MR. WILLIAMSON: Good morning.

AUDIENCE: Good morning.

MR. WILLIAMSON: It is 9:08 a.m., and I would like to call the November 2006 meeting of the Texas Transportation Commission to order. It's a pleasure to have each of you here this morning.

Please note for the record that public notice of this meeting, containing all items on the agenda, was filed with the Office of the Secretary of State at 1:34 p.m. on November 8, 2006.

Before we begin today's meeting, I would ask for you to join with me by reaching into your purse, pocket or coat and taking out your cell phone, pager, PDA and Dewberry and turn it either to the vibrate or silent mode so that we may proceed today with minimal disruption. And I thank you very much for doing that.

It is our custom to open with comments from the commission. You'll notice today that we're absent one member, Mr. Johnson. He had a longstanding commitment that he couldn't change when we decided to have the meeting a little bit early to avoid the Thanksgiving holidays. He sends his best to everyone.

Commissioner Houghton and Commissioner Andrade.

MR. HOUGHTON: Good morning, folks, and welcome to the commission meeting and to Austin for those who have come from other parts of the state or the country. I especially want to wish you a very, very happy Thanksgiving to you and your families. It's that time of year when we reflect on what's important to us, and a lot people in this room are family to me in the transportation world, but my heartiest happy Thanksgiving to all of you.

MS. ANDRADE: Good morning, and welcome to our November commission meeting. I'd like to offer a special welcome to all the friends and representatives of public transportation. This is a great day for public transportation. And also, as Commissioner Houghton, I want to wish you and your families a happy Thanksgiving, and thank you for everything that you do on behalf of the state, but also I wish you very safe travels. Thank you.

MR. WILLIAMSON: Thank you, Ted and Hope, and I associate myself with those remarks. I appreciate each and every one of you attending our meeting and participating, if you choose to participate. I also wish everyone a happy Thanksgiving and holiday the day after.

If you wish to address the commission during today's meeting, we ask that you complete a speaker's card which you can find at the registration table out in the lobby. That's located to your immediate right. If you wish to comment on an agenda item, we ask that you fill out the yellow card, such as the one in my left hand. If you wish to comment in the open comment period on something that's not on our agenda, we ask that you fill out the blue card which is, again, like the one in my left hand.

Regardless of the color of card, we would appreciate it if you would limit your remarks to three minutes, if you can, unless you're an elected member of the Texas Legislature, in which case you may speak as long as you wish. That provides everybody the opportunity to have their say on matters before the commission today.

The first item on the agenda is the approval of the minutes of the special meeting that we conducted at Shorthorn -- Short Course at Texas A&M on October 10. I keep wanting to call it Shorthorn, it's a six year thing with me.

MR. HOUGHTON: Saw 'em off short?

MR. WILLIAMSON: Well, you know, Texas A&M is the baby brother of the University of Texas, we're the Longhorns, they're the Shorthorns.

MR. HOUGHTON: I'll leave it at that.

(General laughter.)

MR. WILLIAMSON: Do I have a motion?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. WILLIAMSON: And now we need to approve or disapprove the minutes from last month's regular meeting in Denton, Texas. Do I have a motion?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

MR. WILLIAMSON: I have a motion and a second. Al 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.

Mike, I will now turn the meeting over to you to work through today's agenda.

MR. BEHRENS: All right. Thank you, Chairman. We'll begin with agenda item number 2 which is Aviation, and Dave Fulton will come forward and recommend some airport improvement projects needing funding.

MR. FULTON: Thank you, Mike. For the record, my name is David Fulton, director of TxDOT Aviation Division.

Item 2 is a minute order that contains a request for grant funding approval for 14 airport improvement projects. The total estimated cost of all the requests, as shown in Exhibit A, is approximately $16,400,000: $11.6 million federal, $3.2 million state, and $1.6 million in local funding.

A public hearing was held on October 19 of this year. No comments were received. We would recommend approval of this minute order. I'd be happy to answer any questions.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation on this item.

