees the development of this project, and the district staff, but we think we can achieve some considerable design and construction savings and time of actually implementing the project.

You'll note, and Mr. Behrens pointed it out, we would also, however, like to have the ability to go ahead and ask the private sector for any sort of financial options they might have on the managed lanes portion of 114. I think it's two managed lanes that the district and the MPO are conceiving on 114. So we would like a straightforward design-build procurement on the CDA with the ability to request the private sector to come in with financial ideas on those managed lanes on 114.

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

MR. WILLIAMSON: And members, any questions of Phil -- I'm going to have a couple of Maribel in a second -- on item (b)?

MR. JOHNSON: Phil, when you talk about two managed lanes, is that total or is that in one direction, or are these reversible lanes?

MR. RUSSELL: Maribel, can you help me? I think it's bidirectional.

MR. WILLIAMSON: Can I see Maribel for a moment? Good morning.

MS. CHAVEZ: Good morning.

MR. WILLIAMSON: How are things back home?

MS. CHAVEZ: Good.

MR. WILLIAMSON: You're obviously familiar with TTC-35 and you're familiar, I think, now with the general proposal that came through from Cintra yesterday on the rail portion.

MS. CHAVEZ: Yes, sir.

MR. WILLIAMSON: If it were to be the case that the department moved forward on that and brought the rail piece around the west side of the Metroplex fairly quickly and decided to go ahead and clear and purchase for the road portion as well, even though the road is not proposed at this time, is it likely that the rejoining -- without getting us in trouble with the EPA because I don't want to do that, but just looking at the lake and the cities, is it likely that bringing it back in on the northwest corner of Tarrant County would occur north of this 35 improvement?

MS. CHAVEZ: I believe so, yes, sir.

MR. WILLIAMSON: So it's almost if this thing gets expediting, in keeping with our notion of lining up long-term solutions with long-term problems, it's almost as if this not only addresses a short- and mid-term problem, it also addresses a probable long-term problem.

MS. CHAVEZ: Exactly. I think the timing of it is all very appropriate, and I think these improvements, particularly along 35W, will tie in and coordinate very appropriately with the region's plans, with RTC's plans as well, not only for freight rail but for passenger rail.

MR. WILLIAMSON: Over on the Funnel matter -- well, actually both of them, we had a couple of House members and one Senator from the eastern side of the project who expressed some concern that we might not be addressing the 183 piece as it goes east into Dallas at the expense of the Tarrant County side.

Was it not the case that we determined the 183 piece on the Dallas side could be picked up and done as soon as the RTC thought it was an important project?

MS. CHAVEZ: Yes, sir. And one other point with respect to the coordination of both of these CDAs is DFW Airport had expressed to us a lot of concern -- and has been our partner in this whole effort -- is their concern that we had all of these major entryways into DFW Airport under construction at the same time. So part of this whole effort at how to implement both of these CDAs, the CDA along the 821/83 corridor and the Funnel projects, was that we look at the timing of these and not have all of those major entry points into DFW Airport under construction at the same time and sequence all those appropriately.

MR. WILLIAMSON: Okay. Members, any questions for Maribel?

(No response.)

MR. WILLIAMSON: Thank you very much.

MS. CHAVEZ: One point I would like to make for you is you just had a discussion about the region's input and RTC's input into the toll structure on toll roads. We're asking the same question of RTC for managed lanes. So they will be taking action in their April meeting on providing us those business terms for toll structures for toll roads, and in May they'll also take up their position for the toll structure on managed lanes, and it's something very important as we proceed on these CDAs, so that again, they have an opportunity and a very strong role in how we negotiate these CDAs.

MR. WILLIAMSON: Thank you very much.

Bill? And I just have to clarify again because we had a couple of House members and one senator who were concerned about when we pulled back the original proposal on 183 and 121. On the east side of the project, the Dallas side of the project, that wasn't identified as one of their highest priorities at the RTC level, as I recollect.

MR. HALE: That's correct.

MR. WILLIAMSON: But we have made progress on certain aspects of that that would permit us to pick up and move quickly on that portion of 183 with not a whole lot of time delay if the RTC were to identify that as a high priority.

MR. HALE: That's correct. And the reason it wasn't identified is exactly what Maribel a while ago, we will have 121, 114 and the Funnel under construction at one time from the north side of DFW Airport. The RTC made a decision a long time ago not to construct the main lanes of 183 into DFW on the south side until those were completed. That's about $650 million, so we were not going to do that. We did have $100 million set aside by RTC to build the frontage roads, and then we also had some projects that were opened up at Texas Stadium because of the 161 toll road to go ahead and build that. So we're taking care of that and we worked real closely with the City of Irving and they're on board with what we're trying to do with this thing.

MR. WILLIAMSON: Why would you think, Bill, that a transportation professional in North Texas would tell a House or a Senate member that we made that decision because we were punishing them?

MR. HALE: I don't know, I don't have any idea.

MR. WILLIAMSON: I don't have any idea either. Thank you, Bill

MR. HALE: Thank you.

MR. WILLIAMSON: Members, we have several visitors who wish to comment on item 2(a), 2(b), item 7(a) and 7(b), and with your permission, I'd like to permit them to comment on all at the same time so they'd be properly on the record and so they may move on. And they may have preferred a certain way but I'd like to do it in a different way, so could I hear from Russell first, Mr. Laughlin? Russell and I shot dice in the parking lot this morning.

(General laughter.)

MR. LAUGHLIN: You put me in a tough position, Commissioner. I had to visit with my county commissioner here and make sure they were okay for me to go first since I'm a private sector rep. It's always a good policy to defer to those elected officials, particularly those that have some influence over where you do business. So he said it was okay so I'm good.

For the record, good morning. My name is Russell Laughlin and I'm a senior vice-president with Hillwood Development. I'm here today representing Hillwood and a newly formed coalition called the I-35W Corridor Coalition.

And I'll talk a little bit about that, but first what I'd like to just extend a great big thank you to this commission, the Department of Transportation, and certainly all the folks that are involved in the types of initiatives you're undertaking currently, and that extends all the way down to all the district offices. You've obviously seen, you heard testimony from our two area district engineers in the Dallas-Fort Worth area. They're heavily involved in this initiative. We think it's very, very important that these types of things move forward, and just a big thank you. These are great big initiatives and we really appreciate the vision that the state has in terms of solving our next generation of transportation projects.

Specifically what I'd like to focus on is introduce you to the 35W Corridor Coalition. Many years ago a group of business leaders and private landowners along the I-35 Corridor Coalition -- essentially from downtown Fort Worth to the Tarrant-Denton county line, Texas Motor Speedway, about 20 miles of 35 corridor frontage, if you can imagine that -- began having discussions, and this was prior to House Bill 3588, and we began having discussions about how do we protect and preserve, and then more importantly, enhance these types of investment that our state has made, our federal government has made, and of course, the private sector.

And as I mentioned, I'm an executive with Hillwood Development, so I can comment with an awful lot of authority with respect to the private sector's investment along that corridor, and I can speak with some authority with respect to the direct correlation on the types of investments that the private sector makes after the public sector shows the kind of commitment you're showing today and begins to invest.

So we had these conversations for quite some time prior to 3588: how are we going to address 35 long-term, how are we going to address 170, how are we going to address 820, how are we going to address connections west as the Metroplex began to grow, all of which have been reaffirmed in our 2030 metropolitan planning update for the Dallas metropolitan area. Everything that we knew was of issue to the private sector certainly has been realized.

So fast forward to today, you have a group of business leaders, private landowners, and includes most of our elected officials that touch that 20-mile corridor that I talked about, the 35W Corridor Coalition. Our goals are to enhance long-term solutions for both short-term and long-term problems.

You've addressed most of those in your discussion today on the items that are of interest to us. Our three goals primarily on the transportation side -- I failed to mention, let me back up, that I also serve as chair of the Transportation Committee for the 35W Corridor Coalition. Our three goals of the Corridor Coalition are to improve -- these are long-term goals that are born out of short-term necessity -- and that is 820, 35, and the connections to a long-term westerly alignment of Trans-Texas and whatever that might be.

In summary, what I'd like to do is just say that we certainly support and encourage you to adopt the minute orders that are before you today. These are good solutions for our needs. We look forward to interfacing with you and your staff as you go forward and you begin to come to the Metroplex, particularly on the TTC-35 alignments and the western alignments.

We're very excited about Zachry and Cintra's -- I'll follow your lead -- Zachry and Cintra's proposal on a rail corridor. It is the single most important piece of transportation initiatives coming forth for the western side of the Metroplex to unravel Tower 55 and help solve the transportation pieces.

I will step back from here, but let me just say we greatly appreciate the efforts that have been put forth by this state and the vision, and we think we're in the right direction. Thank you very much. And I'll answer any questions or defer.

MR. WILLIAMSON: Members, anything?

(No response.)

MR. WILLIAMSON: We want to thank you for taking the time to come up here and express your viewpoint. We know you're very active in promoting the governor's and the legislature's and the commission's vision for North Texas and we appreciate that, and we appreciate your remarks today.

MR. LAUGHLIN: Thank you.

MR. WILLIAMSON: Glen, I'm doing this for a reason. I want to, if you don't mind, hear from Mr. Jordan next. I'd like to have you last because I think the dialogue with you is probably going to be a little bit longer, if you don't mind.

Mr. Jordan is a city council person from the City of Fort Worth.

MR. JORDAN: Yes, sir. I am Jungus Jordan; I am a city council member from the City of Fort Worth. I also chair our Infrastructure and Transportation Committee in the city, and I'm pleased to be here, Mr. Chair and commissioners. Again, regarding 2(a) Trans-Texas Corridor, we were very pleased and very much appreciative of the announcement yesterday made by Zachry-Cintra, a public-private, Texas-Spanish partnership.

MR. WILLIAMSON: Thank you very much.

MR. JORDAN: And very pleased and encouraged that that will put some emphasis on the west side of the Metroplex and work towards transportation.

Also, on item 7(a) and 7(b), we are here in support of those minute decisions and very much appreciate what you have done in that regard, and we look forward to participating with you. Obviously, most of our participation is through the county and Glen and the RTC, but we do appreciate what you've done for us, and look forward to working with you in the future.

MR. WILLIAMSON: Members, questions of Mr. Jordan?

(No response.)

MR. WILLIAMSON: Again, thank you very much for taking the time to be here and speak.

MR. JORDAN: Thank you. I do appreciate Commissioner Johnson's educating us. Your comments regarding the right of way on the Trans-Texas Corridor and the combination of the rail is very encouraging to us. Thank you.

MR. WILLIAMSON: Thank you, sir.

And while Commissioner, soon-to-be-Judge Whitley is making his way forward, I want to put a couple of things in the record.

We had a letter from Mayor Cluck of Arlington, a friend of this body and a transportation mayor of Texas, and the letter is in the record, Mr. Behrens, but I just would indicate that he writes to encourage both actions that we might take on 7(a) and 7(b).

We also heard from Mr. Fuqua, who is with the Fort Worth Chamber of Commerce. He wrote a very nice e-mail encouraging and also indicating great pleasure with the TTC-35 rail component yesterday.

And of particular importance to me that I wanted to share at the same time that Glen was at the podium, we got a letter from a long-time friend and former colleague of mine, Congresswoman Eddie Bernice Johnson. And it is instructive to point out that Congresswoman Johnson and Congressman Michael Burgess, a perhaps moderate Democrat and perhaps moderate to conservative Republican, from almost opposite ends of the Dallas-Fort Worth Metroplex, were in partnership with each other on the Transportation Committee on the floor of the United States House of Representatives, perhaps the two most important congressional spokespersons this state and this department have in advancing changes in the federal law that permit us to move faster, and thus cheaper, and produce assets quicker for our citizens.

We've already spoken to Congressman Burgess's contribution today. But I thought it was really interesting that Congresswoman Johnson took the time to send a letter about an area that's really not directly in her congressional district, and just say: I want you to know that I support what you're doing on the 820/State Highway 183 corridor, and I support what you're doing on 121 and 114, the entire North Texas system is at a critical point, the transportation system in the region needs to be improved everywhere, we're wasting too much time and money waiting in traffic, I'm a proponent of transportation choice, I support public-private partnerships, we have to be pro-active in tackling these issues, I encourage you to pass these minute orders, Eddie Bernice. How typical of such a wonderful woman that she would even just say Eddie Bernice.

And so that letter is in the record and my thanks to her in this forum, and I encourage all of you to thank her for being a regional-thinking congress person in solving the region's problems.

And now we welcome another regional-thinking person, Mr. Whitley.

MR. WHITLEY: My name is Glen Whitley and I'm county commissioner for Tarrant County, and with regards to items 7(a) and (b), both of those projects are within my precinct, as it were, in Tarrant County.

We are very excited about the process that we've gone through, I guess especially with regards to the 820/183/121 CDA agreement that you're looking at. I kind of believe that was the guinea pig for the CDA agreements up in our area, and we learned some, I think, valuable lessons. One is don't ask for four proposals because you then get four times the amount of work that you get. If you simply say here's what we're wanting, now propose upon it.

And I'm going to reference that again in a minute because I think the real important thing that we learned is how successful the process has been, and I really want to compliment Maribel and her staff for the way we've gone about looking at that process, once we've taken it, working with the cities, working with the private companies in that area, and saying what do we need, what are we looking for and where do we need to end up at the end of the project.

We also did that with her staff in the Funnel project, working with all of the cities, working with all of the entities that are involved in that really interchange of major highway projects. And I believe that that is one of the things that will make the whole concept of CDAs very, very successful.

So to that end, I am very supportive of these agreements as they're being proposed. The one thing I might just throw in -- you know, I always want to maybe add a little bit -- the one that deals with the I-35, you've got it going north from I-30, all the way up to 170, you might just extend it a little bit farther and get it up to 114 and we'd cure a lot of the problems. But I'll be all right with 170 if we end at 170.

The project in the Funnel is something that we've been looking for for a very long period of time, and we're very excited about that, almost as excited as we were about the announcement that came down yesterday.

And Commissioner, what I would say to you is that at almost every RTC meeting that I have attended over the last nine years, we have focused on the shortfall. The shortfall in our area, including maintenance, including everything that we're looking at, we have targeted somewhere around $55 billion, and we feel like that every time we've come down as a region to discuss projects in our area with you, we felt like that we were working with you as partners, and I think certainly you and us recognize that shortfall. And now we know that the problem will be cured because Senator Nichols is going to take it to the legislature and is going to convince them that that shortfall is there and that they just need to fund it.

(General laughter.)

MR. WILLIAMSON: I think he left knowing you were fixing to say that.

MR. WHITLEY: He stepped out.

We're excited about the CDAs. I will have to say none of us are excited about tolling the roads that we're talking about tolling, but it's because of the shortfall that we referred to that we know we have to do it.

I would say to you that the other reason we like the tolls as opposed to an increase in the gas tax is that we also know, by your commitment and by the legislature's commitment, that any monies raised via the tolls, excess funds or up-front monies, are going to stay in our region and they're going to be used 100 percent for transportation projects. So I think those are the exciting parts.

As has been alluded to here earlier many times, we are in a bit of a discussion right now in the North Texas area as it has to do with CDA agreements, and the parts that we are talking about are the toll maximums, how we're going to increase those in the future, whether or not we're going to have peak time tolling, or pricing from that standpoint, how to use and where to use the excess and the up-front funds, and then also looking at the local involvement.

And I would say to you, having also sat on the Trans-Texas Corridor Advisory Committee, that perception has not necessarily been that we were as involved in the process as we would have liked to have been, and I think in the Funnel that was shown earlier. We would like to see a lot of public meetings or more local meetings with the leaders in those communities, at least down to that development work phase. And we realize that at some point we have to step back and let you take it out and go through the confidential part of the bidding and that, but we would like to be much more involved up to that part of the process.

And again, I'm going to go back to what I said at the very beginning, I feel like in the CDA agreements that we're talking about on the 820 and the 183 corridors, as well as the CDA agreements that we're talking about with regards to the Funnel, that Maribel and her staff have gone the extra mile in making sure that we sit down and get input from the cities, the companies, the citizens as we've gone through the process. We'll still be going out with the public meetings and the public hearings but we will have had much more dialogue with the cities.

And I think as you see some of the new concepts that we're going to see along that 820 corridor that you'll be very pleased. I believe one of them is going to look very much like something you alluded to when you first came on the commission -- in fact, you probably lost a little bit of hair as a result of that -- having to do with access roads and backage roads and things along that type line.

So what I would say to you is that we're excited. As a result of the partnership, as a result of you agreeing to formulize Category 2 money, what you're seeing is a buy-in, I think in our region, to the whole process.

Tarrant County, in about a month, will go to the voters for a $200 million transportation bond project that we have conservatively estimated, if passed, can bring close to $800 million worth of congestion/transportation type projects to the Tarrant County area. That's going to include parts that will deal with transit, that's going to take care of working with some of these other projects. I think you will see us come before you or go to Maribel and then come before you on the pass-through tolling projects. All of the little new vehicles that we have seen come to play over the last four to five years are things which we're going to try to take advantage of over the next five to ten years and bringing more dollars to the program.

So again, thank you. We're very excited. We will come as a region, I believe, at the April 13 meeting of the Regional Transportation Council and give you our input with regards to CDA and toll projects as far as the toll increases, how to use the funds, and ask for possibly some additional involvement, and then we'll continue that discussion.

But I would say to you that over the last three or four months we have had some of the most lively discussions at our Regional Transportation Council that we've had over the last nine years, and it's good because it's making people aware of: one, that we have a shortfall, and two, that we're looking at finding ways to try and fund that shortfall.

So thank you very much.

MR. WILLIAMSON: Okay, members, Commissioner Whitley commented on item 2(a), 2(b), 7(a) and 7(b). What questions do you have of him, what comments, what dialogue? Go ahead, Ted.

MR. HOUGHTON: I applaud your enthusiasm for transportation. It's nice to have champions out there to make these things happen. And to underscore the shortfall, that's something that I'm laser focused on is maximization of the assets that we currently have to enhance the region that you live in.

But congratulations, and again, you're a champion in transportation and helping us and helping your community.

MR. WILLIAMSON: Hope, anything?

MS. ANDRADE: Commissioner, I just want to thank you. It's great to be able to support something that the community wants. So congratulations on being such a progressive thinker, acknowledging that you've got a gap, a shortfall, but that you're going to do something about it. So I'm happy to support it.

MR. JOHNSON: Commissioner, I'm going to say much the same thing, maybe in different words. What encourages me is the way that the whole Metroplex has recognized a huge challenge and has come together and built a consensus with very solid building blocks. You've focused on a solution and been very positive about it, and clearly there's quicksand that you can drift off into and get up to your knees and subsequently your waist in some of these issues, and yet you focused on results.

And I guess April 13 we're going to be there and I think you're going to find -- I know you feel this way -- very willing partners on this commission and this whole department. So I think it's an A-plus that you and all your colleagues get, but particularly your interest that you have made a lot of these meetings and it shows a very keen interest in transportation issues, not only in your area but how your area affects the state and the state affects the Metroplex.

MR. WHITLEY: Well, I cannot stress enough, we still have a few miles to go in building our consensus, but at the same time, your willingness to let us play a major role in that process, both in the determination of tolls and how that works and also in the development, I think is what is ultimately going to allow us to reach that consensus. Because again, whether we like it or not, we all know we have the shortfall and we all have pretty well resolved ourselves to the fact that we're not going to get adequate funding from the feds or from the state, without us being willing to put a major amount of the dollars up also, and you've given us some tools, I think, that will help us to do that.

MR. WILLIAMSON: I echo the same comments, Glen. You know how much we appreciate your contribution, not only to Fort Worth and Tarrant County and North Texas, but to the state. You've been a good advocate for transportation statewide. I also appreciate the grief that local officials are going through in North Texas, and I appreciate the grief, I understand it. Having been the subject of a few of those spears myself, I think I can understand your pain.

But I have to just say when the governor ascended after the president's election and focused on transportation as one of his key matters of success, one of the first things he zeroed in on is you've got to figure out a way, I don't want people coming to Austin and begging anymore and I want you to figure out a way to give them the tools to fix their own problems, whether it's North Texas or South Texas or Southeast Texas or Far West Texas.

And we at the commission have done that regulatorily, we've worked with and suggested and supported our partners in the legislature, House and Senate colleagues, and they've passed laws to do that, the governor has signed them, and we firmly believe that we have developed a plan and we have a set of goals, strategies and tactics that will work, and if we'll all stay hooked to the plan, by 2030 we'll solve this problem.