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, Dave.

MR. FULTON: Thank you, sir.

MR. BEHRENS: Agenda item number 3, we have a series of reports under that particular item. The first one under 3(a) is a report from the Grand Parkway Association. We hear from them yearly on what's going on in that particular project. David Gornet, please.

MR. GORNET: Good morning. For the record, my name is David Gornet. I'm the executive director of the Grand Parkway Association. I'd like to thank you for the opportunity to come here and give the Grand Parkway Association's annual report. In addition to myself, we have in the audience Mr. Chris Olavson who is a member of our board of directors.

Regarding the Grand Parkway, parts of it are under construction. We are continuing to plan. We have about 140 miles where we have identified various alignments that are in various phases of approval, some of those in the draft EIS, the final EIS process. We have Segment D that is about 20 miles in length that is completed.

During 2006, for a summary -- and this is in your board book there -- Segment I-2 construction continues over on the east side of town in the Baytown area. Toll studies have been completed by TxDOT and/or TTA for portions of the Grand Parkway, particularly for Segment D which is I-10 to US 59, Segment I-2, and they're working on some studies for other segments that are being identified on their alignments.

We initiated the study in the spring of this year on Segments H and I-1 which is about 36 miles, from US 59 on the northeast side of town around to I-10 on the east, that will include the communities of New Caney, Dayton, Mont Belvieu, Huffman, and serve bringing traffic around the east side toward the Port of Houston.

Other segments of note. Segment F-2, in 2006 we received approval from Federal Highways on the revised draft environmental impact statement. We had modified the alignment from what was shown in 2004 in response to comments and concerns raised by citizens. Following release of the document or signature by Federal Highways, we held two public hearings -- or one public hearing over two nights to afford citizens the opportunity to attend at their convenience. We had approximately 800 total attendees register at our meetings.

We had a 90-day comment period that we did extend an additional two weeks at the request of Mr. Jim Blackburn, an attorney that's representing the citizen groups. We received less than 250 comments total on this particular revised draft environmental impact statement, contrasting that with the 1,000-plus received in 2004. A majority of these comments continued to focus on potential residential impacts, proximity of the highway to some of the homes that are going in this rapidly developing area, as well as drainage, noise and air quality as other major factors there.

In developing the revised draft EIS, we worked closely with Federal Highways. They identified some issues that they would like to have addressed, particularly with indirect and cumulative impacts. We responded to Federal Highways concerns and incorporated those into the Segment B and Segment G draft environmental impact statements and resubmitted those for Federal Highways review and consideration, and would anticipate having those signed soon. Likewise, we addressed those concerns in the final environmental impact statements that are being prepared for Segments C and E.

And we continue to work with TxDOT as the Houston District requests information from us for their negotiations that have been ongoing with the Harris County Toll Road Authority.

In 2007 we, of course, anticipate continuing to work. Segment I-2 is scheduled for completion, to be opened as a toll facility in the spring of 2007. That will be about ten miles of road from I-10 south toward the big Wal-Mart and Home Depot distribution centers in the Baytown community. We anticipate that the Segment B and G draft environmental impact statements will be signed very soon. We hope that G will get signed in early December and that we'll hold public hearings for each of those segments then in the early spring of 2007.

The final environmental impact statements for Segments C, E and F-1, C and E have already been submitted, we're working on addressing comments for those, and we'll have those reviewed and approved and will hold the appropriate public meetings, look at the schematics for that and be ready to move forward with those. And we'll have draft environmental impact statements for Segments H and I-1 that will be done as one segment for 36 miles.

And again, we'll continue to work with TxDOT. TxDOT has performed interviews for a general engineering consultant, anticipatory of the efforts that are going to be needed as they move toward right of way mapping and construction following approvals of the records of decision. Those interviews were held this October. It's my understanding that recommendations have been made to Austin and that they anticipate announcing that contract in December, if it's at the commission's pleasure.

One of the questions that comes up is how are we working towards meeting TxDOT's goals. TxDOT has established five significant goals for projects that they work on, as you all are aware of, and the Grand Parkway strives to help TxDOT meet those.

In terms of reducing congestion, the Grand Parkway does it in two ways. One, on a local basis where we can relieve traffic that's currently using existing local roads. For instance, in the northwest area of Houston you have FM 1960 or the Beltway and then Louetta Road, Cypresswood Road, FM 2920, the Grand Parkway will relieve traffic on those facilities. And on a regional basis, it will allow traffic that currently may travel further in on the radial facilities to bypass the metropolitan area of Houston, go around that, making the radial facilities operate more efficiently with less congestion.

By having less congestion, we increase safety on the road. Also, with a highway in place, we can separate trip types. Where today on 2920 or 1960 you may have trucks that are using that to go longer distances, they can then utilize the Grand Parkway, taking that trip off of the local street and thereby increasing safety.

We expand economic opportunity by providing better access to the port facilities on the east side of town, coming from US 59. We expand economic opportunity in each of the individual counties that have participated in funding for the Grand Parkway, allowing for as growth is occurring that you have that you have appropriate transportation infrastructure in place to accommodate the demands that come with that growth.

Air quality is improved de facto because we're reducing congestion. We have better mobility, less stop-and-go traffic, we do improve air quality, and the Grand Parkway is a part of the HGAC's conformity regional transportation plan and their plans for helping to improve and meet EPA standards for the Houston region.

And the Grand Parkway will assist TxDOT in increasing the value of the transportation assets that you already have. Construction of the parkway, being a new location facility, is more cost effective than trying to expand and add capacity to existing facilities, say to widen FM 1960. And so the Grand Parkway is more cost effective and it increases the usefulness of those assets that are already on the ground.

And from this point, going to 2007, we've talked about what's going on there. We also anticipate that TxDOT will continue to work with either HCTRA or some other concessionaire. We welcome the opportunity to support you all in moving forward on that. We look forward to the records of decision being received on the various segments, particularly Segments C, E and F-1 that are nearest on the horizon.

We are ready to work with TxDOT or their GEC or any concessionaires in initiating the design and mapping, using the knowledge that we've gained over the years of working on the project to help expedite the construction of the project. Portions of the construction could start as early as 2008 and some of these segments could be open for traffic and collecting tolls on them in 2010.

And a reminder for all those in the audience or those on the commission, I know that the Grand Parkway project has taken a number of years, but the challenges in doing this 180-plus mile road are equal to the challenges that we would all face in developing a new four-lane toll facility, say between Houston and San Antonio.

And with that, I conclude my brief report and welcome any questions or comments from the commission.

MR. WILLIAMSON: Members, you've heard the report. What questions or comments do you have?

MR. HOUGHTON: Questions regarding when you said to be able to start construction in 2008, did you say?

MR. GORNET: Yes, sir.

MR. HOUGHTON: On which segments?

MR. GORNET: That would be Segment E, most likely. Also portions of Segment C.

MR. HOUGHTON: So the constraints on you starting construction, I'm assuming this, are money, environmental?

MR. GORNET: Environmental approval process right now is the constraint. Harris County has worked with some of the landowners there and we have worked with them.

MR. HOUGHTON: I'm talking about the whole thing.

MR. GORNET: For the whole thing it will, of course, be money, it's a significant project, but the environmental approval process is currently the constraint.

MR. HOUGHTON: This may be a question for Amadeo. Is there a possibility that the northern reaches of the Grand Parkway could be TTC-69, could be, maybe, possibly?

MR. SAENZ: Good morning. Amadeo Saenz, for the record, assistant executive director for Engineering Operations.

The environmental studies that we're conducting for TTC-69 show some connections around Houston towards the port. They possibly could become elements of TTC-69, for example, they could become the car lanes, the regular multipurpose lanes. So all that will be determined by environmental study.

MR. HOUGHTON: The other question is what is the anticipated cost of the entire Grand Parkway? Anybody put a pencil to that? Today's dollars.