Now, if the legislature decides to raise the gas tax rate, fine and good; if they decide to raise the vehicle registration rate, well and good; if they decide to no longer move money from the transportation account to other matters, fine and good; if the federal government decides to do the same thing, well and good. But we've had to take the position and the governor takes the position that those things are not likely to happen, so what has to happen for us to get where we need to be in 2030 -- and we've done that with your help and with your patience and those of others across the state -- we're there if we'll just all stay hooked.

Your colleagues from Dallas who are here will hear us say a lot in the next few months there's a balance. If you want to go the private sector route and take all your cash up front, there are going to be a number of assets you've identified that you can go build immediately. The less you want to set your toll rate, the less the proposals are going to be and the fewer assets that can be built.

But all of us should kind of join hands and recognize that we no longer need to or should run from our public. The problem is what it is, it is us, this is the way we can fix it -- if we don't want to fix it, that's okay -- but let's quit pointing to the guy behind the tree and saying it's his fault.

MR. WHITLEY: If the legislature and feds give us plenty of money, we can always take those tolls off.

MR. WILLIAMSON: That's right. It would be very easy to do.

MR. WHITLEY: We've done it before.

MR. WILLIAMSON: Anything on 2(a), 2(b) beyond what you've already said that you want to share with us? We thank you for your time and patience today, and for your leadership.

MR. WHITLEY: Thank you.

MR. WILLIAMSON: Members, we need to act on 7(a) and 7(b). You've heard the staff's explanation, you've heard the witnesses, and you've heard their recommendation. Item 7(a).

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.

Now, members, we need to act on item 7(b).

MS. ANDRADE: So moved.

MR. HOUGHTON: Second.

MR. WILLIAMSON: I have a motion and a second. All those in favor of item 7(b) will signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you.

MS. ANDRADE: Mr. Chairman, may I make a comment? Bill, I just want to ask you to please tell Michael Morris thank you so much for all his efforts and all his hard work on this. Thank you.

MR. WILLIAMSON: For those in the audience that are yet to participate, we really need to take about a ten-minute break, so what we're going to do is we're going to take ten minutes and we are going to come back at -- please try hard -- precisely 11:50. We're going to try to work through lunch so we're not here till 2:30.

We're going to ask Amadeo to summarize and close 2(a) and 2(b) for us at that time, and we're going to go to Coby and James and then we're going to go back to our regular schedule. So we'll see all of you in ten minutes and 30 seconds or so.

(Whereupon, a brief recess was taken.)

MR. WILLIAMSON: Okay. We're going to return from our short rest. And Amadeo, I wish you'd summarize 2(a) for us, give us a chance to ask a few more questions.

MR. SAENZ: Yes, sir. Thank you. For the record again, I'm Amadeo Saenz.

Item 2(a) had to do with we provided you a history and a status of our 35-TTC Corridor and we kind of talked about the proposal that was submitted by Cintra-Zachry yesterday as one of their projects that was ready for development and how we would approach that project to move it forward. I'd be happy to answer any questions on that.

MR. WILLIAMSON: Members, did you have any more questions to ask Amadeo about 2(a) or did you have anything else we need to, you think, touch on and force a discussion on?

(No response.)

MR. WILLIAMSON: Okay. Well, to summarize, I think, Amadeo, we want to be sure that we're doing what's necessary to educate our transportation partners and the public on things like the notice to proceed, what does self-perform mean, what does compete mean, the information meetings that Commissioner Andrade suggested, and sort of generally making sure the public understands that we don't procure anything around here without a competitive process of some kind.

MR. SAENZ: I think one of the things as we start is probably one of the first things to do is we'll go to, for example, the TTC Advisory Committee and kind of give them a refresher of how the whole process is working on the CDA, because then they can also help us as they carry the messages across and people talk to them about projects, and at the same time also try to schedule some meetings.

We've been having a lot of small meetings discussing the corridor in general, and I think we'll take advantage and try to also focus to make sure that we discuss process as well as just projects.

MR. WILLIAMSON: You know, it might be a good idea to go to the TTC Advisory Committee and ask them if they would be interested in hosting some of these smaller informational meetings up and down the presumed footprint and now the presumed footprint of the rail piece around the west side. That might be the ideal venue to have smaller informational discussions because that puts those who have concerns about the proposal, and in some cases are even opposed to it, in the position of being able to voice their concerns and their opposition at the same time.

As we told the guy yesterday who was concerned about concentration camps, if you're a Texan, you're opinion is worth something and we want to hear it. We may not agree with you but we think we need to hear it.

MR. SAENZ: I think that's an excellent idea and I'll set it up to brief them at the next TTC Advisory Committee meeting and also put that in place.

But we have been having quite a few meetings across the state, both on the TTC-35 and some meetings on TTC-69, and this would be a perfect avenue to add these elements also to help educate people out there on the process.

MR. WILLIAMSON: With regard to the rail proposal we received yesterday, we don't ever want to move so fast we do something dumb, but we would want to be aggressive in processing that proposal, responding to it, and then moving quickly for you to advise us whether or not we need to start spending resources on environmental clearance and right of way.

MR. SAENZ: I think tentatively right now what we'll do is my goal will be to put this out to our staff and have them look at it and be able to come and report to you at the next meeting kind of where we're at, and if it would require action, then we'll set it up as an action item, and if it's just a discussion and an update, we can set it up as a discussion and update.

MR. WILLIAMSON: Now would you close out anything else you need to say about 2(b)?

MR. SAENZ: Item 2(b), of course, is the processes that we've been putting in place to be able to work cooperatively with the metropolitan areas, the MPOs, and of course, the other tolling authorities that exist within those metropolitan areas. It's a process that we've identified. We started it in San Antonio, it worked well in San Antonio; we've added and enhanced it a little bit more in the Dallas-Fort Worth area, the Metroplex, because they've got a few little things that are different.

Is it set in stone? No, it's not set in stone. I think it's going to be a dialogue between us and them so that we can make sure we tweak it so that it's kind of like working in a partnership instead of just here it is, do it this way, and we think this is the only way it should be done.

So we'll continue and tweak it and keep the process going. Our goal is to make sure, like I said, that our process is transparent and it's going to be very easy for anyone out there, whether it's someone in the Metropolex or the general public that hears the process and when we go through the evaluation, there's no question that the group that was selected provides the best value to the state and the region. And we'll continue to work on that.

MR. WILLIAMSON: Members, any additional discussion or questions on item 2(b) for Amadeo?

(No response.)

MR. WILLIAMSON: The only thing I would have wished that I had have added during our dialogue, Amadeo, was we need to be sure and remind not only the RTC but I think it wouldn't hurt to remind the RMAs and HCTRA or the Houston area as well, you know, by design, the toll system that the governor envisioned and that the legislature has adopted and several times changed, permits the use of those revenues for any transportation project.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Now, I know you're close, you don't have a report today, I don't think, but I know you're close to making a recommendation to us on the arm's length indices we will use to begin to judge whether or not a road is a better decision -- whether or not an asphalt is better than a steel road, whether or not that steel road is better than a public transportation investment. I know we're getting close.

But we probably need to be reminding our partners that the gas tax and the motor vehicle registration fee and federal reimbursement are pretty much inviolate but concession payments and toll collections are available for any transportation purpose that most efficiently reduces congestion, improves air quality, enhances safety, brings jobs to the area or keeps pot holes from appearing so that they always know that option is there. They may not choose to take it but they should always know that that option is there with those revenues.

MR. SAENZ: I think that's part of the education is that the concession payments and surplus payments have a lot more flexibility of where they can be used that will allow the people to plan around a transportation system instead of a highway system. They were planning around a highway system because there was no funding mechanism for the other modes, but the other modes, if you work them right, will help supplement and complement the highway system. And so we just need to go back and reinforce and educate on that, yes, sir.

MR. WILLIAMSON: I know we all know it and we all believe in it and may not always like it but we all believe it doesn't matter to us how to reach the goal, the important thing is that we reduce congestion or we improve air quality or we enhance safety or we provide jobs or we preserve our asset life, whatever that investment is.

Members, anything else for Amadeo on 2(b)?

(No response.)

MR. WILLIAMSON: Okay. Thank you. And Michael, with your indulgence, I would like to jump to the pass-through toll financing. I believe that we have item 10, and I'd like to go ahead and address those for a couple of reasons.

MR. BEHRENS: We'll then go to item 10 concerning pass-through tolls, we have two of them.

MR. WILLIAMSON: Is that acceptable, members?

MR. JOHNSON: Absolutely.

MR. HOUGHTON: Fine with me.

MS. ANDRADE: Yes.

MR. BEHRENS: The first one is pertaining to a project in Brazoria County on State Highway 36; the second would be in Titus County, some improvements there in the Mount Pleasant area.

Amadeo?

MR. SAENZ: Thank you, Mr. Behrens. Again, commissioners, for the record, Amadeo Saenz, assistant executive director for Engineering Operations. You have two minute orders before you, both dealing with pass-through financing.

The first minute order authorizes the department to negotiate a pass-through toll agreement with Brazoria County for the expansion and upgrade of State Highway 36 from State Highway 35 to FM 1495. If the negotiations are successful, then we will come back to the commission with a summary of the final terms of the agreement so that the commission may consider them for final approval.

The project is on State Highway 36, it's a project that is part of our Hurricane Evacuation Route system. This project was identified and the district had been working on this project for some time, they're doing some of the environmental studies and design studies, but they don't have the funding in place.

The proposal before you from Brazoria County basically says that they will build the facilities and then request pass-through financing for reimbursement. They propose to build a four-lane facility, go from a two-lane to a four-lane facility. The project cost is estimated at about $180 million and the project is basically the route is a regional route but it does have some statewide considerations because of the Hurricane Evacuation Route corridor and some benefits for both the region, the state, and even some of the local facilities because it will go around some facilities.

We think it's a good project, we've evaluated the proposal and it does meet the requirements under pass-through financing, and we would recommend approval of this minute order for us to continue to negotiate.

MR. WILLIAMSON: I need to ask you for the commission, Amadeo, is this primarily congestion relief, is it primarily safety, is it primarily air quality, is it primarily economic opportunity, or is it asset preservation?

MR. SAENZ: It has a little bit of all of them. Of course, it's safety in that we are expanding from two-lane to four-lane, it's safety in that we are enhancing our evacuation route system. It's got some bypasses around communities that would allow for economic opportunity in areas that are not developed yet. Of course, it does relieve congestion in that you're adding capacity to the corridor itself and also around the communities, and of course, all of that will lead to a higher quality of life. So it does touch on every single one of our goals.

MR. WILLIAMSON: But you wouldn't fix on one primarily over the other?

MR. SAENZ: No, sir. I think it does cover all of them. Probably, if we look at it, I would look at the safety because of the Hurricane Evacuation Route for that whole region.

MR. WILLIAMSON: And with regard to the governor's emergency preparedness report, I know that he didn't put specific projects in his report, but would this comport with the general project to get the evacuation routes as early as possible?

MR. SAENZ: Yes, sir. 36 has been on the state's evacuation route system. In fact, 36 was planned as a project that was identified not only in the state's emergency management evacuation route system, we used to have a Hurricane Evacuation Route funding category and 36 was on that also, it just never got the funding in place to be able to complete it.

MR. WILLIAMSON: Dr. Jack, I know you didn't sign cards. Do you wish to say anything?

DR. HARRIS: No, sir. I think it's been said well. Thank you.

MR. WILLIAMSON: And I beg your indulgence as we ask the questions about our goals, but as a former member and a colleague and a conservative resistor along with me in the era when big government was growing a little too fast, you'll appreciate we are trying to implement a system in this organization where we don't just build something because somebody

wants it built, we ask hard questions about why we're spending the taxpayers' money where we are.

DR. HARRIS: Well, obviously what we learned in Rita is any way we can get our people out and not have to go through Houston is going to be a plus for us.

MR. JOHNSON: Everybody.

MR. WILLIAMSON: Members, you've heard Amadeo's explanation and his proposal. Do you have discussion you wish to have on this item?

MR. JOHNSON: I have a question or two that are basically follow-ups to where you were going, Mr. Chairman.

Amadeo, on State Highway 36, between the completion of this project and US 59, how many miles, approximately, remain non four-lane?

MR. SAENZ: I think the majority are non four-lane but all those other projects are funded and will be constructed between 2007, 2008 and 2009. So with this in place, we will have a four-lane divided highway all the way from 1495 to US 59.

MR. JOHNSON: And I've driven this recently from Rosenberg up to Sealy.

MR. SAENZ: There's still, I think, some projects from Sealy south towards 59 that I think we need to address, and I don't have that information with me today, but this gets me to US 59.

MR. JOHNSON: And pretty much from 59 up to 10, there's some of that that's four-lane and it's good road, but it's certainly not the standard that we want to have for hurricane evacuation.

MR. SAENZ: Yes, sir, and we will continue to work on that.

MR. JOHNSON: Thank you.

MR. HOUGHTON: Amadeo, project costs $180- total?

MR. SAENZ: Yes, sir. The estimated cost of the project design, right of way and construction is about $180 million.

MR. HOUGHTON: Contribution by the county?

MR. SAENZ: In their proposal it's not clear, we'll be negotiating that. They're asking for $127 million but they're also saying that all the design work and right of way work is being done by the state, so really they're asking for $180- because that work is being done by the district currently. So we will sit down and negotiate that based on some of the strategies that we've identified.

MR. WILLIAMSON: Anything else, members?

(No response.)

MR. WILLIAMSON: Okay, members, you've heard the explanation, you've heard the dialogue between commission and staff, you've heard the staff's explanation. What's your pleasure?

MR. HOUGHTON: So moved.

MR. WILLIAMSON: I have a so moved. Do we have a second?

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. Thank you.

MR. SAENZ: It's been my show all morning. I think I said good morning again, but it was good afternoon.

The next item is also a pass-through financing proposal request. The minute order before you authorizes the department again to negotiate for a pass-through financing agreement with Titus County for the improvements on US 271, FM 1000 and FM 2348 in Mount Pleasant. Basically, the expansion of these three facilities will allow for a loop to be constructed around Mount Pleasant. After we negotiate with the locals, if you all so approve today, then we would come back to you with the terms that we've agreed upon for you all to consider for final approval.

The project, like I mentioned, will construct a loop around Mount Pleasant. Basically it will address some local needs because there are some schools that will also have access by the expansions of these facilities. Of course, it will lift truck traffic completely out of Mount Pleasant so therefore you've got a safety and a congestion relief and an air quality problem, and of course, you're building a relief route so you do have some economic opportunity that would come to that.

All three projects equal about eleven miles and their estimated cost is $128 million. Staff has reviewed the application, it does meet the requirements that are outlined in Section 554 of the commission rules, and we would recommend approval of this minute order to proceed with negotiations.

MR. WILLIAMSON: So primarily safety, primarily congestion?

MR. SAENZ: Safety and congestion, yes, sir.

MR. WILLIAMSON: Robert, come tell us why we should do this. Is this the Senator Bill Ratliff Bypass?

MR. RATCLIFF: Senator Ratliff started promoting it. He came here, I think in 2003, and talked to you about the bypass. We've had the 271 bypass program for a number of years, started with Mr. Adams, the district engineer at that time. We also have the FM roads that are included here programmed and we have been developing a schematic on these projects.

Quite frankly, there was no money to develop these projects further than the schematics, and that's when we started talking to the county and the city about some of the new tools that we have for financing.

Now, first of all, US 271 as a bypass most certainly is for congestion relief. We've got existing probably anywhere from 27- to 29,000 vehicles per day that are running through Mount Pleasant and hitting a lot of stop lights, a lot of truck traffic through that area because of the industry. That was what started us looking at the pass-through financing.

Now, the FM roads would effectively create a loop. FM 1000 would run east-west south of Mount Pleasant; FM 2348 would run north and south east of Mount Pleasant. The extension of those roads would be beneficial because if you were familiar with Titus County, they have a lot of lignite operations in the western part of the county, so then most of the residential areas have developed in the eastern part of the county, and all of the traffic that wants to go south toward Tyler, Longview, the industrial areas to the south, usually passes right through Mount Pleasant in order to go that way. Now, if we had the FM road extensions, they would have another route, alternate routes to take, and that should effectively provide some more relief off of the US highways that we have in Mount Pleasant itself.

I'd also mention that we do have Northeast Texas Community College that is in the southeastern part of the county, and that would provide access to those roadways too.

We've been working very closely with the county and the city on these projects.

MR. WILLIAMSON: Sounds to me like you've got good reasons to want to build this. Members, any questions or dialogue with Robert, our great district engineer?

(No response.)

MR. WILLIAMSON: It's kind of nice to have these tools, isn't it?

MR. RATCLIFF: Yes, it is.

MR. WILLIAMSON: Thank you.

Members, you've heard staff's explanation and recommendation, you've heard the district engineer's response to questions. Do I have a motion?

MS. ANDRADE: So moved.

MR. WILLIAMSON: Wait a minute. Excuse me. I should keep my glasses on all the time. Mike, how could I have missed you? Are you ready, Mike? I apologize, sir.

MR. FIELDS: Chairman Williamson, Director Behrens, and members of the commission, good afternoon. I'm Mike Fields, commissioner of Titus County.

In March 2003, we were in this room with a similar request to the one you are considering today. We listened carefully to what you had to say about the quality of our application for the needed relief route, your problem in funding all the worthy requests, and the emerging concept of pass-through toll financing. We heard you and we think we've effectively adopted the public needs for this project to your new concept of pass-through financing.

We as a county are prepared to act. We've called our election for May 13 which allows our voters to declare our ability and intention to partner with TxDOT to build these roads that have both regional and statewide significance.

I will conclude by saying that we in Mount Pleasant and Titus County feel that this will be an excellent example of a small, growing rural county and city making this new pass-through financing concept work. We are a major regional crossroad community that will work with you at TxDOT to make this a successful joint undertaking. Thank you.

MR. WILLIAMSON: Hang on a second.

MR. HOUGHTON: What was the bond that you passed?

MR. FIELDS: We have not passed the bond, we've put to have a bond election May 13 this coming year.

MR. HOUGHTON: For transportation?

MR. FIELDS: Yes, sir.

MR. HOUGHTON: Is there a contribution by you all to this project?

MR. FIELDS: Yes, sir.

MR. HOUGHTON: Okay. So Amadeo, is the total project $120 million?

MR. SAENZ: The total project is $128 million.

MR. WILLIAMSON: And what will your contribution be, Commissioner?

MR. FIELDS: I think right now we've got some up-front money around $9 million, we have some federal money.

MR. HOUGHTON: Did you get an earmark on that?

MR. FIELDS: Yes, sir.

MR. JOHNSON: What is the total budget for Titus County?

MR. FIELDS: Our total budget for our county government is around $10 million.

MR. JOHNSON: You know what I find fascinating about this, and I think it's a wonderful illustration what can be done, a county with a $10 million budget is about to undertake a series of transportation improvements that are going to cost $120 million or 12 years of budgets and it's going to speed them up, I would say, by two decades at least. And this tool, I just salute you for the vision to look at all the alternatives because if we wait on traditional funding sources to do all the transportation projects, as you well know, we'll be waiting a long, long time, and this is going to make these projects almost occur immediately.

I know there are 254 counties in this great state and there are a lot of them that are facing the same challenges that Titus is, and so I think you've set a wonderful example for what can be done and gone about it in a very positive way.

MR. FIELDS: Thank you.

MR. HOUGHTON: And that goes for myself also when you're talking about the contribution that you're making to get things done, champions in communities. Again congratulations to you.

MR. FIELDS: Thank you.

MS. ANDRADE: Sir, I also congratulate you, and I just want to tell you that I hope you don't mind but we'll be using you as an example throughout the state.

MR. FIELDS: That will be fine.

MS. ANDRADE: Thank you.

MR. JOHNSON: You'll be a poster child.

MR. WILLIAMSON: It's almost unlimited what you can accomplish when you think of things as one Texas. Thank you, sir, we appreciate it.

Jerry, Mayor?

MAYOR BOATNER: Thank you. Chairman Williamson, Director Behrens and members of the commission, good afternoon. I'm Jerry Boatner, the mayor of Mount Pleasant, and for almost ten years our city has worked on this mobility improvement plan with TxDOT and our county to strengthen and preserve traffic flow at our crossroads location.

The improvements that we are seeking today will truly heighten the connectivity between Interstate 30, US 67, State Highway 49, and US 271. These improvements will allow the north-south flow of the Green Carpet Route from Oklahoma to the Gulf Coast area, also along the Texas trunk system. These improvements will allow what we find to be the world's largest poultry processing plant, Pilgrim's Pride, in Mount Pleasant to direct its hundreds of trucks and many of its 4,000 employees on to the new adjacent relief route, not into the clogged state arteries in our community.

So to help partner with TxDOT, we as a city and county have partnered with the Titus County Fresh Water Supply District to raise $10 million up front to pay for almost half of the local costs of the estimated share that has been looked at so far, making the needed tax levy election that we have more attractive to our voters, once again, leveraging, as you outlined.

We want to commend the Atlanta District office, led by Ratcliff, who you heard from, and the Austin staff, directed by Amadeo Saenz, for their diligence and assistance as we have together crafted this plan to this moment.

You as members of the commission are to be commended for your vision in structuring workable solutions for Texas transportation challenges. So we respectfully request commission approval today to negotiate pass-through financing for this project.

MR. WILLIAMSON: Any questions of the mayor, any dialogue with the mayor?

MR. HOUGHTON: Just congratulations again, poster child.

MR. WILLIAMSON: Yes, city and county both deserve high marks for this.

MAYOR BOATNER: I think it shows the leveraging aspect you're looking for and the fast forwarding, and we hope to be that shining model of a stand-alone county not right up against an urban area that can come up with their share and find leveraging through pass-through financing. We appreciate the opportunity and we will be that unique example that shows rural counties and cities can do this.

MR. WILLIAMSON: The next big thing we're working on is finding a way to quantify or to put a dollar value on how much faster the asset got to your citizens and what that meant to Bo's bottom line which apparently is fixing to greatly increase what he pays in state taxes for the public education system. In fact, we need to think about how we want to begin to link the transportation system more directly to the generation of tax dollars for the public education system because without any question, if the legislature follows the governor's leadership on reforming the business tax, there will be a direct link between the revenues you generate and the taxes available to educate children.

Our last kind of challenge, Amadeo, is to figure out how to quantify that time saved and what that means to housing values in Titus County, to industrial development in Mount Pleasant, to attracting new business in Mount Pleasant, and then to the quality of life for the people who live there.

MAYOR BOATNER: To quantify is difficult, but if we can be a model or help, we'd be happy to do so. But I think Bo Pilgrim -- you mentioned him -- he made a significant contribution recently to TxDOT for US 271, I think it was a $4 million donation for some improvements there.

MR. WILLIAMSON: Pretty significant. But we do appreciate, Mayor and Commissioner, your patience through the morning and being here.

MR. HOUGHTON: Chairman, we need to talk about those types of commitments by the private sector to making transportation as it's happened, especially like this, Amadeo, as we look at economic development opportunities, safety opportunities going hand in hand.

MAYOR BOATNER: We have a terrific truck problem with all the through traffic plus Pilgrim's many hundreds of trucks a day, and this is a big important thing for us safety-wise. Thank you.

MR. WILLIAMSON: Now, members, we've heard staff's explanation and recommendation, we've heard the testimony of the witnesses and the dialogue in between all of us. Do I have a motion?

MS. ANDRADE: 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.

MR. SAENZ: Thank you.

MR. WILLIAMSON: Thank you, Jack. We'll see you.

MR. BEHRENS: We'll go back to our regular agenda, we'll go back to agenda item number 2 and go to item 2c. which will be a discussion item by Coby Chase on our recommendations on our legislative agenda for the coming session. And after that, James Bass will then follow up on legislative appropriations recommendations.

Coby?

MR. CHASE: Good afternoon. For the record, my name is Coby Chase, and I say that for the benefit of the stenographer I sit next to. We're in the same neighborhood, and this is a polite admonishment, we haven't been doing a great job of stating our name for the record, and what she does is she sends me out to find everybody's name after they do that. So not for her, for me, if I could remind everybody to state their name for the record.

(General laughter.)

MR. CHASE: For the benefit of those in the audience, let me restate that the Texas Transportation Commission is authorized by law to make recommendations to the Texas Legislature on statutory changes that would improve the operation of the department, and this is part of our continuing dialogue on that all through, I would imagine, this year.

I want to kind of talk in broad terms about what I plan to say today is if nothing new has developed on an issue, I don't intend to raise it unless you have a question about it if you remembered it from a past presentation. I will try to concentrate on new developments and new directions and maybe some new variables. And anything else you would like to add, I am absolutely at your disposal.

On January 27, Mr. Behrens sent out a memo out to our districts and divisions and offices soliciting their input on ideas to enhance our operations. The department has been doing that for the 12 years that I've been here and before then, to solicit what changes in law that would actually help the operations of the department.

We received 75 proposals from 23 divisions and districts, and to just send a word out, so to speak, to my colleagues, it was actually high quality, about the highest quality I've seen in my tenure here at the department, actually. But right now we're in the process of reviewing each idea with an eye toward prioritizing the ones that deserve further examination by the commission and the administration. You will hear more from me on these issues in ensuing presentations before you. I'm just going to mention a handful today that immediately caught our attention.

One is putting oversize/overweight permit fees in the Texas Mobility Fund. There is a logical tie between oversize/overweight permit fees and road usage, at least to some degree, and to us, at least on first pass, this makes sense. And as you know the damage inflicted on our highways by overweight trucks is disproportionate to the amount of the fee and there's a logical connection there, like I said. It makes sense that if these trucks are doing more damage to our roads that if they're paying money, it should actually go into something that helps improve the roadway system. Presently only a small portion of permit revenue is used to improve highway infrastructure, while the majority of that money collected goes to the state's General Revenue Fund.

And as I learned before last session, I want to state this very clearly for the record, we're not talking about anything at all that would affect anything that goes to counties. The fee itself no longer goes to counties, a portion of it. It used to be something in the neighborhood of $4-1/2 million a year, not that that's going to change a whole lot in 254 counties, but the legislature changed that so it's no longer just straight cash but it's materials provided by the department in double that amount, $9 million. So I just wanted to make that clear, at least nothing said here or nothing recommended to us says bring any harm to the counties in this.

But that is something that we are looking forward to kind of digging deeper into and bringing back to you for more thought.

Relocation of billboards, another proposal, and as do many things, they come through the Houston District. Some cities have ordinances that would require when a billboard is removed for something like highway expansion, that the billboard not go back up, and then it all of a sudden becomes something we have to pay for when you're taking somebody's billboard property. That's expensive. And there's a conflict between what we do and what some cities impose on us to do.

And so as with many things, we're breaking a lot of new ground, so to speak.

MR. WILLIAMSON: Mr. Johnson was just saying we need more billboards in urban Texas.

MR. CHASE: Sure, all about that. It doesn't necessarily address the issue of whether or not there should be more, but if a city decides that it doesn't want more billboards which is not inherently a bad idea, but they're sticking us for the bill when it goes. So it's a city decision. It's kind of a reverse unfunded mandate, so to speak. It's their ordinance, we have to pay for it when the ordinance says if a billboard goes down, it doesn't go back up. So, at least according to this proposal, there needs to be a balance struck somewhere or an agreement about who pays what when you do those kinds of things.

MR. WILLIAMSON: What account bears the cost of that, the district's discretionary account?

MR. CHASE: That I don't know.

MR. BEHRENS: For the billboards? That would be out of the right of way account. Money that we have to pay when a billboard has to be relocated when we're widening a facility, like such as Houston when they say you can't put it back, then we have to compensate.

MR. WILLIAMSON: How much is that normally?

MR. JOHNSON: It's going to run more than a million dollars.

MR. WILLIAMSON: So say is a million a good average?

MR. JOHNSON: No, I wouldn't think.

MR. WILLIAMSON: Do we reduce the amount of transportation assets we build in that city or that county by that million?

MR. BEHRENS: Yes, you would, eventually you would.

MR. WILLIAMSON: So maybe what we need to do is start making it clear to them that any time we have to do that, that's a million dollars less in asphalt or concrete or bicycle paths or enhancements.

MR. HOUGHTON: Somebody is going to pay for it.

MR. BEHRENS: That's correct.

MR. CHASE: If I might ask the question for you, that might be an interesting question, could enhancement money be used for something like that.

MR. WILLIAMSON: Now, why couldn't you use enhancement money to remove billboards because you're obviously enhancing the driving experience, if you believe and take Mr. Johnson's approach as opposed to barbecuing the property rights of people. That's really a good thought, we ought to look into that. Add that to the list, we need to see if we can use enhancement money.

MR. JOHNSON: If that's barbecuing the property rights, it's a very mild barbecue sauce.

(General laughter.)

MR. CHASE: Another issue is international bridges. As you know, there has been some discussion about cities and counties leasing their international bridges. As a matter of fact, we're going to have an entire session on it June 8 at our Texas Transportation Forum here in Austin, Texas, hosted by Commissioner Houghton, a session about leasing your assets, and he's put together a great panel on that.

The Chicago Skyway experience demonstrates that the lease of public facilities can provide vigorous economic benefits when the proceeds are committed strategically and in a fiscally responsible manner. We will further examine this proposal and identify the significant benefits such an arrangement could have on a region's transportation system.

Interim hearings. I'm leaving department-suggested topics and going into interim hearings. Interim hearings are fully underway now, and much of what you as the commission may recommend for next session may be formulated or tempered by what transpires under the watch of committees with oversight over transportation matters.

As the legislature convenes for a special session next month, we anticipate a fairly hectic schedule. I mean, they'll be in town and not all of them will be handling the tax package, but while they're here, they will tend to do their interim hearings which makes sense from an efficiency standpoint. So in one way I'm putting you on notice, being our front line of testimony, followed by the administration, that the request might come more.

Here's a very brief summary of what's transpired on some of the more substantive committees that have addressed transportation so far. On January 25, Dave Fulton and Amadeo Saenz and Commissioner Andrade addressed the House Transportation Committee regarding aviation, needs for commercial private airports, as well as the funding process. And Commissioner Andrade and Mr. Saenz testified about the rail relocation needs of our metropolitan areas.

On March 24, again in front of House Transportation, they held a hearing related to transportation planning and coordination of land use with respect to transportation corridors. Mr. Behrens provided the department's testimony, and if I may offer color commentary, so to speak, there were a lot of very good questions and it seemed to be received very well. They did pass the bill last session and I believe they're using the interim now to learn more about the bill, and it actually seems to be getting some traction.

And then the House Transportation Committee will conduct another hearing on April 18 to continue its consideration of aviation and rail needs of the state.

On March 1, Senate Transportation and Senate Finance held a joint hearing on the process by which TxDOT allocates funds to the districts through the allocation program. They also discussed how we handle the $159 million federal rescission recently. Chairman Williamson, Mr. Behrens, James Bass -- I apologize if I'm missing somebody -- headlined that hearing for the agency, and we're preparing our responses to them now.

Senate Transportation will hold another hearing on April 18 to consider some more of their interim charges.

The Study Commission on Transportation and Financing, everybody has now been appointed, Commissioner Houghton, of course, being one of the governor's appointees. They will meet on April 19 to begin discussing their charges.

I'm going to talk a little bit about research. As you know, we have some research projects underway, the products of which could find their way onto your legislative agenda. Here is an update on those efforts.

With rail, with respect to rail and freight movement, we have an effort underway to identify a funding source for the Rail Relocation and Improvement Fund. A work authorization has been started authorizing HNTB to begin work on providing a list of possible revenue sources from freight movements. Each possible source will be evaluated for feasibility and ranked. HNTB will be working closely with TxDOT during the entire process. Within 90 days we hope to have narrowed the possible revenue sources to a short list that may be presented to you and then to the legislature.

Temporary tags. House Bill 2701 requires the department to conduct a study of systems for issuing temporary tags for use on unregistered vehicles. We have contracted with the Texas Transportation Institute to conduct this study. The researchers have completed a draft of the report for the first task regarding a review of pertinent legislation. They've also begun comparing the current system in Texas to systems used in other states. The final comprehensive report is due to TxDOT by August 28.

Utility relocation. House Bill 2702 requires the department to conduct a study to determine how to maximize use of highway rights of way by public utilities. We have contracted with TTI again, Texas Transportation Institute, to conduct this study. Their work will involve an engineering analysis of key issues in utility accommodation, including safety during and after construction, future access for maintenance, et cetera. This report is due to TxDOT no later than October 31. I believe it's due in December of this year to the legislature.

I want to touch very briefly, and then I'll conclude, on some other research we plan to outsource or use our research arm to conduct. Additionally, as we've been reviewing possible legislative proposals, we've started considering the use of independent researchers to evaluate some of the ideas. It should prove useful to have a third party's objective analysis included in the debates. For example, when you offer your idea of writing a new method of procuring professional services, you will certainly attract naturally interested parties to the picnic, and that's fine and that's how the system is supposed to work. But rather than listening to the two sides debate the matter and trying to filter out the hyperbole that seems to follow, it may be beneficial for legislators to have evidence gathered by an uninterested third party.

Some of the candidates for outside research we've identified are: the quality-based best value procurement method; the benefits of comprehensive development agreements; methods to capitalize and apply the Rail Relocation and Improvement fund; sobriety checkpoints; the remaining point of collection issue; the benefits of advanced right of way acquisition when there's a willing seller; the methods and benefits of acquiring existing toll facilities and bridges.

That concludes my comments, my update on our work on the state legislative agenda. I'll take any questions

MR. WILLIAMSON: Ted, when we were talking about the rail proposal over the last few months before we received a specific one, did I understand you to say it was a continuing theme of those who were in that business that if we were going to get the private sector to fully finance some of these projects, the legislature was going to have to let them have operational rights for longer than the current 75 years?

MR. HOUGHTON: We needed to look at the opportunities to amend that legislation. I think it's 50 years now if it's in the corridor, outside the corridor it's 70. So on any TTC asset we have a 50-year and that hamstrings the concessionaires and the private sector.

MR. WILLIAMSON: Not only should we put it on our list, I would think, Coby, we might want to start communicating to our legislative sponsors, leadership sponsors that that might be something that's necessary for them to start thinking about because I know for some that it was an important thing and it's better to not spring it on them in January, let them know ahead of time, finding out and why.

MR. HOUGHTON: You can point to the Chicago Skyway project, you can point to the Indiana toll project as long, a 99-year type leases of assets, and that maximizes the up-front payment for participation opportunities in those types of projects.

MR. CHASE: When the announcement was made yesterday, my staff and I were talking and it's kind of interesting, they made a point -- which is absolutely true and it's so obvious that's why they made it -- and it's kind of getting to this but kind of unlike trucks and barge operators, railroads finance their own infrastructure and right of way. I mean, we all pay taxes and build roads and our taxes finance the Corps' dredging operations and things like that, but railroads are in kind of a tough spot in that respect or in a different spot than others, and something like a longer concession term probably makes sense in these things.

So yes, absolutely, we'll add that to our list.

MR. HOUGHTON: And we can demonstrate it has a profound effect on an up-front as well as a participation.

MR. CHASE: Absolutely.

MR. WILLIAMSON: Coby, I know you touched on your research you're doing and I know your division is doing some research, Amadeo's division is doing some research, or divisions under his supervision. I just want to emphasize that on the 18th and 19th we're probably going to be asked some fairly specific questions about our position on what the gas tax rates should be. I'm sure there will be more commissioners besides myself testifying, and I would think that we would want the department to speak with one voice from a research document that we can give the Senate and House members, so if we could put, Amadeo, special emphasis on that research and in your section, in your division or office, I'd appreciate it.

MR. CHASE: Yes, sir, we'll do that.

MR. WILLIAMSON: I think we think we know what the gas rate is, but there will be a moment in time where we need to lay, you know, those 10,000 projects or corridor plans down and say here's what we need to do between now and 2030 and this is the gas tax rate it takes to pay for it. If you can't support this tax rate which we understand, then the plan you and we have developed will work to solve this problem, just so you know what your range of options are.

MR. CHASE: Right, absolutely. And it just kind of struck me that at one of those hearings he'll be asking you questions. All of a sudden it's crystal clear.

MR. HOUGHTON: Just call me Mr. Chairman.

(General laughter.)

MR. WILLIAMSON: You know what will be really dangerous is if Mr. Nichols ends up being on one of those Senate Transportation committees and they have the Finance Committee, and then it will be you and Nichols asking one of us questions. It will be really dangerous then.

MR. CHASE: Yes. We've got to come clean.

MR. WILLIAMSON: Ms. Andrade, Mr. Johnson, anything for Coby?

MR. JOHNSON: I had one thought, Coby. One of our stated objectives is to enhance safety. Have we thoroughly investigated any and all -- that's maybe too inclusive -- the ideas of how we might improve and enhance safety on the state's system with assistance from legislative changes or additions?

MR. CHASE: Well, first and foremost, there is the sobriety checkpoints. I have not personally reviewed everything that's been submitted by the divisions. I wouldn't be surprised if there wasn't something in there. We tend to get some that tend to be protections for say -- I don't know if it was submitted but I know we've had a discussion about the men and women who are courtesy patrols, clear wrecks off the road, giving them certain protections and abilities to do that faster, and things of that nature. But I don't know off the top of my head what has been proposed this time.

MR. BEHRENS: Coby, if I might interject. Carlos and I had a discussion the other day about some things we were preparing for upcoming testimony concerning safety, and of course, we're going to give them a report where we are on our Chris Project, use of the safety bonds type of projects being done, but then we'll probably touch on some things that need to be considered by the members as far as driver behavior and things like that on the other aspect of it.

MR. JOHNSON: Thanks.

MR. WILLIAMSON: Okay. Thank you for the update, Coby. I know it gets tedious about this time, but it's much better every month to address this stuff, publish it, let our transportation partners know what we're working on so that there's no surprises in January. Everybody knows what we think is the correct thing to do.

MR. CHASE: If I might add, at the risk of causing more work for my division, I would like to hear from more of our transportation partners, to be quite honest. We have been very straightforward about what we're doing and very public about what we're doing and have heard very little from anybody on the outside expressing any interest. I believe last time we were subject to a little bit of criticism, even though I made this appearance for almost a year, it's just if you're meeting with people -- and I know you do all the time -- and if they really do have something, send them our way, send them to Jefferson or send them to me. We're happy to talk to anybody at any time.

MR. WILLIAMSON: We might even give a midyear letter to each House and Senate staff and to our known transportation partners, NTTA, HCTRA, Alamo RMA, CTRMA, on and on, and just say here's where we're at and here's what we think we need to do, just see how they respond.

MR. CHASE: A little bit, I suspect, is to pat ourselves on the back, I think we're a little more ahead of the game than everybody, but I just want them to know it is not just an in-house operation.

MR. WILLIAMSON: No hiding the ball, here we come.

Okay, Mike.

MR. BEHRENS: Thank you, Coby.

We'll go to item 2(d), James Bass will discuss with you his ongoing preparations of our legislative appropriations request.

MR. WILLIAMSON: He used to be known as Fast Jimmy Bass, he's now known as Hop Along James. Hop along, James, tell us about it.

MR. BASS: I will get hopping. For the record, I am James Bass, director of Finance at TxDOT. And as Mr. Behrens said, this is one in a series of ongoing discussions and conversations that we will have concerning the department's development of our appropriations request.

What we've done since we've met with you last is we've received input from all the districts and divisions on what they see as their needs and/or wants for 2008 and 2009. We have refined our revenue estimates somewhat, but I would point out that these are still very preliminary. We've had an initial meeting with the administration to begin going over this input, but both our revenue estimate and the figures I'll show you later on here are still preliminary and subject to refinement.

But if we start off looking at the first year of the next biennium coming up, our estimated revenues right now for just the State Highway Fund are in the neighborhood of $6.8 billion. If we then start to look at the different uses of where that money is utilized, we can see that if the Department of Safety were to grow zero percent in 2008 above their 2007 level, they would utilize about $526 million of funds. That includes not only their direct appropriation but also their employee benefits, retirement and group insurance.

As we head down the list of some of the other agencies, TEA receives $50 million per year. Again, all of these are at 2007 levels with no growth. Health and Human Services is at $10 million.

MR. JOHNSON: James, let me ask one question. The revenue estimate, how does that compare to the 2007 estimate?

MR. BASS: That actually is lower than our 2007 estimate; 2007 is about $7.1 billion. There's a couple of primary factors why it's going down. We have a specific agreement with Harris County Toll Road Authority that is providing us $100 million of participation on the Katy Freeway project. All of that money will come in in '07 with nothing in '08. There's $100 million of the difference there.

What we're also seeing as we go from '07 into '08 is the downside of the implementation bubble from the tapered match that we've discussed before. How that accelerated some of our federal reimbursements and was going to create kind of a cash infusion, we now see between 2007 and '08 returning to normalcy, if you will, so it's actually a little bit less revenue in 2008.

MR. JOHNSON: Thank you.