MR. GORNET: The current cost that's shown in HGAC's regional transportation plan is about $1.2 billion. Those cost estimates are being revised to reflect increased construction costs and being forecasted out to reflect inflation costs for time of construction, but in today's dollars, about $1.2 billion.

MR. HOUGHTON: $1.2 billion for 182 miles.

MR. GORNET: Yes, sir.

MR. HOUGHTON: That's a bargain.

MS. ANDRADE: Thank you for your report. One of my questions was what is the cost of the total project, and I'm glad to hear that you resolved some of the issues that I think at your last report some of the citizens had.

MR. GORNET: Yes, ma'am.

MS. ANDRADE: So thank you for working with them.

MR. GORNET: Thank you.

MR. WILLIAMSON: Thank you also for the report, and particularly for taking the time to focus on the goals of the state and how this project supports the state reaching those goals.

I have a couple of questions that are not so much focused on your project as they are on how to develop projects generally, because I think your answers will apply to some of the other large corridors that we're going to try to move forward with in the state over the next 20 years. When did the Grand Parkway Association form?

MR. GORNET: 1984.

MR. WILLIAMSON: And what was its mission generally in 1984?

MR. GORNET: To work with TxDOT, local counties and landowners to facilitate doing the environmental work, acquiring right of way, design and ultimately towards construction of the project.

MR. WILLIAMSON: And the project was known in people's heads at that time as the next outer loop of the Houston area?

MR. GORNET: That's correct.

MR. WILLIAMSON: Right now the footprint is having to be worked through what has become in some areas a heavily residential area.

MR. GORNET: Yes, sir.

MR. WILLIAMSON: Were those areas heavily residential in 1984?

MR. GORNET: In 1984, no, sir, they were not.

MR. WILLIAMSON: Had you chosen a route -- I want to think carefully how to put this because I don't want to lead you to the answer I want, I want you to give me the answer that makes sense -- had you been the executive director in 1984 and had you a population probability analysis available to you that offered guidance as to in which direction and at what density population would occur based upon reasonable assumptions, would you have selected the footprint -- if it were yours to select and not the environmental process, would you have selected the footprint we're currently on or would you have gone slightly further out, knowing that it was going to take you 30 years to build the entire project? If you'd have sat in 1984 and said, I know because of cash flow constraints, because of the environmental process, and because of residential growth, I won't be able to finish the project until 2020, therefore, the logical footprint to pursue would it have been further out than it is now?

MR. GORNET: No. I believe that based on how development is occurring and had previously occurred, the densities that had been there, that an appropriate spacing between the major facilities, the loops around Houston, the Grand Parkway, the approximate path is appropriate, that it is the right spacing from other roads where you would have your local thoroughfares accommodating traffic immediately adjacent to where that development is but you don't want to go more than six or seven miles out beyond the prior loop.

1960 in some ways functions as a loop around Houston, the 1960/Highway 6 loop, and addresses a significant amount of the travel demand there. The Grand Parkway, being out another six to eight miles past that is appropriate. If you tried to go further, you would have to expand some of the local thoroughfares to accommodate a denser trip pattern in there. So I think where we are is good. It's unfortunate that there weren't methods or techniques available to reserve the corridor earlier in the planning process, and that way, citizens as they bought homes knew that's definitely where the road is going, than us have to come in after the fact when some of this growth is already occurring. That's had a significant impact.

MR. WILLIAMSON: What percentage of the growth that's occurred in the footprint has probably occurred as the result of people knowing where the footprint was?

MR. GORNET: A very small percentage of the growth is within the proposed path of the highway.

MR. WILLIAMSON: Maybe I asked the question wrong. I'm aware that the footprint passes close to densely populated areas that weren't even subdivided 20 years ago. How much of the siting of those densely populated areas might have been influenced by the knowledge that someday a more direct route east and west or north and south would be available?