MR. BASS: Health and Human Services Commission, they utilize state highway funds for Medicaid match. Attorney General, eminent domain cases, $6-1/2 million. The Texas Transportation Institute for their operations as well is about $6-1/2 million. State Office of Administrative Hearings who oversees some hearings I believe primarily with our Civil Rights Division and Motor Vehicle Division, just over $3 million per year. And then of the other agencies, just under $1 million. The Judiciary Section of the Comptroller's Office receives $910,000 and that's for prosecuting motor fuel tax fraud.

After we take away those other programs and other agencies, that leaves us just under $6.2 billion for TxDOT programs. If we then start delving into the TxDOT programs and first looking at the retirement and group insurance benefits for the 15,000 employees that we have, again at 2007 levels, that is roughly $230 million that would come out of the $6.2-

The next line is our MAINTAIN IT category, preserving the state transportation system we have, almost $2-3/4 billion per year. One thing I would note on this one, from here down we actually start putting in what the districts have submitted to us for 2008, not just a repeat of the 2007 levels. This is about $109 million higher than the '07 amount which equates to about a 4 percent jump, and as some of our discussions, our typical inflation, unlike the last two years, has been around 4 percent. So just in the maintenance of the system, keeping up with inflation is somewhere around $100 million more per year. Not doing any more restriping, resurfacing any main lanes, it's just doing what we've been doing costs about $100 million more per year.

Then the next line is the PLAN IT category, acquiring right of way, developing plans, doing environmental studies to make sure that there are projects continuously in the pipeline and ready to go as we move forward on to construction.

Look at our next broad category of USE IT, around $322 million. This is Vehicle Titles and Registration, Public Transportation, the Travel and Information Division, and Traffic Safety Operations, amongst many others.

After that one we go down to the administration and management of the department and we have $196 million for that category, and in order to balance back to the revenues coming in, for the BUILD IT category, that leaves us with just below $1.3 billion in the BUILD IT category. One thing I'll point out on that of interest, of the construction projects that are active today, that have already been awarded and been let, we expect those projects to have cash payments in 2008 of around $1.4 billion, and that's for projects that have already been awarded today. Some of those projects are funded by other tools other than the State Highway Fund, but that gives you some sense of the magnitude or how little that $1.3 billion represents.

If we then just jump, and not going necessarily line by line, going through the same steps for 2009, we will see that the revenue has increased slightly, it's about 1 percent in total, various pieces growing at various rates, but in total about 1 percent growth. Not surprisingly, the other agencies, we've held them flat which is probably not a very realistic assumption but we won't know what their requests are that they're going to send forward to the legislature until sometime later in the summer, so we've kept them flat at 2007 levels, gone through the similar process looking at the department's programs, and the bottom line for it, once we get down to the BUILD IT category is again just under $1.3 billion.

Again, the existing contracts we have today, once we get to 2009, we expect those to pay out somewhere in the neighborhood of $750 million, so there's not a whole lot of additional projects that could be funded through just looking at the State Highway Fund. I've presented this in this fashion to hopefully gain some attention at that low number in the BUILD IT category from the State Highway Fund.

Now, in 2008 and 2009, we're still going to have capacity and resources from both the Texas Mobility Fund and from the State Highway Fund revenue program, or Proposition 14. However, by the end of 2009, we would expect those to be fully depleted, and so the next cycle after this one, when we're going into 2010 and 2011, there will still be some ability within the Texas Mobility Fund but nowhere near the levels and the impact that we've seen as we've initiated and implemented that program.

At the same time, when we get into 2010, as we've discussed before, projections are that the Federal Highway Trust Fund would likely be operating near a zero balance as well as we move forward into that time.

So the tools we've received over the past few years will continue to serve us well in 2008 and '09, but those do not solve all of the transportation needs in the state. As a matter of fact, once we get through this cycle, we would see a dramatic drop-off without some other action taken.

MR. WILLIAMSON: So that just means that we need to be steadfast in adhering to our plan and holding our partners accountable for staying on the plan so that the slack in capacity expansion by 2010 will be taken up by toll projects, RMA projects, public-private partnerships.

MR. BASS: The traditional sources, as we've known for some time, we're seeing getting close to that dramatic drop-off of those traditional sources.

MR. WILLIAMSON: And that's fine. As long as we all stick to the plan, it will be okay.

More, James, or are you ready for us to ask you some questions?

MR. BASS: I'm ready for questions.

MR. WILLIAMSON: Members? One thing I think we need to be prepared for, even though the legislative appropriations request is pretty simple and straightforward, whether we do it our way or the LBB's way, we are inevitably going to be asked budget questions about our public-private partnerships, our investments in RMAs, and our partnering with RTC, for example. I think we need to be prepared from a budget standpoint, from a legislative affairs standpoint, from an Amadeo Saenz standpoint to demonstrate to our House and Senate sponsors how that interplay works and equates to a construction project in, for example, Senator Shapiro's district.

She's going to ask us those questions, she'll be on Transportation -- I presume she will -- and she's going to ask that question: How do all these tools actually equate to concrete on the ground in my district? And we'll need to be prepared in some manner to show a relationship between our budget and that occurrence in her senatorial district, I would think.

Nichols might even ask us a few of those questions, who knows.

MR. BASS: If past history is any indication, I would imagine.

MR. WILLIAMSON: Anything else, or are we going to let James off the hook?

MR. JOHNSON: Well, my observation is that you've taken the more optimistic route here. You've held diversion steady, you've increased the TxDOT expenses proportionately, and you've held revenues pretty much in check which is going to ultimately yield a BUILD IT category which is the plug of the delta figure at a level, and the actual occurrence, the diversions are probably going to be higher which means that BUILD IT category number is even going to be smaller in all likelihood than you've estimated in '08 and '09.

MR. BASS: And just for clarification, perhaps for the audience, even at this point we would not plan that our appropriations request for BUILD IT would be at the levels you just saw here, that would be what we could fund that category at through the traditional levels, but it will be supplemented, again, only in '08 and '09 through the tools that we have, Mobility Fund and Prop 14.

And more than likely we are being a little bit optimistic but we won't know even what those other agencies are requesting for probably another three or four months.

MR. JOHNSON: But then the amortization of Prop 14 bonds will diminish that number in the future.

MR. BASS: Correct. Proposition 14 is really just a cash flow technique. It will deliver projects sooner but when we get to 2030, there will be no additional projects that have been delivered because of Proposition 14. The Texas Mobility Fund does both: it delivers additional projects and delivers those sooner than they otherwise would have been.

MR. HOUGHTON: What kind of rescissionary effect by the federal government? Are those in there?

MR. BASS: Those will be built in. That has an impact. What gets confusing at times, we deal with apportionment and obligation authority with the Federal Highway Administration, and when we obligate the funds, that happens when the contract is awarded, but of course, that contract will live for three, four or five years, depending upon the size of the project, and we'll make monthly payments and get monthly reimbursements, and it's those monthly reimbursements that show up in the state's budget. So there's a timing lag between receiving federal obligation authority and then actually seeing it show up in the state's budget as reimbursements.

MR. WILLIAMSON: Okay, you're unhooked.

MR. BEHRENS: Chairman, if I could, I'd like to ask James to lay out agenda item number 9 which is an item that's related to -- he spoke of Proposition 14 bonds or bonding out of the State Highway Fund, and when we talk about money, we're going to need some of that, so we need to get that approved so they can go ahead and start working on that and be prepared to go to the bondholders.

James?

MR. BASS: Thank you. Agenda item 9 would approve the master and first supplemental resolutions, the preliminary official statement and other related documents establishing and relating to the State Highway Fund Revenue Financing Program, otherwise known as Proposition 14, and would authorize designated department officials to act on behalf of the commission in the issuance of those obligations.

Our first issuance will have an aggregated principal amount of $600 million of debt with that service payable over the next 20 years and also with an additional bonds test of four times. This issuance received Bond Review Board approval last week on the 23rd of this month and has received Triple A rating from Standard & Poor's and a Double A-1 from Moody's Credit Rating.

Staff would recommend your approval so that we may move forward with the issuance of this debt.

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. Thank you, James.

MR. BASS: Thank you.

MR. BEHRENS: We'll go to agenda item number 3, Aviation. This would be to approve funding for airport improvement projects for this month. Bill?

MR. FULLER: Thank you. For the record, I am Bill Fuller, representing the Aviation Division.

This minute order contains a request for grant funding approval of eleven airport improvement projects. The total estimated cost for all requests, as shown in Exhibit A, is $3,635,086. That's comprised of $2,387,542 federal, $647,100 state, and $600,444 local funds. A public hearing was held on February 17, no comments were received. We recommend approval of this minute order.

MR. JOHNSON: Bill, do we have anything in the pipeline on McKinney?

MR. FULLER: Commissioner, ultimately there's going to be some more McKinney stuff. The deal with my boss is that I'm not here when it arrives.

(General laughter.)

MR. FULLER: Ultimately we are planning several other projects down the line and there will be some substantial planning that will go into a number of those projects. Of course, there is no doubt that the McKinney Airport is an extremely important cog for congestion and a number of other roles it plays in the Metroplex.

MR. JOHNSON: How about Cherokee County?

MR. FULLER: We just concluded a project at Cherokee County, and I'm not aware of another one coming up at the moment.

MR. WILLIAMSON: I just think it's interesting that we were real quiet while we were looking this over and you were thinking about the same thing, both looking for where McKinney County was in this deal.

MR. FULLER: No, sir, it's not in this.

MR. WILLIAMSON: Anything else, members?

MR. JOHNSON: I heard that since Robert Nichols won the primary that he's probably buying a bigger airplane and needs a longer runway in Cherokee County or Jacksonville.

MR. FULLER: I had not heard that, Commissioner.

MR. JOHNSON: Well, I can't say that my sources are very reliable.

(General laughter.)

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. FULLER: Thank you.

MR. BEHRENS: Agenda item number 4 is under Public Transportation, and this will be to discuss and recommend how we'll disburse the 2006 5311 Commission Discretionary Funds to nonurbanized transit programs.

MR. GLEASON: Good afternoon. For the record, my name is Eric Gleason, director of Public Transportation.

Agenda item 4 is a minute order that awards $7 million of federal fund under the FTA nonurbanized program to each of 39 rural transit districts across Texas. Fifty percent of those funds, or $3.5 million, will be awarded to all rural transit districts in accordance with formula provisions of the Texas Administrative Code. The remaining 50 percent, or $3.5 million, will be awarded to those rural transit districts whose need and performance indicate that they should receive a higher level of funding than the current formula makes available.

SAFETEA-LU has provided the state of Texas a large increase in the nonurbanized program. Under the current formula, all that increase, approximately $10 million, is allocated to Commission Discretionary Funds. This award recognizes the efforts of rural transit districts in encouraging Congress and the president to provide more federal funds for rural transit. This award also takes advantage of a significant opportunity for the state to provide additional funding to historically underfunded rural transit districts, as determined by the current formula. The award is also consistent with the recommendation of the Public Transportation Advisory Committee.

Texas's rural transit programs are growing, providing 4.5 million passenger trips in fiscal year 2005, an increase of over 3 percent from the prior year. These funds may be used to reimburse transit districts for both operating and capital expenditures associated with the provision of public transportation services.

We recommend your approval of this minute order.

MR. JOHNSON: There are two people who have requested to speak on this matter. Do you want to ask questions first, do you want to hear the two speakers? You want to hear the speakers first? All right.

Two have signed up. The first one is Beverly Lutz. Beverly, we're delighted you're here. You're from SA, TX.

MS. LUTZ: Yes, sir.

MR. JOHNSON: Would that be San Angelo?

MS. LUTZ: San Antonio.

MR. JOHNSON: San Antonio.

MS. LUTZ: Yes, sir. Good afternoon. My name is Beverly Lutz and I'm the transportation manager for Alamo Area Council of Governments, and I'm here to ask you to approve this minute order for us. It would mean a great increase in our funding. We have been one of those historically underfunded organizations, and so this funding will help us to increase our ridership, and as well, increase our capital which our vehicles have a lot of miles on them so this is really needed in our area.

So I think the distribution is well organized and I think all the agencies will really appreciate the funding.

MR. JOHNSON: Beverly, how does an increase in funding correlate to an increase in ridership?

MS. LUTZ: We have been planning and talking about two deviated routes for quite a number of years, and because of the lack of funding, have not been able to implement it. In New Braunfels and also in Frio County, we are working with JARC, the county judge is trying to get some people coming up from the southern counties coming into the colleges to help the educational aspect of their citizens, and then also maybe in Wilson County and Atascosa, we're getting more and more ridership in the southern counties. So we're trying to put buses out there so we can get them going.

MR. JOHNSON: Ted, any questions? Hope, of your neighbor?

MS. ANDRADE: No. I just know the need.

MS. LUTZ: Yes, ma'am.

MR. JOHNSON: Beverly, thank you for coming this distance and sharing with us your comments, and I apologize for barbecuing your last name.

MS. LUTZ: That's okay. Thank you.

MR. JOHNSON: The next speaker is the appropriately named Ben Herr, who I assume will get in his chariot and come forward, the executive director of the Texas Transit Association.

Ben, it's a delight to have you here.

MR. HERR: Thank you, sir. Good afternoon. For the record, my name is Ben Herr. I'm executive director of the Texas Transit Association.

Commissioners, thank you for the opportunity to speak before you on behalf of the transit operators in the state, and thank you for all that you do for public transportation.

The Texas Transit Association is in support of the minute order that distributes $7 million to the rural operators in Texas. These funds are greatly needed and they will enable the rural operators to pay for increased current operational expenses and in some areas expand service to meet the increased demands.

By using the current guidelines in place under the federal 5311 grant program and not otherwise restricting the use of these funds, this gives the rural operators the flexibility to use these funds in a manner that best meets the needs of their communities.

For example, Bee Community Action Agency that serves a five-county area near Corpus Christi, is experiencing increased operational costs and they were planning a decrease in service for the community. With these increased funds that you're providing, Bee Community Action Agency is planning to maintain the level of service by using these funds towards increased employee insurance and fuel costs, both gasoline and propane. They are also looking at expanding service to a new senior citizens center that opens in May.

Similarly, in Uvalde these funds will go to meet an increase in operational costs in fuel, insurance and maintenance. These funds will allow Community Council of South Texas to maintain current operations without cutting back in service in the eight-county area that they serve.

In the Hill Country, Hill Country Transit is planning to use the additional funds to meet the increased operational expenses in such areas as fuel and maintenance. They have a growing non-Medicaid medical transportation demand for service that's placing a financial strain on their budget, so these funds will be used to meet that demand.

And finally, the Heart of Texas Council of Governments serves a six-county area in the rural areas near Waco. They plan to use these funds to replace older vans that have over 500,000 miles on them. Even though these vans have such high mileage, they cannot be removed from service because of the high demand for transportation that's placed on them. HOTCOG also expects to purchase an additional vehicle for McLennan County because they currently cannot meet the demand for non-medical transportation. Some of these funds will also be used for maintenance costs.

These are just a few examples but they illustrate the prudent use of these federal funds that will be provided by this minute order.

As shown, most operators will be using these funds to meet increases in operational costs or to replace and expand their aging vehicle fleet. This additional $7 million is an excellent investment in public transportation for the citizens of Texas, and the Texas Transit Association supports this minute order and the manner in which these funds will be distributed.

I'd like to thank TxDOT and the commission for making these funds available to the rural operators. Your financial support of public transportation is very much appreciated.

MR. WILLIAMSON: Members, do you have questions or dialogue with this witness?

MR. JOHNSON: I have a question. Ben, again thank you for being here.

The methodology by which these funds are being distributed and the fact that the number is $7 million of additional funds that are going out under formula, does it make any difference what the methodology is as long as the number is $7 million?

MR. HERR: I think it makes a difference. I agree on the manner that the Public Transportation Division decided to distribute that. Certainly there are some people that are getting an increase that greatly need the increase, and yet there's a certain amount of it that's distributed to all to help everybody because they're all suffering the same operational costs increases. So I'm in agreement with the manner that it was distributed. And I think it does make a difference, yes.

MR. JOHNSON: Well, the number $7 million, how was that arrived at?

MR. HERR: Well, the $7 million, there was about $10 million that was available in additional federal funding, and the decision was made to take approximately $2- to $3 million of that and set that aside for Commission Discretionary Funds. And I think that's a prudent move. That gives the commission the flexibility at a later date for a certain project that you deem is necessary to be funded, could be an emergency situation, could be a special project, could be expansion of some kind of new service -- for example, if we have a new rural operator that starts to establish service. It gives the commission flexibility to provide that funding where it might be needed, but at the same time we're taking that $7 million and distributing it to the operators that need it at this particular point in time in 2006.

MR. JOHNSON: Thank you.

MR. WILLIAMSON: Say, Ben, what happens -- I'm sorry. Hope?

MS. ANDRADE: No.

MR. WILLIAMSON: I know we've been going out, have we not, Eric, with our invitations to propose -- if that's the right word -- for medical transportation responsibilities? I would presume on this list are going to be proposing to provide services to medical transportation. Is it not the case that we could use that $3 million -- and in fact, at least two of us have thought that we might need to use that $3 million in the event that some of these providers end up having a large increase in their service requirements because they're successful proposers on the medical transportation side? I mean, would this be an example of how the commission could use the Discretionary Funds?

Well, let me give you a specific example, because I'm not sure public transit services in my area is bidding, but let's say PTS is proposing to be one of the providers for medical services transportation and they don't' have any expectation that they're going to be picked but they go ahead and they're very aggressive and they propose to cover five counties and they get the pick, and they come to you and say, you know, we need $200,000 in startup cash to carry this contract off. Would that not be an application of this $3 million that we reserved for Discretionary Funds?

MR. GLEASON: It's not one we've considered. We are reviewing proposals, we are talking with individuals on those proposals. As part of the proposal, they are requested to provide a unit cost for both a trip within their county and for trips outside of the county, and those costs are intended to cover the expense of those trips, and to that extent, that's reimbursable.

MR. WILLIAMSON: Last year we awarded some money because fuel went through the roof unexpectedly. Would this $3 million the commission is reserving be a potential use for that?

MR. GLEASON: That's a potential use for it, yes. Where we have talked about potentially as being useful is in the context of the regional coordination plans. As they come together and identify opportunities for service expansion and need for service expansion, that one potential use of the Discretionary Fund would be to foster those kinds of projects as a way of encouraging coordination.

MR. WILLIAMSON: So your vision as division leader would be the commission would use this for planning unexpected fuel increases or things of that nature, not necessarily for the medical transportation element?

MR. GLEASON: Yes, sir. I would add a third potential area and that is around the modernization of capital, if you will. Fleet replacement, facility upgrades, all of those things contribute significantly to reducing operating costs, getting cleaner burning vehicles in operation which helps with air quality issues and things like that. So those are three general areas we've talked about for uses of the Discretionary Fund, yes.

MS. ANDRADE: Mr. Chairman?

MR. WILLIAMSON: Yes, please.

MS. ANDRADE: If I can add, I'd also be a little uncomfortable with us saying that we're going to put this money away for medical transportation. I'd rather that we say at this time it's for unexpected expenses, perhaps even technology that can improve. But I'd be a little uncomfortable with that.

MR. GLEASON: Absolutely.

MR. WILLIAMSON: Anything else, Ben? How are you doing in your new job?

MR. HERR: Busy, sir.

MR. WILLIAMSON: It's not new anymore, though, is it?

MR. HERR: No, sir, it's not.

MR. WILLIAMSON: Anything else, members?

MR. JOHNSON: I have a question or two of Eric.

Eric, first of all, thank you for taking the time to bring me up to speed on this particular issue, actually familiarizing myself with it. Some of these things needed a lot of expert help and I was in need here.

I think I mentioned to you, or at least through Phyllis Chandler, my assistant, that when we talk about a different amount of funds, the proposal here is the calculation is made on increasing the base from the 2004 level by $7 million. It's from $14- to $20-; it's $6 million and some change then.

MR. GLEASON: If I may, Commissioner Johnson. This item speaks directly to the 2006 Discretionary Fund. The item we've spoken about is item 5(a)(2) on your agenda regarding some changes to rules governing future fiscal year allocation of these funds, and that's where our conversation has been.

MR. JOHNSON: Okay. Well, I'll wait until then to ask my question.

MR. WILLIAMSON: Any other questions, members? What's your pleasure?

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. Thank you.

MR. BEHRENS: We'll go to agenda item number 5(a)(1), these will be Rules for Proposed Adoption. 5(a)(1) concerns Management and Traffic Operations and it deals with Advisory Committees and Safe Routes to School.

Carlos?

MR. LOPEZ: Thank you, Mike.

Good afternoon, commissioners. My name is Carlos Lopez and I'm director of the Traffic Operations Division.