MR. GORNET: Probably a larger percentage. Fifty percent or more of some of this growth has been anticipatory of increased transportation opportunities. You might see some developments that occurred that are today on smaller roads, two-lane country roads or FM roads that need for the Grand Parkway to come in place, and those were put out there anticipating that the Grand Parkway would be developed at some time and serve their transportation needs. I think the rest of it, the balance of that has all just been opportunistic: the land was at the right price and a developer was able to go in there and do a subdivision and sell homes.

MR. WILLIAMSON: Two more questions. In 1984 is there any historical record to inform us as to how long the then founding fathers and mothers of this project thought the project would take?

MR. GORNET: I'd have to go back and look through the records.

MR. WILLIAMSON: Did Judge Lindsay think it would take ten years? Did someone think it would take 30 years? Did your strategic plan and your tactical decisions anticipate a 30-year project?

MR. GORNET: I would believe that at the time in '84 when this was being created that they would have anticipated at least a 20-year horizon for the entire project to be complete.

MR. WILLIAMSON: To be complete.

MR. GORNET: Yes.

MR. WILLIAMSON: And then the last question, when the footprint was imagined, was it mostly rural undeveloped farm and timber land?

MR. GORNET: Mostly rural undeveloped farm land, yes, sir.

MR. WILLIAMSON: Now, there's an argument out there that suggests that it's more fair to expand existing footprints and take people's service stations and retail outlets than it is to lay new footprints in fertile rural Texas. Tell me one more time why the association did not elect to expand the footprint of 1960.

MR. GORNET: Rather than say 1960, let's discuss maybe FM 2920 or something like that. We held discussions with the citizen groups. That was one of the alternatives that we considered. There was a fair amount of concern from the local citizens and the school districts in that they would lose their tax base. From a construction standpoint in expanding an existing route, such as 2920, besides the fact that you had to buy out commercial properties at a higher value, you also had to build continuous frontage roads in addition to the main lanes that would be there in the middle, so your cost of construction of the facility was essentially doubled than trying to buy undeveloped land on a new location and build just the main lanes there and leave the existing road in place where it is. You weren't buying that commercial property, you weren't then having a significant impact on the current tax base of the local entities.

MR. WILLIAMSON: Thank you for answering my questions.

MR. HOUGHTON: I have another question. Is the entire loop toll viable, every segment?

MR. GORNET: As stand-alone segments, I do not believe they'd all be toll viable. The entire loop, given a long enough horizon, is toll viable.

MR. HOUGHTON: I mean to construct today, is it 100 percent financeable?

MR. GORNET: I don't have those numbers, sir.

MR. HOUGHTON: Who does?

MR. WILLIAMSON: I believe that TTA and Harris County Toll Road Authority are both individually working on that, and hence, there's negotiations between TxDOT and Harris County Toll Road Authority over what is the definition of how viable it is.

MR. HOUGHTON: On, what is it, I-2 that you just opened?

MR. GORNET: That will open in the spring, yes, sir.

MR. HOUGHTON: What's the cost of that piece?

MR. GORNET: That was ten miles and a $45 million contract. Amadeo? It was let in the August meeting of 2003 and I don't remember the exact number, but it was around $4 million a mile for the construction, $4-1/2 million a mile on the construction there.

MR. HOUGHTON: So Amadeo, if you can answer the question on the cross-collateralization -- maybe I shouldn't use that word -- but these facilities individually are not stand-alone facilities, 100 percent toll viable?

MR. SAENZ: Staff has been looking at the entire corridor. We've been looking at segments that are ready to be developed. If you recall, I think, my presentation two meetings ago showed that one of the Grand Parkway segments was a 100 percent toll viable project -- in essence, it was a cash revenue positive project. As a whole, we've not looked at every single one of them because some of them are too far into the future because they're just in the beginnings of the environmental.

The Segment I-2, we're moving forward, we're doing some re-evaluation to be able, when it opens, to look into possibly putting toll booths on that project.

MR. HOUGHTON: On I-2?