The minute order before you proposes revision to the existing rules for the Safe Routes to School Program to implement the new federal program created under SAFETEA-LU. The proposed revision will allow us to create a program that is in compliance with both the new federal law and guidance issued by the Federal Highway Administration. This will be a comprehensive program designed to encourage children to walk and bike to school, promote safety, reduce traffic, reduce fuel consumption, and improve air quality in the vicinity of schools. The program will also include funding for non-infrastructure projects such as public awareness and outreach campaigns, traffic education and enforcement, and student education. This is a 100 percent federally funded program with no local match requirements.

We're also proposing expansion of the existing Bicycle Advisory Committee to allow for members with experience related to public health, traffic enforcement, child safety and other areas. This expanded range of expertise will help us in implementing this program.

We recommend approval of this minute order.

MR. WILLIAMSON: Members, you've heard the explanation and recommendation. Do you have questions of Carlos?

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.

Carlos, just as a matter of curiosity, absent any other controls, could we use Enhancement money for bicycle routes, Safe Schools?

MR. LOPEZ: We did that with our first program. It was totally Enhancement funded.

MR. WILLIAMSON: Interesting.

MR. JOHNSON: I think about 30 percent of the projects we did qualified for Safe Routes to School on the Enhancement call.

MR. LOPEZ: That's correct.

MR. WILLIAMSON: Courthouses, bicycle routes. I like that choice. Thanks.

MR. LOPEZ: Thank you.

MR. BEHRENS: Agenda item 5(a)(2), back to Public Transportation, Eric will lay out recommended rules concerning our Formula Program and also the 5311 Grant Program rules.

MR. GLEASON: Again for the record, my name is Eric Gleason, director of Public Transportation.

Before I get into my specific comments, Mr. Chairman and members of the commission, I'm going to be focusing on sort of the nuts and bolts portions of the rules that would be changing. The vice-chair of our Public Transportation Advisory Committee, Mr. John Wilson, is here as well today, and he will be describing for you the process that the Public Transportation Advisory Committee went through in their deliberations on this topic, and what they were attempting to accomplish and what their opinion of these proposed rules are.

This minute order proposes the adoption of amendments to Section 31.11 relating to Formula Programs and Section 31.36 relating to Section 5311 Grant Programs to be codified under Title 43, Texas Administrative Code, Part I.

These amendments affect the distribution of state Public Transportation funds to small urban and rural providers. They also affect the distribution of federal funds, Section 5311, to rural providers.

State Fund Formula revisions for small urban providers are as follows:

One, small urban transit providers are divided into two groups or tiers based on service-eligible population.

Two, the relative importance of need versus performance for small urban providers will change over time from 80 percent need and 20 percent performance for Fiscal Year 2007, 65 percent need and 35 percent performance for 2008-2009 biennium, and 50 percent need and 50 percent performance for each biennium thereafter, moving us along that spectrum when it comes to allocating funds to placing a heavier emphasis on performance in the future.

Three, the revisions increase the number of performance indicators used from three to four and change the indicators and their weights to provide a better mix of indicators relating to service, efficiency, and local support.

The fourth revision for the small urban providers, the revisions limit the maximum population amount to be used in the calculation of a small urban area to 199,999 but establish the urban area population, a larger number, for the amount to be used in the calculation of performance indicators. The current rules use that smaller number in both cases and they tend to overstate the performance of the small urban providers in those areas, so that revision addresses that.

State Fund Formula revisions for rural transit providers are as follows:

One, the relative importance of need versus performance will change over time, from 80 percent need and 20 percent performance for 2007 and 2008 and change to 65 percent need and 35 percent performance in 2009 and each year thereafter, again moving us along that spectrum.

Two, the revisions also replace the passengers per operating expense measure in the formula with passengers per revenue mile to include a service effectiveness indicator in the rural formula.

Federal Section 5311 fund distribution to rural transit providers is revised as follows:

One, increase the amount of Federal Section 5311 funds to be distributed by formula from $13.1 million which was the 2004 baseline amount, to $20.1 million. This proposal resets the baseline for each rural transit provider to their 2006 rural funding level and includes the amount resulting from today's allocation of an additional $7 million of federal funds. This proposal will help ensure the intent of SAFETEA-LU is met by distributing a large portion of the increase in federal funding to rural areas whose population, land area and performance indicate a need for additional funding as soon as possible, providing future funding stability and reduce the uncertainty in budgeting for future service.

Two, these revisions make the transition provisions of the current rules permanent and an ongoing matter as opposed to ending in 2010.

And three, these revisions incorporate the same proposal to change the relative importance of needs versus performance and changes to performance indicators as State Fund Formula revisions for rural transit providers.

These proposed changes are the result of six months of intensive work by the Public Transportation Advisory Committee. Our colleagues at TTI deserve a tremendous amount of credit. I think they exceeded our expectations on the quality of the support that they provided to this effort. And we recommend adoption of these proposed rules. Thank you.

MR. WILLIAMSON: Members, we have two witnesses. Shall we proceed?

Would you prefer us to hear from John Wilson first or Beverly first, Eric, do you have a preference?

MR. GLEASON: No.

MR. WILLIAMSON: John? Good afternoon, sir.

MR. WILSON: Good afternoon, Chairman Williamson, members of the commission, and Mr. Behrens. I'm John Wilson. I am currently serving as the vice-chairman of your Public Transportation Advisory Committee.

When you asked PTAC to look at ways to revise the funding formula, you gave our committee a task that has potential to impact the state public transportation systems for the foreseeable future. There are more transit systems in the state right now than there have ever been before. All of these systems are competing for a pool of funding that has not had a corresponding increase in state appropriations. This means every year each transit system gets a smaller slice of the same size pie. This increased demand for funds has a devastating effect on our transit systems and the citizens who use their services.

From the very beginning when we started looking at ways to develop a funding formula, our group was committed to the idea that whatever formula we came up with would meet with the following standards: it had to be fair; it had to encourage transportation coordination; it had to encourage local investment; it had to be efficient and effective; and it had to increase the statewide availability of public transportation.

We are proud of the formula we came up with. While it may not yet be perfect, the members of PTAC are in agreement it is the best that can be done with available resources. We also feel that it meets the standards that I have just outlined.

Mr. Gleason has summarized the nuts and bolts of our proposed formula and plan, how it would work, so I won't discuss that again. I would, however, like to give you an idea of a process that we used to get to where we are today.

First of all, I'd like to thank you for allowing the Texas Transportation Institute to assist us with the background information that we needed in order to make an informed decision. Without their assistance, we could not have met the challenge. We're especially grateful to Linda Cherrington and Jeff Arnette for their knowledge and assistance.

We had six meetings and one all-day workshop where various funding scenarios were discussed in great detail. Thanks to the information from TTI, we were able to look at a variety of formulas and see what the outcomes of each one would be. As we developed the proposed formulas, we presented the information to various groups and in a variety of formats. We listened to what we were told, and believe me, we were told plenty. We made changes based on comments that we got and those that are being presented to you reflects those changes.

We feel the funding formula, as presented, will achieve efficiencies right away, and as the transit systems across the state will move closer to the goal of full coordination, we believe that these efficiencies will only increase.

We appreciate your continued support and confidence you've placed in our committee. We believe what we have developed is a model plan and hope you agree. Thank you very much.

MR. WILLIAMSON: Hang on, John. Members?

MS. ANDRADE: John, I want to thank you for your leadership on this and I want to congratulate you. You've come a long way and I'm very proud of the work that you and your committee have been doing. I also am very glad that we got TTI involved.

Thank you so much.

MR. WILSON: Thank you.

MR. WILLIAMSON: Anything else, members?

MR. JOHNSON: I just have one observation. I'm going to ask Eric some questions to continue on the conversation that I started when we were talking about an action as opposed to changing the rules.

But I think the role of PTAC has been significant and I think that's the way things need to be done. Clearly the people who are part of the system, use the system, and make up the system are closest, and therefore, they should have the most knowledge about the way these things should work. And I want you to please convey my personal thanks to your colleagues for the sacrifice that they make to serve in that capacity because, one, I know it's not a highly paid -- it's an honor but it's not highly paid, and you do good work, and we're grateful.

MR. WILSON: Thank you very much, appreciate that.

MR. HOUGHTON: I want to echo the previous remarks, the labor of love that you put into this, but it's extremely important and I appreciate it very much.

MR. WILSON: Thank you.

MR. WILLIAMSON: I appreciate it, John, also very much. I know that time is one of the more valuable things a person has, and we appreciate the time you and your colleagues give to this effort.

MR. WILSON: Thanks very much, Mr. Chairman.

MR. WILLIAMSON: Beverly?

MS. LUTZ: Thank you. Again, my name is Beverly Lutz and I work with Alamo Area Council of Governments, and we also want to support PTAC and the division on this decision on the funding formula.

And also I have two resolutions here. One is from the area judges from AACOG and also from the board of directors showing you their support, and so I have some originals and then I have some copies that I'd like for you to have for your file.

But I also wanted to thank PTAC and the division for listening to us down on the bottom, down listening to the clients. We're hearing their demands are increasing, and so they are listening to us as providers, and we really do appreciate that. Even though we do give them a little trouble sometimes, they are listening to us, and that is very nice to know that they have an ear for us.

So I have these to submit to you. Thank you.

MR. JOHNSON: That's high praise saying that they have an ear for you. It's wonderful to deal with people who listen.

MR. WILLIAMSON: Members, did you have any additional questions of Beverly?

MS. ANDRADE: No. I just wanted to ask Eric, do we have any other members from PTAC in the audience?

MR. WILLIAMSON: Thank you, Beverly.

MR. GLEASON: I'm sorry, what was that?

MS. ANDRADE: Do we have another member from PTAC?

MR. GLEASON: Yes, we do. I'd like to introduce Vastene Olier.

MS. ANDRADE: Thank you very much for what you do.

MR. WILLIAMSON: Vastene has been doing it for a while, I think.

MR. JOHNSON: Back to my questions, and thanks again for helping me understand this. When I first was looking at this and the way it was constructed was to take a baseline that is already in existence and create a new base and then work from that base. And it occurred to me -- and it shows that different people look at things from different angles and construct things in different ways -- that rather than changing the base, if we were to keep the same base and just deal with the difference between that base and the new amount of money, and then agree on how we spread that out, might be a better way, especially if that number continues to change year after year. And there's no certainty, I believe, that that number is going to remain constant. These things have a way of moving about. Hopefully they will increase but there's no guarantee to that.

So my suggestion was let's go back and look at what would happen if we maintained the existing base and said any increase over that, two-thirds would go by formula and then one-third would go into the Discretionary pool. And interestingly enough, the result was the numbers differed a little bit but it wasn't a great number of dollars. And in fact, the providers, I believe, got more money under the scenario of just let's pick a ratio and divide the increased funding, keep the same base and divide the increased funding by this percentage basis.

But thanks to your explanation and the work of PTAC, I think where you've landed is an excellent spot. If this were a sole proprietorship, I probably would have constructed it my way, but it's not, and I again want to salute to the work that they did and I think this is a good place to land.

MR. GLEASON: Thank you.

MR. WILLIAMSON: Members, you've heard staff's explanation and recommendation, you've heard the testimony of the witnesses and you've witnessed the dialogue in between members and staff. Do you have a motion?

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. Thank you, Eric.

MR. GLEASON: Thank you.

MR. BEHRENS: We'll go to our Rules for Final Adoption, agenda item 5(b)(1) is rules concerning Finance and Pass-Through Toll Financing.

James?

MR. BASS: Again for the record, I'm James Bass, director of Finance.

Agenda item 5(b)(1) would adopt revisions to the rules for pass-through fares and tolls. Some of the significant changes are amendments to incorporate pass-through fares into the rules, and also that TxDOT can now either pay or receive a pass-through payment, and now design, development and financing are added as subjects allowable for a pass-through agreement.

The amendments are in response to statutory changes enacted through House Bill 2702 from the 79th Session. The amendments were published in the Texas Register to receive public comments. One comment was received and is addressed in Exhibit A. And staff would recommend your approval.

MR. WILLIAMSON: I had a question for a moment, James, but I'm thinking now that I don't need to make it.

Members, you've heard staff's explanation and recommendation. Do you have questions of staff?

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, Hop-Along.

MR. BEHRENS: Agenda item 5(b)(2), another rule for Final Adoption, this is rules concerning Motor Carriers, and Carol Davis.

MS. DAVIS: Good afternoon.

MR. WILLIAMSON: Howdy.

MR. DAVIS: For the record, I'm Carol Davis, director of TxDOT's Motor Carrier Division.

The final adoption package you have before you contains amendments to Chapter 18 concerning Motor Carriers and Vehicle Storage Facilities. These amendments are necessary to clarify existing requirements and implement the provisions of several statutory changes that came out during the 79th Legislative Session, all of which were effective in 2005.

These amendments incorporate new vehicle storage facility requirements concerning fees, proof of ownership, notifications and acceptable forms of payment, they incorporate modified liability insurance levels for certain commercial school buses, and they incorporate the elimination of alternative motor carrier registration based on vehicle weight for household goods carriers.

The proposed amendments were published in the December 2 issue of the Texas Register, posted on TxDOT's website. We also sent notices concerning the statutory changes to household goods carriers and posted those notices on our web pages.

The public comment period for the proposed amendments ended on January 2 and five comments were received from two industry associations. Three of the comments concerning fees associated with vehicles stored by law enforcement and clarifications of workers compensation requirements were incorporated into the proposed rules in the packet you have before you.

One additional comment was received at the February commission meeting, and final adoption of these rules were deferred until this meeting. MCD staff met with that individual to address his comments. One of his comments or concerns, the one concerning workers comp requirement clarifications were already included in the packet, however, the majority of his comments were related to statutory mandate and we were unable to come to an agreement regarding those comments.

With that being said, we are again recommending approval of the amended sections.

MR. WILLIAMSON: Members, we have several witnesses in this matter. Is this Mary Copp?

MR. ROD JOHNSON: She had to leave.

MR. WILLIAMSON: She was in the general comment, but you don't think she's here?

MR. ROD JOHNSON: No, sir. These people all are small movers, they had to go back to their business.

MR. WILLIAMSON: We have one for, one against, and one on, and I have personal knowledge that we have some confusion as opposed to some disagreement about this, so I think the way I'd like to approach it is have the person in favor, Rod Johnson, speak first, and then the person on, Bill Webb, a friend of many of us in the transportation world second, and then let the person speaking against, let Manny speak last, because he probably will take up the most time. And while we ask all of you to limit it to three minutes, we're not unreasonable people and we try to have a reasonable dialogue about problems in this world we're in.

Let me ask you one question before you vacate the podium. This is basically a responsibility we picked up or were transferred to us from the Railroad Commission. Is that correct?

MS. DAVIS: Yes, sir, in '96 -- '95.

MR. WILLIAMSON: So unless you object, members, we'll hear from Rod Johnson first, if Rod is still here. Rod, are you still here?

MR. JOHNSON: Chairman Williamson, commissioner, Director Behrens. My name is Rod Johnson. I own a small local moving company that was founded in 1978 called The Apartment Movers. We move people from one apartment to another one. And first I'd like to apologize that there's some misunderstanding about me being for or against it or on it. I'm not against the insurance, I'm for it, it's just got to be something that you can buy and something you can get. There's no fairy dust in this room, I know that, we all know that.

The rules before you are going to eliminate my company and most of the small moving companies in this state. That may not be the original intention but that's what's going to happen because they require you to have insurance that you can't get. The small mover can't get it.

Twenty-three percent of the population of the entire United States moves every year. That means that these household goods rules will touch every person in Texas eventually. Most of these Texans moving are small local moves. My company alone has moved almost 1-1/2 million people since 1978.

I'd quickly like to give you some background on how we all got to this juncture today that will determine the fate of the small moving industry. The Texas moving industry has historically been dominated by the large van lines with large semi tractor trailers and large regulation. There has been no small moving industry in Texas until the last 28 years.

In the late '70s there began a widespread deregulation of the transportation companies in the U.S. In Texas, local moves between two or three cities became completely deregulated. I myself was an architect in the late '70s and had numerous bad experiences with the large van lines. In the last instance, my large van line movers did not show up for my too small move, so I moved myself and wound up with two hemorrhoids.

I spent the time well in the next three days but productively writing a business plan for how to correct what was wrong with the moving industry in Texas, creating a small moving industry that didn't exist. The result was a company that cut the average apartment move from $350 to $112. The company started doubling in size every year, and numerous other small movers joined and created to serve an unserved market.

The small moving industries quickly outnumbered the large van lines. In 1995, due to large consumer pressure, the large van lines were again hit with large regulation in Texas, and in 1997 and 1998 provisions were passed to allow the small moving companies to be regulated under the same set of rules but small provisions for their small type of equipment and small operations. The simple distinction would be weight of the vehicle: under 26,000 pounds, small trucks; over 26,000 pounds, large trucks, large semis. The insurance requirements and registration requirements would, of course, be less for a small mover's pickup than a large mover's semi.

2004 and 2005 were tough years in the moving business. Some movers, possibly rightfully so, convinced some legislators that the small movers needed more insurance. Just take away the weight distinction. It would be simple, you just get someone to take away the weight distinction and all the large regulations for large semis will hit the small movers in a large way.

In 2005 in the last few hours of the 79th Legislature, an amendment was tacked onto House Bill 2702 -- a good bill -- that eliminated the weight distinction between large and small movers. In one line, in an unread amendment, the Texas moving industry would go back 30 years, there would be no small moving industry. Every one would be a large semi or owned by the people with large semis and big trucks.

So what makes the new rules so bad for small movers? Insurance that is required that does not exist. Fairy dust on rules don't create insurance. You can't insure your semi like a pickup truck, and you can't insure your pickup truck like a semi, especially if it doesn't belong to you, it belongs to the contractor you hire.

Over the last nine months, my staff and I have spent 490 man hours working with 51 insurance companies and agents. Today there is not one valid insurance quote on my desk for the insurance required by the new rules. There's no insurance product to buy for the small movers that use independent contractors.

And I want to say this, TxDOT has been great. They have come forward, they have called the insurance companies, they have called the brokers, the brokers have called me, the insurance companies have called me. There's still no product, there's still no insurance.

Chairman Williamson, you gave me some great advice about contacting my representatives and senators. Several asked me to bring you messages and their comments. Representative Hochberg sends you his regards, and Mr. Chairman, he said some very nice things about you. He asked me to tell you that he understands what is trying to be done, it's just being done the wrong way.

And I'll go on to quote him, A The big van lines aren't going to move 82 percent of the people in my district that live in apartments, you are, Rod. The people just can't afford to pay the big van line prices.@ And to go on, A There's nothing in the statute that requires TxDOT to put you in the classification of commercial motor vehicles. In fact, they went out of the way not to put you in the classification in the statute. There's no reason to put you out of business just because you can't buy something that does not exist.@

Senator Carona is chairman of the Senate Transportation Homeland Security Committee and the committee director is a brilliant attorney who spent many hours researching and evaluating the new statute, the new proposed rules, our suggestions and talking to me. His conclusion: this is unintentional consequences, this is unintentional harm; you must go to them and tell them that.

I believe you have a package there from Senator Carona and it has some of my comments, some of the legislative background. Okay, I told you. The last thing he said was to be sure I entered into the record the comments and suggestions I made to TxDOT, and you have them behind Senator Carona's letter. They're all based on requirements to harmonize with federal law or risk losing federal funding, and based on Texas attorney general opinions that require statutes of doubtful meaning to be resolved in the interest of all parties, end quote.

A statute that requires something that does not exist is doubtful. TxDOT can only resolve it if you give them directions. Thank you.

MR. WILLIAMSON: Hang on.

MR. ROD JOHNSON: You don't want to let me out of here?

MR. HOUGHTON: I have a question, Rod, and maybe to you, Bob. Are we mandated so we have no choice to do this? Is this correct? What are our choices as to the statutes?

MR. JACKSON: We are mandated to adopt rules that set minimum liability insurance requirements for all motor carriers, and the new motor carriers that weren't under the rules before, those household goods movers between 10,000 and 26,000 pounds, our rules proposed $300,000. We are not required by the statute to set it at $300,000, we have to set it somewhere.

MR. WILLIAMSON: I want to be sure I understand, and maybe by way of helping answer Ted's question. There was a point in time, as I understand it, Bob, where there was like a Class A and a Class B type of carrier, and one person might tell us that it was the intention of the legislature to eliminate the distinction between classes and treat everybody the same way, and someone else might be telling us that it was the intention to create one class but not necessarily to treat everyone the same way. That's probably the confusion we're going to hear, is it not?

MR. JACKSON: There used to be Type A movers, over 26,000 pounds, Type B, under 26,000. The Type B did not have to have minimum liability insurance requirements as set by commission rule. The legislature did remove that distinction; there are no Type A and Type B, there are just household goods movers who are regulated by TxDOT. However, in the mandate from the legislature for us to set minimum liability insurance requirements, we can make distinctions by weight.

MR. HOUGHTON: But we still have to do it.

MR. JACKSON: Yes, we have to do it.

MR. WILLIAMSON: Okay. Thanks, Bob.

MR. ROD JOHNSON: I would beg to differ with that, but again, you didn't ask me that.

MR. HOUGHTON: My lawyer tells me we have to.

MR. ROD JOHNSON: He's the same attorney general that tells you you have to resolve things that are of doubtful meaning. Requiring insurance that doesn't exist, in my opinion, is doubtful, and there's attorney general opinions with the package that I gave you that goes into detail.

I'm certainly not an attorney but I'm trying to do my best.

MR. JOHNSON: What is the insurance package that does not exist that you refer to?

MR. ROD JOHNSON: It's not possible for -- we use independent contractors. We've gone out to every company that exists, they do not offer a package, what they call an insurance product, to us that lets us carry that insurance on all those independent contractors, it just doesn't exist.

MR. JOHNSON: As an individual contractor, is the insurance available? A policy that covers a group of you as opposed to each individual contractor.

MR. ROD JOHNSON: The way it is right now and the way it was recommended by TxDOT and what we do is the person has insurance on his vehicle, we submit a form to his insurance company that says he is using his vehicle commercially, make sure we've got everything straight, and we want to be on the policy too as an additional insured. We don't want any gaps in between. That's what's been working since, I guess, '97. We do not have one claim. We have general liability with a non-owned hired vehicle; we do not have one claim against it. It works pretty well the way it's been.

There's also something else that there's no mandate or deadline in enacting these rules. This commission, with all due respect, has the ability to go to the attorney general and get opinions on these things and it's your direction to do those things, I believe.

MR. WILLIAMSON: Well, we may or may not act or not act.

MR. ROD JOHNSON: I'm not going to advise you.

MR. WILLIAMSON: We love the attorney general but we generally love even more our own lawyers. We kind of have a tendency to trust and believe in our own lawyers.

MR. ROD JOHNSON: I thought he was the attorney general. I apologize.

MR. JACKSON: I want to be positive, there's not necessarily a disagreement. The statute says the commission shall adopt a rule that sets minimum liability insurance requirements. Mr. Johnson, I think, is saying that there is case law that if the legislature tells us to do something that is impossible, then we can't do it or we don't have to do it. And that's a fact question that you may want to ask Carol about, is it, in fact, impossible to get this insurance.

MR. WILLIAMSON: Hang on a second. Carol, can you tell us your viewpoint of that?

MS. DAVIS: Well, I'm not a motor carrier who is trying to get insurance, but when our staff members have called various insurance companies, they have told us that yes, they do offer these products. And I believe a better source of information on that would be someone from the motor carrier industry who actually is a former Type B carrier or someone who is registered and has insurance.

MR. WILLIAMSON: Well, let's see.

MS. ANDRADE: Mr. Chairman, can I ask a question? So are you saying that for your type of business, because you hire contractors, there is not insurance, but for the individual truck owner there is insurance.

MR. ROD JOHNSON: Yes. As I understand the law in Texas, there's only two kinds of insurance policies: you're either an owner or you're an operator; I don't think there's anything in between the way I read it. What we do is we use people that have either their own trucks or their own pickup trucks and they pull a small enclosed trailer. With all due respect to her, we are now a Class C mover and were a B mover, and we have tried as hard as anyone I know to get that insurance.

I had one quotation at one time before the rules were even promulgated, as I recall, and the quote was for them as service vehicles. Well, at that time -- I didn't want to discuss it with anybody -- I was in the U.S. Appeals Court in the Fifth Circuit over one word. I don't think I want to go back over the word service vehicle versus commercial vehicle. It was very expensive to get there, the lawsuit was over $4.3 million. I spent 100 grand to get there. Maybe it seemed like I was picky before about this word like vehicles and how broad that was. I had been burned, that was horrible.

MS. ANDRADE: So this is affecting you because of how you run your business.

MR. ROD JOHNSON: It's affecting all the small movers. A little over half of them, something like 57 percent, basically have the same business model that I do: they use independent contractors. Now, that's not everybody, that's not every B mover, that's a majority of them, though.

MS. ANDRADE: Thank you.

MR. ROD JOHNSON: Thank you.

MR. WILLIAMSON: Bill, why don't you give us your viewpoint, and then we'll hear from Manny and see if we can make some sense out of this.

MR. BILL WEBB: Thank you, Mr. Chairman. Director, members of the commission, thank you.

Before I get to the topic at hand, just because I don't come before you very often, on behalf of the trucking industry I'd like to thank the commission and Governor Perry for your foresight on the corridor and some of the other programs. You know, Lieutenant Governor Bullock told me a long time ago, he said, Don't come in and tell me what you're against, tell me what you're for. And our industry is for an infrastructure in this state that's going to work and it's got to be paid for and we appreciate that you have taken to try to get us there.

MR. WILLIAMSON: We appreciate it, and Bill, you and your group have been good transportation people. Sometimes we agree, sometimes we disagree, but we all understand that, and folks who are focused on the end goal are very important to us. I can't tell you how much we appreciate it.

MR. BILL WEBB: Well, the only thing I would say is we're often characterized, whether it's toll folks, non-toll folks, as being on different sides. I think we're all on the same side and that's the side of the state of Texas and having an infrastructure. So we appreciate it.

MR. WILLIAMSON: Thank you.

MR. BILL WEBB: To the issue today, I want to speak briefly because I don't want to cost Commissioner Houghton his over and under on the end of the meeting.

(General laughter.)

MR. BILL WEBB: I represent the Southwest Movers Association and the Texas Motor Transportation Association, and I'll be honest with you, we were the groups that were behind this legislation, and our association, the movers side is made up of approximately 320 members in the moving industry, 100 of those are what you would call Type B carriers that we're talking about here. They do support this program, they do carry the insurance.

And let me be clear on what the problem has been historically, and I respect what the previous speaker said, but the problem is that when you use someone who owns a pickup truck to make a move and they have a personal auto policy and they're involved in commercial activity and there is a problem, that private policy is not going to honor a commercial activity, and the consumer never finds that out until after the fact. So that's number one.

Our 100 or so Type B carriers are getting this insurance. I believe, and completely disagree with the previous speaker, it is available. Is it more costly? It could very well be, but you're talking about a commercial policy versus a private policy.

We have no intent of running anyone out of business because this legislation impacts our members as well, but this is a consumer issue, and trying to be delicate, we had a slogan as we went through this that size doesn't matter. It shouldn't matter whether you're goods are being delivered by a pickup truck or an 18-wheeler, that the consumer has protection. So this is really about consumers and the protection they have.

And I want to applaud TxDOT because they literally had this issue thrust on them when the Railroad Commission went away, and I'm fairly sure didn't want it when they got it, and have done a pretty good job of working through it, and I think we've done some things to work with them.

I believe this will make the consumer safer in this state. I do know that the insurance is available and as to the issue of the limits, to us this is not about what the limits are. I'll say two or three things about that. Number one, it's the same limits that tow truck operators have to have; number two, this requirement is no different than what plumbers and electricians and all those folks in this state are required to do; and it's still $200,000 less than what Class A trucks are required to do -- we're required to have $500,000 insurance.

So that's sort of the reality of where things are, and our members do have this insurance now, so it absolutely is available.

I'll just close with one story. When we first started working on this two years ago -- and we were kind of caught by surprise last month because there were no comments, as Carol said, in the proposed rules, we had not heard anything until a couple of days before you met last time -- but in the discussions working into the legislature, we ran into Representative Bohac and he said, I want to be a part of this bill. And he got pretty adamant about it, and the question was why, and he said, Because I had a move that I was trying to make and we used what was called a Type B mover and they showed up in two small trucks and couldn't get all of the move, all the household goods on two small trucks, two small trailers. And he said, Well, why don't you just bring a bigger truck? And the guy said, We don't want a bigger truck because then we have to answer to TxDOT's rules.

So my question to you is clearly we want -- you know, our average member has eight trucks in our association. Yes, the big van lines are members, but the moving business in Texas is small business, just like the trucking industry is for the most part, so we are very pro small business. But the question is what kind of seal of approval does TxDOT want to put on folks who are not carrying the insurance that's going to protect the consumer, and that's really what it comes down to.

I would be more than glad to work with the previous speaker to help him get insurance, and I think we could help do that, but he chooses to run his business the way he does, and as a successful businessman, he certainly has that right to do. But with all due respect, there is one person here saying that it's not possible, and I can bring you a list of 100 of them who already have it.

MR. WILLIAMSON: Does anybody else want to ask Bill a question before I do?

MR. JOHNSON: What's a typical premium for the type insurance for what used to be classified a Class B carrier?

MR. BILL WEBB: What we did, Commissioner, was we went back, because we knew that question would be asked, and we determined that with the limits at the statutory minimum where they've been on a private policy, that it was somewhere averaging $900 per year, and to go to these limits with a commercial policy would take it to around $1,300 to $1,400 a year per vehicle.

MR. HOUGHTON: Per vehicle.

MR. BILL WEBB: Per vehicle, yes.

MR. WILLIAMSON: Any other questions?

(No response.)

MR. WILLIAMSON: Hang around a second, Bill, because we're going to have a lot of visiting back and forth about this.

MR. BILL WEBB: Thank you for your time.

MR. WILLIAMSON: Thank you, sir.

MR. HOUGHTON: Don't leave.

MR. WILLIAMSON: Manny?

MR. KHAVARI: Manny Khavari.

MR. WILLIAMSON: Khavari.

MR. KHAVARI: Yes, sir.

MR. WILLIAMSON: Thank you for helping me pronounce that, sir. Welcome, Manny.

MR. KHAVARI: Thank you, sir. Again, thank you, Chairman and members of the commission. Thank you for the opportunity. My name is Manny Khavari. I own a small Type B moving company in Dallas called Alliance Apartment Movers. I started it back 14 years ago in 1992 with one truck and two men. I was one of those two men. By the way, at age 40 I was doing the work of 20-year-olds, you know, lifting furniture.

I started my business with $13,000 that I had saved up all my life. $13,000 got me started, $13,000 was not enough money to even make a down payment on a tractor-trailer pulling an 18-wheeler and start a big van lines, much less anything else. However, we started the business and I copied a successful principle that was already -- there were some entrepreneurs, such as my colleague, Rod Johnson -- and that is to employ the independent contractors and keep your costs down. You don't have to have equipment because the independent contractors are providing their own pickup truck. The size of our trailers are no longer than a suburban, you know, 16 to 20 footers. These are small trailers. The entire weight of the truck, trailer and all the contents is probably no more than 12-, 13,000 pounds versus the 18-wheelers that are five times more than that.

Anyway, we started this and by reducing our expenses we started to attract the public and profited by working hard and generating loyal and repeat customers. Before our type of business came to being or came into the market, there were two options available: you either had a lot of money or your company was paying for you to move and you would go to the van lines. That's when money was no object and your moves would cost hundreds, if not thousands of dollars.

We basically, in 1992, created a new niche of market that did not exist before. Back in 1992 we created $115 moves from one apartment to another, and today after 14 years, factoring in inflation and factoring the high price of gas, our average cost is only $241.

We cater to people who cannot afford to go to van lines. We're talking about students, we're talking about teachers, we're talking about nurses, we're talking about old people on fixed income, we're talking about blue collar people. They cannot afford the exorbitant cost of going to van lines so they come to us, and we have created a tremendous amount of repeat customers as a result of that, they love us, and they're the ones who are going to get hurt as a result of this House bill that was passed.

Now, any attempt to increase the cost of operation cannot be passed on to these people. These people, before we came into being, they were either using their Uncle Bill's pickup truck on the weekend to do the move, or they would go and rent a U-Haul and do it themselves. Of course, it was unsafe, they did not have the experience, it caused a lot of injury, back injury, herniated disks, and a lot of damage to their property. So by increasing our cost, we cannot pass it on to these people; these people will migrate back to doing it themselves.

This will hurt a lot of people. It will hurt small business owners such as myself, it will hurt my family, it will hurt my customers, it will hurt old people, it also will hurt many independent contractors whose livelihood is depending on us. Most of these independent contractors are low skill and low educated, and they're making very good money, they work very hard, they make tips, and their other option would be to go to a fast food restaurant and earn a minimum wage.

Our industry was not organized like the large moving companies, we were not prepared for the regulations. We know, and I'm sure some of you know in this room, that the new rules have little or nothing to do with the safety and consumer protection, and I insist, against what the previous gentleman said, it has everything to do with large moving companies' campaign to run the little moving companies out of business.

As stiff as the rules are, we have to comply with them, however interpretation and implementation of the law should be practical and workable. Problems that I have encountered so far are two. One, I researched all the insurance companies, just like my colleague Rod said, all over Texas and I have found only one insurance company in Houston that offers cargo insurance meeting the TxDOT requirements. I can purchase my cargo insurance from this gentleman but he's the only one. If he decides to drop my insurance six months later or double my rate, I'm at his mercy, I have no other options. So rules should not be written in such a way that creates a monopoly.

I cannot find any insurance company -- that's number two -- that will provide my independent contractors with commercial liability insurance. The type of insurance required by TxDOT does not exist, as Rod said. The type of commercial liability that exists requires me to employ the independent contractors as employees. I should further master Social Security and Medicare deductions increasing my labor costs by at least 7-1/2 percent, I should also purchase workman's compensation insurance for them, increasing it by another 24 percent.

And in our type of moving business, 65 percent of our moves are done in two days, on the weekends, Fridays and Saturdays, the other 35 percent is done scattered throughout the week, and we rely on independent contractors and part-timers. Having people on a part-time basis as employees, if we work them less than 30 hours, they can go and file for unemployment and that would also increase our employment costs.

The lack of thought and understanding of our type of business in making these rules are obvious. These rules were written with good intentions. The consequences are definitely bad for our business and the public. However, if they have been written by the influence of hostile groups to our industry, it is doing its intended work.

As rule-makers, I urge you to make it possible of small business owners to first, be able to comply with the regulations, and secondly, to make it affordable for us to be able to operate. Stiff rules will drive these industries underground and will create law-breaking people from otherwise law-abiding citizens. It will create a monopoly by large moving companies and it will create a barrier to enter this industry by small businessmen.

Gentlemen, I hate whiners or complainers. I always say don't whine and don't complain; if you are presenting a problem, come up with a solution. Our industry is very unique. With 14 years of experience that I have in this business, combined with Rod Johnson's of experience, we can come up with a solutions that are workable if we can just sit down and they understand the way we're operating. But the way they're treating us like the large van lines, this is not going to work, we cannot get the insurance.

MR. WILLIAMSON: Members, do you have questions of this witness? You'll have another chance in a second, but do you have questions right now?

Let me just say I appreciate your remarks, I love America, this is what America is all about right here. What you do may be unique but your business isn't unique. You and Rod, and then Bill, representing his association, have just given the entire watching audience a great summary of the battle between the unregulated, uninsured, wide open, entrepreneurial small business person who generally drives down the cost for the consumer at the expense of government and its tax collections, the insurance industry and its equalizing of insurance premiums across the board, and the healthcare industry and its equalizing of healthcare costs across the board because you and your subcontractors don't pay FICA, don't pay Social Security, don't pay workers comp. I'm not saying it's bad, I'm saying that's the way the world is. And as a result, when Roger hires you, he gets his apartment moved probably 50 percent cheaper than when one of Billy's members moves.

And one of Billy's members, on the other hand, does pay FICA which keeps everyone's taxes down, does pay into Social Security which keeps everyone's old folks covered, does pay workers comp insurance which does drive down the healthcare costs for everybody because his members are paying into the system, and does protect the consumer when that one in 10,000 does the wrong thing and the consumer can't find someone to reimburse them for their loss.

I just can't tell you how much I've enjoyed the last 15 minutes of listening to this because it's pretty much a snapshot of where America is in its economy. I see some I think new Americans in the background laughing about this because they see the same thing I do.

Now, I know where we're going to go with this in a minute, but I want everybody to have the opportunity to have their say, so members, we have before us Manny and Rod and Bill, ask all three of them what you want to ask them, and establish what you want to establish.

MR. HOUGHTON: Well, Mr. Chairman, I think you just summarized everything that needs to be summarized. I will ask Manny and Rod if something happens to one of your customers' goods, are those goods protected?

MR. KHAVARI: Yes, they are.

MR. ROD JOHNSON: Absolutely.

MR. HOUGHTON: Under these rules?

MR. KHAVARI: They were and they are now.

MR. HOUGHTON: If you can't buy insurance.

MR. KHAVARI: Cargo insurance would take care of that. Before this House bill --

MR. HOUGHTON: Is that a fact, their goods are protected?

MR. KHAVARI: Yes. Before this House bill, the rules were that you have to show the proof of financial responsibility up to $5,000 by either providing cargo insurance, number one, number two, by giving $5,000 letter of credit to TxDOT showing that you can actually do that, or $5,000 in surety bond.

Now, in the new legislation they took the letter of credit and the surety bond out, and I submit to you the intention was to drive the cost of operation for us up.

MR. WILLIAMSON: Now, be careful.

MR. KHAVARI: I will back that up.

MR. HOUGHTON: Well, I don't want to deal in that. I'm just trying to get to the point.

MR. WILLIAMSON: We don't want you entering into the record in our hearing that kind of debate because that's not what we're charged with resolving.

MR. KHAVARI: I understand. But to answer your question, yes, we did have --

MR. HOUGHTON: No. Today can you meet the requirements under these rules?

MR. KHAVARI: Yes. Like I said, we can get the cargo insurance, but the problems that I'm having is that only one guy right now will give that to me.

MR. HOUGHTON: Okay, let's stop. Bill tells me that it's more carriers than one guy.

MR. WILLIAMSON: Well, I think really what these guys are saying -- if I'm wrong, you need to tell me -- but I think what they're saying is they're in the business of scheduling multiple subcontractors to move people all across the Metroplex, and under the old system they could buy one policy for themselves and in effect take that premium, $1,200 or $1,300 a year, and spread it out over 50 subcontractors.

MR. HOUGHTON: No.

MR. WILLIAMSON: Well, tell me how I'm wrong.

MR. ROD JOHNSON: And I apologize if I went too fast on this and I didn't mean to step in front of you, Manny. I think there's two issues here: one is the cargo and the other is the auto liability, and those may be getting a little confused. The cargo is one issue and it's not really a very big issue. We've got the policy, I'm sure Manny can get it. That's not really a big issue, the consumer's goods are protected. And they've lumped this under consumer protection but that's not it. The consumer's goods, unfortunately are set at 60 cents a pound, but that's what they are. Whether it's me or Class A, Class B, it doesn't make any difference, we have that coverage, that's not a problem.

It's the auto liability side of it, that's the issue.

MR. HOUGHTON: Per car.

MR. ROD JOHNSON: It's not per car. We now have to carry a policy on all these independent contractors out there that have their own insurance --

MR. HOUGHTON: Or per vehicle.

MR. ROD JOHNSON: Well, it's not per vehicle. They don't have a way to rate it, there isn't any product out there, there is no way to rate that. How do you rate it whenever one day you've got two guys out and the next day you've got 20 guys out? They don't have a way to rate that -- at least they haven't brought me a way to rate it. If they would, we wouldn't be sitting here right now. It would have been cheaper for me to just go get the policy and get out of here.

MR. WILLIAMSON: Well, but do I read your business correctly?

MR. ROD JOHNSON: We don't do that. You misread it, I'm sorry, sir.

MR. WILLIAMSON: Tell me what you do.

MR. ROD JOHNSON: We hire independent contractors.

MR. WILLIAMSON: Do you have an ad in the newspaper and an ad in the telephone book?

MR. ROD JOHNSON: Yes.

MR. WILLIAMSON: I pick up the phone and I call. I want to move my apartment, I pick up the phone, I like the ad in the apartment movers yellow pages, I call you.

MR. ROD JOHNSON: Right.

MR. WILLIAMSON: Now, do you have employees?

MR. ROD JOHNSON: Only in my sales staff. Those independent contractors are the movers.

MR. WILLIAMSON: So you have subcontractors or what you call independent contractors out there in the world, they're not your employees, they're kind of sitting on standby waiting for you to then pick the phone up and say in the northwest quadrant of Dallas, Texas I need to move Mr. Behrens in apartment 16-G to apartment 5-D.

MR. ROD JOHNSON: A little bit more sophisticated, but you got the point, yes.

MR. WILLIAMSON: And then you take me off hold and say Mr. Behrens, it's going to cost you $112 or $251 or whatever.

MR. ROD JOHNSON: It's actually a fairly sophisticated computer system, but in the basics it still works the same way.

MR. WILLIAMSON: So, so far I'm understanding your business.

MR. ROD JOHNSON: Right.

MR. WILLIAMSON: So Mr. Behrens says, Fine, here's my credit card or here's my credit reference or I'll pay by check, or you just take the chance, whatever, and you send Mr. Johnson over, who is located in the northeast quadrant of Dallas, to move Mr. Behrens. Now, does Mr. Behrens pay Mr. Johnson in your world?

MR. ROD JOHNSON: Yes, they collect the money.

MR. WILLIAMSON: And does he write the check to Mr. Johnson or does he write it to you?

MR. ROD JOHNSON: It's typically credit card or cash.

MR. WILLIAMSON: To whom?

MR. ROD JOHNSON: It's all collected by the independent contractor.

MR. WILLIAMSON: How do you get paid?

MR. ROD JOHNSON: They take and turn it back in to us. They either keep their share of it or they turn it back in to us, let's say it's a credit card, we run it through our machine and they get their share.

MR. WILLIAMSON: Well, I pretty much did understand your business, didn't I?

MR. ROD JOHNSON: Well, I think the part that you may have misunderstood -- and you probably understand it better than I, from what it sounds like -- was that we buy insurance and somehow spread it out over these people, and that's not the case.

MR. WILLIAMSON: Let me rephrase that. You buy insurance to protect yourself from the claims of those other people.

MR. ROD JOHNSON: We certainly do, absolutely.

MR. WILLIAMSON: And they, in theory, buy their own insurance to protect themselves from claims by Mr. Behrens when they drop the lamp.

MR. ROD JOHNSON: No, sir. All the damages are our responsibility. We have cargo insurance to cover that.

MR. HOUGHTON: So it's the auto liability insurance.

MR. ROD JOHNSON: It's the auto liability.

MR. HOUGHTON: It does not cover fleet.

MR. ROD JOHNSON: And I'm sorry if I interrupt you. The consumer protection is about the cargo and that's taken care of it. Manny has a problem with it, it's not a big issue.

MR. WILLIAMSON: Well, then I think I did understand his business.

MR. HOUGHTON: They're a clearing house.

MR. WILLIAMSON: Yes.

MR. ROD JOHNSON: We're classified as a broker.

MR. WILLIAMSON: There's nothing wrong with that. Like I said, I love America, I love this job. This is a snapshot of some tremendous problems in our country that the United States Congress and the various legislatures of the states have created by attempting on one hand to guarantee everyone that there's no pain in life, and attempting to guarantee on the other hand that consumers and entrepreneurs can save and make as much as they want to by their own decisions, by attempting to guarantee an industry can grow and flourish and provide safe business, and at the same time guarantee liberty for all, and it's just incompatible.

MR. HOUGHTON: Rod, the issue then is the individual owner of the vehicle obtaining liability insurance on that move that day, and he may not work the next day.

MR. ROD JOHNSON: That is part of the problem, yes, sir.

The requirement is now I'm the moving company and what happens is TxDOT --

MR. HOUGHTON: So how do we protect the consumer if we can't get the liability insurance on that move on that day?

MR. ROD JOHNSON: That is the problem.

MR. HOUGHTON: Well, it's not a problem. How do we protect the consumer? The consumer is the one that has to be protected under the statute.

MR. ROD JOHNSON: I agree, and they're protected today. The problem is that they're now requiring an insurance product that doesn't exist.

MR. HOUGHTON: How are they protected today?

MR. ROD JOHNSON: The independent contractor comes to us with insurance. We file a form with his insurance company that names us as the additional insured and puts them on notice that his vehicle is being used commercially. They either accept it or they don't. They don't accept it, he doesn't work, it's that simple. You don't have the insurance, I'm not going to send you out. Why would I risk 28 years of my life?

MR. HOUGHTON: Take it a step further. What today prevents you, under these rules, from doing that?

MR. ROD JOHNSON: There is no policy like that, I can't go out and buy one. I can't go out and say I want a policy to cover all these independent contractors, it doesn't exist.

MR. HOUGHTON: No. He has a policy that's going to name you as additional insured.

MR. ROD JOHNSON: There's nothing wrong with that, that's just not what the new rules say, that's what the old rules said. That's the way that TxDOT recommended we do it. They said, Put yourself on there as additional insured, put his insurance company on notice. We did it. Richard Garwood, our local auditor or whatever, he said do that, that's what you need to do. We did it, we've been doing it.

And with all respect to the one in 10,000, we've moved a million and a half people and I don't have any fatalities out there, I don't have any claims out there.

MR. HOUGHTON: Well, but there's always that one time.

MR. ROD JOHNSON: There is that one time, and that's why I want the insurance. And I can't sprinkle fairy dust on this and make it happen. Someone may say they've got it, but that's probably on a box truck, that's probably with employees. All B movers don't use independent contractors; I think the last study we did was 57 percent.

So someone can stand up here and go I've got a box truck, I've got employees, I'm a B type mover, and I've got insurance, and he's absolutely telling you the truth. This guy over here sits there and goes I'm a B type mover, I've got independent contractors, they provide their own truck and their own insurance, and I can't get the insurance. Why? The product doesn't exist like that. You can't insure a semi like a pickup, you can't insure a pickup like a semi, they're just different things.

You can go out there and you'll see owner-operators, they've got fleets of semis. Yes, they've got an operation like that but they've got an insurance product. Show it to me, I'll buy it and I'll get out of your hair. That's the problem, you've got a doubtful statute, it requires something that can't be produced.

MR. WILLIAMSON: Bill, we've had a lot said here. Come up here and share with us your second viewpoint.

MR. BILL WEBB: The only thing that I would say -- with all due respect to Rod because he's very successful -- but making a million and a half moves is not small business. This is not small business versus van lines. I told you how many of our members fit into that category, and of those 100 or so Type Bs, I would say 95 of them use independent contractors.

I understand Rod's problem and the problem from a rating standpoint is that Rod can't really provide a driver list because he doesn't use the same drivers all the time. Insurance companies don't particularly want to insure vehicles that they've never seen, that they have no idea if they're safe or not. So what happens is we're in a situation to where a mover calls somebody on the list and says I've got this ready for you, get your trailer and go get them, with all due respect to Rod, he has no idea what shape that car is in.

MR. ROD JOHNSON: Bill, that is totally wrong, and I resent the fact that you said that because you don't know what our safety program is. Come by some day, take a look at the insurance companies we've applied to. And pardon me for interrupting you.

MR. BILL WEBB: Well, you are, so let me finish.

MR. ROD JOHNSON: I'll let you continue.

MR. BILL WEBB: My point is in the discussions with some of the insurance agents that I know he's spoken to, that has been the case. So if I misunderstood that conversation, I apologize. But this isn't about Rod Johnson, this is about the practice, and I'll be completely up front with you, if we want to allow in this state for TxDOT to approve moves with drivers that basically are sitting at home waiting for a phone call and equipment that is not under the same purview of any other equipment, that's this commission's decision. But I would be less than honest with you if I told you that is exactly what we're trying to do is make sure that that kind of operation has to step up the same level that the other operations because we don't believe the consumer is protected.

And Chairman, with all due respect, you have hit the nail right on the head. It's a fundamental discussion that's not about whether Rod is a good businessman or we're a good or bad association. You've hit the nail on the head.

MR. WILLIAMSON: Listen, this is exactly why those poor guys are up there battling the whole immigration thing in Congress right now. I mean, this is it, this is what our culture has to decide, which way is it. And some of us think one way and some of us think the other.

MR. ROD JOHNSON: I think it's accurate to first get a characterization of what's really happening there. Some of the things that Bill has said, he's a respectable guy, I quote him all the time, and he gave me something that I can quote him on, I want to quote him on the law he just passed.

A I wish you could say that the virtues of the bill were enough to get it passed. Unfortunately, that was not the case. Many of the legislators who voted on our bill did not understand the issue.@ This is Bill's words right here about the bill that he just got passed. A I wish you could say that the virtues of the bill were enough to get it passed.@

I'll go on and quote him another couple of places here. A The grease that really turns the political wheels is money.@ This is a letter from him to the people in his association. A Fortunately, with very real targeted and well thought out contributions, we were able to prevail in our legislative bid to pass the household goods legislation.@ Now, that doesn't sound like consumer protection to me.

MR. WILLIAMSON: But Rod, that's no different from -- that's the position that anyone who has an organization and is organizing members to pass a certain legislative program, as the same position your National Federation of Independent Businessmen take, or whatever you belong to.

MR. ROD JOHNSON: And I probably shouldn't have quoted that and I don't want you to take it out of context -- I don't like doing that -- it is an association newsletter. I think the part that he mischaracterized was the fact that we've got somebody out someplace that doesn't go through a daily safety checkup. That's not the case.

MR. WILLIAMSON: Well, we thank you for all your hard work, and we particularly thank you for seeing Scott Hochberg, who is a close friend of ours, and Senator Carona, who at the time we suggested you see him was an important senator and then since then has become very important.

MR. ROD JOHNSON: Well, he shares our opinion.

MR. HOUGHTON: Bill, don't leave yet. I want to talk to you about another subject later -- not yet, later.

MR. JOHNSON: I have a question. What happens if we adopt this, what happens to the marketplace? What's your best guess, Rod?

MR. ROD JOHNSON: I can tell you what the insurance brokers have told me, and I think that's a pretty good feel for it because it's about insurance. You've got insurance, I'm going to buy it. But what they've told me is the company that has under five units, whatever you call it, they're either going to go underground or they're going to go bankrupt because they simply can't do it.

MR. JOHNSON: And I agree with that, but I think that most of them are going to go underground.

MR. ROD JOHNSON: I think they probably will. And that doesn't work for me. I'm competing with somebody out there without any insurance, God only knows what they're doing, I don't know. I've got a pretty good idea, so do you. I don't want that, I want the insurance. I just don't want to see a law that requires me to have to have something that's not available. That isn't complicated.

And you know, I've talked to lots of insurance people, the association is full of them. I've talked to every one of them, 51 of them. I wouldn't be standing here right now. It's not the money. This policy for me wouldn't probably be more than $30,000, something like that, I would guess that. Where is it? Give it to me, I'll sign a check today. It's not about affording it, it's about you can't get it.

MR. JOHNSON: This has a lot of similarity, at least from my perspective, of an issue of the insurance of school buses of certain number of passengers, and it affected a lot of the private carriers in the Houston area, and Rick Noriega did a lot of work because it affected his constituents sending their children to school where there was a requirement that would, in essence, force them to buy more insurance or maybe in some cases to buy insurance in the first place, and this is similar.

MR. WILLIAMSON: And John, it has the same shadings and the same overtones of a thousand battles over economic and sociocultural policy going on in our country right now.

MR. JOHNSON: I agree.

MR. WILLIAMSON: Across the universe. I'm sitting here listening to this testimony, and in my world, if I go out to set a meter run for Devin, I have to use, Devin requires me to use the Bill Webb network of well-insured, well-trained, well-equipped, proven, asset-based subcontractors. If I go out and set a meter run for my friend Robert Patton, it's really how quick and how cheap can I get it done and we'll all go hot and take a chance. And that is the great economic divide that this country finds itself in right now.

I'd say again it's what the immigration debate is about in Washington, D.C. right now.

MR. JOHNSON: I think Rod's point is that Devin has access to the legislature and your entrepreneur friend doesn't.

MR. WILLIAMSON: Well, maybe, except that it was easy for Rod to find a listening ear in Scott Hochberg, not an inarticulate member, and Senator Carona, not a member without influence. Perhaps he was not as organized in getting his message to those as Bill or our association, or I guess there's an association for financial advisors out there that Ted belongs to.

MR. JOHNSON: His message is after the fact.

MR. ROD JOHNSON: And we found out about it way late; these people are very much more organized than we are. There's no organization for small --

MR. WILLIAMSON: Power to them.

MR. ROD JOHNSON: Pardon?

MR. WILLIAMSON: Power to them for being organized.

MR. ROD JOHNSON: But it isn't necessarily someone is out there running hot, please don't characterize us like that. We're looking for something down the middle.

MR. WILLIAMSON: Listen, Rod, everything you've said, you've been a wonderful witness, this has been great intellectual stimulation, and we're all kind of dealing with what to do, but don't even try to convince me that most of the people you describe aren't running hot, because everybody in this room has used your subcontractors and there's not one of us that believe that every one of them is properly covered, properly trained, properly educated in what they do. We just don't. Nothing you say is going to change our mind about that because we all live the same life you do.

MR. ROD JOHNSON: I'm not asking you to.

MR. WILLIAMSON: Any other questions for the witnesses? We need to make some decisions here.

MS. ANDRADE: Let's move on.

MR. WILLIAMSON: I want to ask Carol a couple of questions. Can we divide -- my understanding is we need to adopt some rules that the legislature requires us to adopt about things that are unrelated to this.

MS. DAVIS: Right.

MR. WILLIAMSON: Can you bring us back those rules and we sever this insurance argument for a moment, for a month, two months, whatever?

MS. DAVIS: Yes. It wouldn't just be the insurance, it would be all of the household goods carrier related.

MR. WILLIAMSON: What I'm comfortable with -- I think I clearly see both sides of this -- what I'm comfortable with is we need to move on with things that are beyond any disagreement or philosophical disagreement.

MS. DAVIS: Right.

MR. WILLIAMSON: Then we need to give the entrepreneurial side, the small -- I won't say hot -- I'll say fast, nimble, entrepreneurial side fair warning to permit them to inspire the insurance industry to develop a product. We also need to give ourselves some time to understand the impact of all this insurance business. But we don't want to give these witnesses and their colleagues -- we don't want to mislead you into thinking we're not going to adopt rules, because we are, we are going to do that, assuming all four of us are in agreement.

And the legislature has clearly told us they want some insurance standards imposed on everyone, and you can read into my record there's no product and it's not legal all you want to, but the legislature has told us hat they want us to adopt insurance standards and we don't think that your position is sustainable.

So what I want to do, if the commission is agreeable, I want you to bring back rules for our consideration next month that don't include this argument, I want to send fair warning to the industry that in 90 days we're going to adopt something. That gives us time to study it and understand it.

MR. HOUGHTON: Severing Article 6, in other words, of this discussion.

MR. WILLIAMSON: Is that the right way to put it, Bob, severing Article 6? Whatever I do, I want to do legally.

MR. JACKSON: I want to make another important distinction. Are you talking about reproposing a portion of the rules?

MR. WILLIAMSON: Yes, I'm talking about reproposing it at a later date.

MR. JACKSON: Now, also on severing, do you want to sever anything regarding Type Bs or just the minimum liability insurance?

MR. WILLIAMSON: What would you recommend to me as my lawyer?

MR. JACKSON: It's a policy issue and I want to hear from Carol.

MR. HOUGHTON: It's liability is where the issue is.

MR. JACKSON: We can just sever that issue. There are other Type B issues that I think we can go forward with, but I'd like to hear from Carol.

MR. HOUGHTON: It all boils down to liability insurance.

MS. DAVIS: I'd have to look at the rules. The way these are set up, basically is we took out all of the information about Type B carriers, all the requirements for Type B carriers which basically makes everybody have to have the same requirements. So I need to look at these and see how we could keep the other information in there but take out the liability insurance information.

MR. WILLIAMSON: Please do, and then come back with something for us.

MR. HOUGHTON: Can I ask a question, please?

MR. WILLIAMSON: Sure, and I want to be sure that my colleagues understand what I'd like to do because they may want to vote against me. What I'd like to do is give our staff 90 days to educate us, give his end of the industry 90 days to find a product, adopt what needs to be adopted right now that's not in contest, and make it very clear to the industry that we believe the legislature has told us to establish insurance.

MR. HOUGHTON: I'd also like to have Mr. Webb participate in that.

MR. WILLIAMSON: Oh, sure.

MR. JOHNSON: By statute are we required to make one classification, or can we actually divide into two different classifications based on size? Do we have that flexibility?

MS. DAVIS: The statute removed the classifications by weight.

MR. JACKSON: We can't have Type As and Type Bs anymore, but we can set different minimum liability insurance requirements based on different types of weights. You can break that up as much as you wish to.

MR. WILLIAMSON: But in all fairness to my good friend and fellow commissioner, I think it was exactly the intention of the legislators who put this amendment on our bill to not do that anymore, for what it's worth.

MR. JOHNSON: Well, you're better at interpreting intent than I am.

MR. WILLIAMSON: I have reason to believe that was their intention, anyway.

MR. JOHNSON: Well, if I were in the place of these two gentlemen -- who I think you have appropriately described -- on the entrepreneurial side of this equation, if I were dependent upon a market for which I have absolutely no control of, I do have access to but in a lot of the instances the access is limited to a few products that, once again, is not a widely distributed insurance product, if I'm dependent upon that mechanism for a solution to this, I only have one path that I can go down, and as an entrepreneur I would like to have multiple paths. That's why I'm hopeful that they might even suggest some language.

I know Manny said something about he hates whiners, and I appreciate that because I agree with you, I'd like to come with solutions and suggestions, and so I'd like to throw it open for solutions and suggestions too. I don't want them just to have to look for an insurance product which either is or isn't there or it's prohibitively expensive or it's very affordable. I mean, it's a multiple choice game here, so pay your money and take your choice.

MR. WILLIAMSON: Well, if there are other solutions out there, we'd love to hear about them. But I say again, at the end of the day we need to make it clear to this segment of the industry that the legislature, one way or the other, wants us to have liability insurance for all people who participate in this business, and I think that's what we need to say. It's going to happen, it's maybe not going to happen the next month.

Is that okay with everybody?

MR. KHAVARI: Mr. Chairman, I have a question. Are you giving us 90 days to come up with a solution?

MR. WILLIAMSON: No. My staff will get a hold of you. I can't tell you what to do. I'm instructing my staff to pursue this option and I'm sure they'll call you, as they will call Bill.

Is that clear?

MS. DAVIS: Yes, sir.

MR. WILLIAMSON: So we're deferring this and we'll look forward to seeing pieces of it next month.

Okay, Mike, let's move on. Thank you.

MS. DAVIS: Thank you.

MR. BEHRENS: Okay. We have one more rule for Final Adoption. It's agenda item 5(b)(3).

MR. WILLIAMSON: Do you want Bill to leave?

MR. HOUGHTON: We can do it another time.

MR. BEHRENS: This is concerning Utility Accommodations for Rail Facilities.

MR. WILLIAMSON: We've got completely unconnected to this thing we've got to talk to Billy about.

MR. BILL WEBB: With all due respect, Mr. Chairman, I have a T-ball practice at four o'clock.

MR. WILLIAMSON: And that's way more important.

MR. HOUGHTON: Bill, you are responsible for my obligation to Commissioner Johnson for the over.

MR. BILL WEBB: Sorry.

MR. JOHNSON: You and multiple others.

MR. BILL WEBB: We can use our well-funded association to take care of that.

(General laughter.)

MR. WILLIAMSON: Go ahead, John.

MR. CAMPBELL. Good afternoon. For the record, my name is John Campbell, director of the Right of Way Division. I'd like to present for your consideration item 5(b)(3) which proposes final adoption of new rules regarding Utility Accommodation for Rail Facilities.

New Section 21.901 through 21.911 of 43 Texas Administrative Code relate to the criteria for safe accommodation of utility facilities located in, along and across state railroad right of way. Legislative additions to Chapter 91 of the Texas Transportation Code increased the department's authority to own and operate rail facilities and transferred various responsibilities of the Railroad Commission to the department.

These new rules are similar to the department's existing rules concerning utility accommodation on state highway right of way. The guidance is necessary to ensure the safe installation and coexistence of rail transportation and utility facilities.

These rules were presented for proposed adoption at the December 15, 2005 commission meeting. No comments were received, and staff recommends your approval.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation.

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. Thank you, John.

MR. CAMPBELL: Thank you.

MR. BEHRENS: We'll go to agenda item number 6 under Transportation Planning. We have four minute orders that Jim Randall will present, the first one being agenda item 6(a), a recommendation for approval of the 2007 Statewide Preservation Program.

Jim?

MR. RANDALL: Good afternoon, commissioners. Jim Randall, director of Transportation Planning and Programming Division.

Item 6(a), this minute order approves the 2007 Statewide Preservation Program of the Unified Transportation Program. The UTP which is updated annually is the basic transportation planning document that guides and controls project development for the department. The SPP represents the department's effort to maintain the existing transportation system and contains programs for Category 1, Preventive Maintenance and Rehabilitation, Category 6, Structures Replacement and Rehabilitation, and Category 8, Safety.

Exhibit A of the minute order outlines the policies relating to the allocation of funds along with the criteria and restrictions for the selection of projects in these three categories. Exhibit B contains the annual program amounts for Preventive Maintenance, Rehabilitation and Safety. Exhibit C and D list individual on- and off-system Structures Replacement and Rehabilitation projects. Exhibit E lists individual Railroad Grade Separation projects. Exhibit F reports anticipated preservation efforts through the Maintenance budget expenditures. Exhibit G describes preservation projects on the waterway and railroad networks for which the department is responsible. And Exhibits H, I and J list Category 6 projects which are awaiting letting in Fiscal Year 2006 and must be retained for CONSTRUCT authority.

The Draft 2007 Preservation Program was posted on the department's website on January 26, 2006 for public comment. Districts informed metropolitan planning organizations and local officials of its availability. The comment period was open until February 28, 2006 and no comments were received.

With approval of this minute order, the department may continue project planning and development for Fiscal Years 2007 and beyond. Staff recommends approval of this minute order.

MR. JOHNSON: Any questions of Mr. Randall, any comments?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. JOHNSON: There's been a motion and a second. All in favor, signify by saying aye.

(A chorus of ayes.)

MR. JOHNSON: Those opposed, no.

(No response.)

MR. JOHNSON: The motion carries.

MR. RANDALL: Okay, sir. Item 6(b), this minute order approves revisions to the Midland-Odessa Transportation Organization Metropolitan Area Boundary to reflect new urbanized areas based upon information received from the United State Census Bureau.

Pursuant to Title 43, TAC Section 15.3, revisions to metropolitan planning area boundaries must be approved by the governor or the governor's designee. Additionally, all documentation of the rationale supporting a recommended boundary change must be provided to the governor and to the department.

In accordance with federal regulations, a metropolitan planning area boundary shall, as a minimum, cover the urbanized area and the contiguous geographic area likely to become urbanized within the 20-year forecast period covered by the metropolitan transportation plan.

On May 3, 2004, the MPO's policy committee approved the adjusted metropolitan area boundary in accordance with the most recent census. On October 4, 2005, Governor Perry delegated authority to the commission to approve metropolitan area boundary changes.

The staff has reviewed and concurs with the proposed boundary changes. Staff recommends your approval of this minute order.

MR. JOHNSON: Jim, does this happen very often?

MR. RANDALL: No, sir, not really. I talked to Jack Foster in our Systems Planning Section and asked him about how many times this is really adjusted, and he said it's very infrequent. In this particular case it's kind of a unique situation where we've had back-to-back requests for changes in boundary within the last two months.

MR. JOHNSON: Any questions of Jim on this issue?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. JOHNSON: There's a motion and a second. All in favor, signify by saying aye.

(A chorus of ayes.)

MR. JOHNSON: Motion carries. Thank you.

MR. RANDALL: Item 6(c), the minute order amends Category 10, Supplemental Transportation Projects of the 2006 Statewide Mobility Program to include the new Coordinated Border Infrastructure Program, or CBI. This program replaces TEA-21's CBI Discretionary Program which ended in 2005.

This new allocation program will be funded for $200 million and these funds will remain available until expended. The purpose of the CBI program is to improve the safe movement of motor vehicles at or across international borders. A consensus meeting was held with representatives of TxDOT border districts, border MPOs and select TxDOT divisions. This group recommended utilizing the federal formula used for allocating CBI funds to U.S. border states and distributing funds through TxDOT districts.

While SAFETEA-LU allows these funds to be expended within 100 miles of the international border, the group recommended the distance to be limited to a 50-mile radius from border crossings. The group believed this requirement would focus improvements on facilities near ports of entry. The basis of fund allocation eligibility is described in Exhibit A of the minute order.

Staff recommends approval of this minute order.

MR. WILLIAMSON: Members, you've heard the explanation and recommendation by staff.

MR. HOUGHTON: I have a question. We talked about commercial vehicles, commercial trucks. I'd like to ask Bill Webb a question under this. Is that all right, Mr. Chair?

MR. WILLIAMSON: You bet you.

MR. HOUGHTON: It may be a little stretch, but Bill, you've seen the announcements yesterday on rail, significant rail proposal. We're getting ready to announce TTC-69 in the near future. Are you seeing any greater cooperation -- it's kind of a leading question -- cooperation between the trucking industry and different proposers out there asking questions of what the industry is doing -- well, not only the trucking industry but manufacturers are wanting, shippers are wanting?

MR. BILL WEBB: We certainly are, Commissioner Houghton. We've been approached by several of the potential vendors to ask our input on what we think should happen, particularly with 69, and we've provided that input and been asked that we would be at the table in the future, and we've committed to be a part of that process. We've been very involved with the Port of Corpus Christi and the Port of Houston in their development. And it may very well be due to you and Chairman Williamson, but in the last probably six months we've seen a significant sort of up tick in asking for our opinion, and we're not shy about giving it. So we're certainly at the table and plan to be in the future.

One of the challenges that we have, honestly, is that we're somewhat like you in that we have members in certain parts of the state that have their own constituencies that they want money to go to I-69 or to Ports to Plains Corridor or whatever it is, and in the past it's been very difficult with sort of traditional funding for us to take a position on a corridor, but now that we're looking at this as a public-private partnership, it allows us to bring our people to the table and have much more input on a specific corridor without having my name show up in the paper and be mud everywhere else in the state.

So that was sort of what I was referring to earlier, sort of the non-traditional ways of looking at this has allowed us to be more significant in the dialogue.

MR. HOUGHTON: I appreciate the new relationship. It's been a lot of fun. It's kind of fun to ask the customer what they'd like to look at and like to see as transportation assets.

MR. BILL WEBB: Well, and I appreciate it too. I'd just say very briefly we've had a problem in the past in that many of you know the trucking industry traditionally has not favored tolls but we clearly understand the future and funding and as long as we have a business decision that we can make, we make those every day, and we're willing to make them out on the highway, and I think the direction you're going makes a lot of sense.

Does that mean that every truck driver that loves Travel Stop is going to stand up and say this is a great idea? No. But our job is to lead the industry and we think we can get everybody where they need to be.

MR. HOUGHTON: Great.

MR. WILLIAMSON: And just let me associate myself with Ted's remarks. We do appreciate your industry's, and in particularly your association's recognition of the problem and willingness to help us talk through how we solve it. We've tried to say for several years now, this isn't easy for any of us. There's nobody sitting at this table that wants to pay a toll, there's nobody sitting at this table that wants to pay any more taxes than we absolutely have to have. We are no different from every other consumer in this state.

The dilemma is how much longer do we put off much needed investment in our future before we start making the choice between that which we can't create which is taxes -- that's not our job -- and that which we can, a business option, a market-driven consumer decision.

MR. BILL WEBB: Well, without making a speech, for the record, our goal is to be able to do business in Texas for our members so that business wants to come to Texas. And if that's where we're going ultimately, the marketplace will decide whether the decisions you're making are the right decisions. My guess is ultimately they will be, but all we're looking for is an opportunity to do business, because literally that's what's going to continue to make business come to Texas. The more taxes that are paid, the better off we're all going to be.

So they're not easy decisions, you've had to make tough ones and I have too within our association, but I believe we are closer -- no pun intended -- to being on the same road than we've ever been.

MR. WILLIAMSON: We thank you for your help.

MR. BILL WEBB: Thank you.

MS. ANDRADE: I have a comment, Bill. I also want to thank you. I'm glad to see that you're at the table giving your input. I remember when I met with you 2-1/2 years ago, that was a concern of yours, so I'm glad to hear that you are at the table. And I think the trucking industry will see the value to the toll.

MR. BILL WEBB: You are the very first one that came to me and we had an opportunity to talk, and I will not forget that, so thank you for initiating that relationship a long time ago.

MS. ANDRADE: Thank you very much.

MR. WILLIAMSON: Can we release Bill to go to T-ball?

MR. HOUGHTON: I think as soon as he pays Commissioner Johnson, it will be over.

MR. BILL WEBB: I respect you, but I respect my wife getting me there quickly. So thank you very much.

MR. JOHNSON: Are you the batting instructor or the fielding instructor?

MR. BILL WEBB: I'm just getting my son there, that's all it is.

(General laughter.

MR. WILLIAMSON: Thank you, Bill.

MR. HOUGHTON: Thanks, Bill.

MR. WILLIAMSON: Okay, members, you've heard --

MS. ANDRADE: I have one question.

MR. WILLIAMSON: Please.

MS. ANDRADE: You know where it says improvement of existing transportation on these funds, that they will be used for improving existing transportation?

MR. RANDALL: Yes, ma'am.

MS. ANDRADE: Would that include public transit?

MR. RANDALL: That's a good question. I would think it could, it doesn't say you can't use it on transit. So I'd probably defer to Mr. Jackson and get a ruling on that from him.

MR. HOUGHTON: He left.

MS. ANDRADE: He's here.

MR. WILLIAMSON: Well, why don't we put it this way, Jim. The commission more and more is interested in giving local and regional leaders across the state as many options as possible in solving their own unique transportation problems. We're interested in providing the communities that qualify for this money with the option of using this for transit if that makes more sense, congestion or air quality or safety or asset development or economic opportunity wise. And so let's look into that and report back to the commission and see what we can do.

MR. RANDALL: Yes, sir. It's an allocation program to the districts, and so they work with the MPOs in that district to solve that transportation program in that area.

MS. ANDRADE: Well, public transit is very important in these areas.

MR. RANDALL: Yes, sir. We'll come back to you with an answer.

MR. WILLIAMSON: Maybe more so than other parts of the state in some ways.

MS. ANDRADE: Thank you.

MR. RANDALL: Yes, ma'am.

MR. WILLIAMSON: Okay, members, you've heard the staff's explanation and recommendation, witness's comment and dialogue. What's your pleasure?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: All those in favor of the motion, signify by saying aye.

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you.

MR. RANDALL: Okay, sir. Item 6(d), this minute order accepts the 2006 Port Capital Program submitted by the Port Authority Advisory Committee.

Transportation Code Section 55.008 requires the committee to develop a two-year program and submit it each year to the governor, the lieutenant governor, the speaker of the House, and the commission. The committee met on February 6, 2006 and formally adopted the 2006 Port Capital Program and submitted the program to the department.

Staff recommends your approval of the 2006 Port Capital Program as shown in Exhibit A.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation.

MS. ANDRADE: 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. And let the record reflect, Jim, that a strong supporter of transportation matters in general, John LaRue, the executive director of the Port of Corpus Christi was here earlier today. John intended to speak for this and speak aggressively about it, and the record will reflect that he was here and intended to speak for it, and we appreciate John taking the time to come all the way up here and then drive back to Corpus Christi.

MR. RANDALL: I think also that he would like to work with the commission on maybe trying to capitalize that Port Access Fund which has not been capitalized.

MR. WILLIAMSON: We'd love to have him. John is a smart guy.

MR. RANDALL: Okay, sir. Thank you, sir.

MR. WILLIAMSON: Thank you.

MR. BEHRENS: Before we move on to agenda item number 8, you've already taken action on agenda item number 7, but I just want to let you know for the record that we received a communication from Representative Vicki Truitt concerning the acceleration of the Dallas-Fort Worth area projects, and basically says she wholeheartedly supports any positive action by the commission and TxDOT that they can offer to rid Tarrant County of its transportation gridlock, and supports this plan as long as these plans have the blessings of the local leaders.

MR. WILLIAMSON: Very good.

MR. BEHRENS: Going on to agenda item number 8 concerning Toll Road Projects, and this concerns updated traffic and revenue report, toll rate schedule, and revised remarketing memorandum documents for the Central Texas Turnpike System.

MR. BASS: Thank you, Mr. Behrens. Again, I'm James Bass.

This minute order will complete three tasks associated with the 2002 Project of the Central Texas Turnpike System. First, it will be the commission's approval of design changes that in general result in certain vehicle movements no longer being tolled, accepts an updated traffic and revenue report required by the above changes, and also approves a remarketing memorandum that is required by a change in the provider of the standby bond purchase agreement.

Staff recommends your approval.

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.

MR. BASS: Thank you.

MR. WILLIAMSON: Thank you, James. I thought you were going to New York.

MR. BASS: That will be next week.

MR. WILLIAMSON: We were in a hurry to get that other one out; I thought you were leaving.

MR. BEHRENS: Agenda item number 11 is our contracts for the month of march, both our Maintenance contracts and our Highway and Building contracts.

Thomas?

MR. BOHUSLAV: Good afternoon, commissioners. Thomas Bohuslav, director of the Construction Division.

Item 11(a) is for the consideration of award or rejection of Highway Maintenance contracts let on March 7 and 8, 2006, engineers' estimated cost is $300,000 or more. We had 16 projects; average number of bidders is 3.1.

We have two projects we recommend for rejection. The first one is Project Number 4017, Eastland County. It's a mowing project; we had three bidders on it; the low bid was $545,000, about 39 percent over. It was a two-year contract and the district thinks they can save some money by going to a one-year contract. The contractors are telling us that they're having to put a lot more risk in their bids for longer term contracts.

The second project recommended for rejection is Project Number 4008 in Denton County. We had four bidders for it; the low bid was $619,000 which was under 21 percent. The contractor requested we consider rejection due to a bid error. We've made a review of that and have determined that it is, in fact, a mathematical mistake, did meet the requirements for rejection due to bid error, and we're going to go back and rebid the project.

Staff recommends award with the exceptions noted. Any questions?

MR. WILLIAMSON: Members, do you have questions of Mr. Thomas?

MR. JOHNSON: I just want to congratulate him or laud him on his tie. He's got a transportation tie on.

MR. BOHUSLAV: I have to give credit to my mother-in-law, Marian Ryan, who lives in Galveston, Texas, and that will be in the record so I'll tell her to look it up.

MS. ANDRADE: I can't see it.

MR. HOUGHTON: And that's in the record too.

MS. ANDRADE: I agree.

(General laughter.)

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.

MR. BOHUSLAV: She's a wonderful mother-in-law, by the way.

MR. WILLIAMSON: Now, let's don't get carried away here.

(General laughter.)

MR. BOHUSLAV: She does have access to the web.

Item 11(a)(2) is for consideration of award or rejection of Highway Construction and Building contracts let on March 7 and 8, 2006.

We had 94 projects; the total estimated cost as $367 million. We have one project we recommend for rejection; it's in the San Antonio District in Wilson County. It's a bridge project that involves some Transportation Enhancement money as well. There were seven bidders on the project; the low bid was 23 percent over at $1.5 million. This is to replace a bridge on a county road there and do some approach work, and then move the existing bridge to a hike and bike trail with some Transportation Enhancement funds.

There were some significant errors in the plans, left out a lot of work that should have been included in there, and there should have been some changes for the types of work we were doing. We need to go back and relet this thing so we have an even field on how we bid this project.

Staff recommends award of the other projects with the exception noted. Any questions?

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. Thank you, Thomas.

MR. BEHRENS: Agenda item 11(b) is our Contract Claims. We have three claims that Zane will present. Past history tells me we used to have about one or two, we've got three this time; they must be testing the new guy.

MR. WEBB: Good afternoon, commissioners. For the record, I'm Zane Webb, director of the Maintenance Division and chairman of the Contract Claims Committee.

The minute order you have before you approves a claim settlement for a contract by C.D.S. Enterprises, Inc. for project STP 2000(253)UM in Brazos County in the Bryan District.

On February 2, the TxDOT Contract Claims Committee considered this claim and made a recommendation for settlement to the contractor. The contractor has accepted. The committee considers this to be a fair and reasonable settlement of the claim and recommends approval.

MR. WILLIAMSON: Members, you've heard the staff explanation and recommendation.

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. WEBB: The second minute order you have before you is to approve a claim settlement for a contract by J.L. Steel, L.P., for project STP 94(84)MM in Tarrant County in the Fort Worth District.

On March 13, the TxDOT Contract Claims Committee considered this claim and made a recommendation for settlement to the contractor. The contractor has accepted. The committee considers this to be a fair and reasonable settlement of the claim and recommends approval.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation.

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. Thank you, Zane.

MR. WEBB: I apologize. I went from number (1) to number (3). I'll back up to number (2).

MR. BEHRENS: For the record, that was 11(b)(3) that was just approved.

MR. WEBB: Right, sir.

MR. WILLIAMSON: Okay.

MR. WEBB: For the record, I'm Zane Webb, director of the Maintenance Division again, and head of the Contract Claims Committee.

The minute order you have before you approves a claim settlement for a contract by CCE, Inc. for Project BR 2003(565) in Sabine County in the Lufkin District.

On February 2, the TxDOT Contract Claims Committee considered this claim and made a recommendation for settlement to the contractor. The contractor has accepted. The committee considers this to be a fair and reasonable settlement of the claim and recommends approval.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation.

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. Thank you, Zane.

MR. WEBB: Thank you, sir.

MR. BEHRENS: Agenda item number 12 is our Routine Minute Orders. They're all listed, they have all been duly posted. I don't think any of those have any impact on anything that might pertain to an individual commissioner.

Before I recommend approval, though, I'd like to ask Carlos to come up and just lay out 12(a)(3) as a matter of information. It's our Work Zone Program and have him explain that to you, what we're trying to do in that program.

MR. LOPEZ: Thank you, Mike.

Good afternoon, commissioners. My name is Carlos Lopez, director of the Traffic Operations Division.

Commissioners, next week is Work Zone Awareness Week throughout the country, and it's a week where organizations try to raise awareness with people to use caution when they're driving through work zones.

In Texas, at any given time, we have about 1,300 work zones going on and that's not counting the daily maintenance activities that are going on every day. This year we want to participate to a greater extent in Work Zone Awareness Week, so with the generous help of AGC and Texas Good Roads, we're going to buy approximately $160,000 worth of air time over the next two weeks to air some public service announcements.

Now, typically for every two spots that we buy, we get one for free from TV stations. We have a 30-second spot and a 10-second spot we'd like to show you that's going to be shown over the next couple of weeks statewide.

(Whereupon, a video was shown.)

MR. LOPEZ: Those are the first two spots that will air over the next two weeks, and just a matter of information, each of the caricatures on the bowling pins is a member of the TxDOT administration and certain division directors, just so you will know.

MR. SAENZ: You said commissioners?

MR. LOPEZ: No, we didn't have any commissioners on that.

After the two-week media buy is over, the Fort Worth District is going to run for about a week or so in the Dallas-Fort Worth area an additional spot that they've been able to work out with TV stations locally because of traffic data that they get from TransVision, and this will be of no charge to TxDOT. This is an older spot that we ran in the mid '90s that still kind of gives the message, so if you'll go ahead and do this next one.

(Whereupon, a video was shown.)

MR. LOPEZ: Anyway, commissioners, we'll have a good three weeks of spots running here in the month of April and we hope it will raise awareness in work zones and make them safer overall.

MR. HOUGHTON: Are you sure there wasn't one of the commissioners on that bowling pin?

MR. LOPEZ: Very positive.

MR. HOUGHTON: The slickness of the top of the pin reminded me of a commissioner or two.

(General talking and laughter.)

MS. ANDRADE: Carlos, maybe we can help you. I invite my fellow commissioners that as we speak throughout the state that we end our speeches with perhaps reminding them about that.

MR. LOPEZ: Thank you, Commissioners. And in fact, I think Randall is going to send out some talking points to all the PIOs tomorrow, we'll release this by satellite tomorrow afternoon, and I'll ask them to make that available to all of you.

Recommend approval of the donation minute order.

MR. WILLIAMSON: Thank you, Carlos.

MR. BEHRENS: And with that, I recommend the approval of all the routine minute orders.

MR. WILLIAMSON: Members, you've heard Mike's explanation and recommendation, Carlos's explanation and recommendation.

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.

Bob, to your knowledge, is there any reason for us to go into executive session?

MR. JACKSON: No, sir.

MR. WILLIAMSON: Members, I would say the most privileged motion is in order. John won the over.

MR. HOUGHTON: John won the over. Go ahead, John.

MR. JOHNSON: So moved. Privileged to so move.

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. Let the record reflect that we are adjourned as of 3:10 p.m. Thank you.

(Whereupon, at 3:10 p.m., the meeting was concluded.)

C E R T I F I C A T E

MEETING OF: Texas Transportation Commission

LOCATION: Austin, Texas

DATE: March 30, 2006

I do hereby certify that the foregoing pages, numbers 1 through 280, 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.

                     04/03/2006
(Transcriber) (Date)
On the Record Reporting, Inc.
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Austin, Texas 78731