MR. SAENZ: On I-2.

MR. HOUGHTON: The question I have is are you going to develop this under one concession model or possibly one concessionaire, or are you going to break it up?

MR. WILLIAMSON: Well, we haven't made a decision about whether this is a concession or not, have we?

MR. HOUGHTON: No, but I'm just thinking of the possibilities out loud.

MR. SAENZ: Looking at the project as a whole, because the environmental is at such different levels of getting cleared, we will probably look into the possibility of building good usable segments that could then help cross-collateralize some of the other ones.

MR. HOUGHTON: Finance the others.

MR. SAENZ: But instead of delaying the project to build it until everything is environmentally cleared, it would be better to do some and then use the revenue or the concessions from that to be able to fund the other parts, as the environmental clears and we're able to build those. The environmental clearance is what normally controls the development of a project, and a project of this length that's been done in segments like that will require us to build it as different.

What we're looking at now on some of our bigger projects, like Trans-Texas Corridor, we are looking at long segments that we will clear so that you can almost build a 50 or 60 or 100 mile corridor at a time. This one here was broken up into pieces because, again, this project started under our old model that we were design-bid-build and pay-as-you-go --

MR. WILLIAMSON: No. Pay as you collect.

MR. SAENZ: Pay as we collect, that's right. So we would develop those projects based on small pieces so that we could build those as quickly as we could.

MR. HOUGHTON: Just thinking out loud, this looks ripe for a developer to develop this project and finance the whole thing instead of piece-mealing it -- like you said, the old model -- if you had one developer develop the entire project.

MR. SAENZ: We will look into that. And of course, we have been talking to HCTRA. This is one of the projects that we've been in communication with HCTRA but it's only for one piece and not the entire corridor.

MR. HOUGHTON: That's the piecemeal effect we've been used to over the years.

MR. SAENZ: Yes, sir. And the reason being is that one piece is a lot closer to being able to get it to construction.

MR. WILLIAMSON: Wait, don't leave. More?

MR. HOUGHTON: That's enough.

MR. WILLIAMSON: My colleague asked if the corridor was toll viable, and my question is is it tax viable.

MR. SAENZ: No, sir.

MR. WILLIAMSON: Which is more viable?

MR. SAENZ: Which is more viable?

MR. WILLIAMSON: The reason I ask the question, Amadeo, and the reason I asked you those questions unexpectedly, David -- I didn't mean to catch you off guard -- the session will begin soon, and I think it's important for those who watch what we do for us to share with them the most basic choices that have to be made, and if we don't always ask the question is this road tax viable, is it transit viable, and is it toll viable, if we just leave that void, that void will be filled with the assumption that it's tax viable. And I just think it's real important for us to really begin to focus on the choices that the commission and that local governments have.

If the taxes collected or generated on Segment E will only pay for 16 percent of the road, we need to say that it is not a 100 percent tax viable road. If the tolls collected on Segment E will only generate 40 percent of the cost, we need to say that, that it's not a 100 percent toll viable road, it is, however, twice as cash flow positive as a toll road than it is as a tax road. And in recognition of the most significant event of the day today, public transportation, we also need to begin to ask the question: What is the cash flow viability if we didn't build a road and instead built a light rail, or whatever other alternative was available to us to move the people and goods that need to be moved in that part of the state.

MR. HOUGHTON: I have one more question. Sorry, Mr. Chairman. Could an RMA finance this project?

MR. SAENZ: I'll defer to Bob -- I'll probably get it wrong -- but the project goes through several counties in and around the region where we have HCTRA and there was some legislation that would allow the county toll road authority to transfer their assets to an RMA. What I don't remember -- and I'll ask Bob to correct me -- is if an RMA can be formed within this region because of the HCTRA designation.

MR. HOUGHTON: It can?

MR. JACKSON: It can.

MR. SAENZ: Yes, it can. At one time it couldn't.

MR. WILLIAMSON: Big Bob Jackson, Johnny on the spot.

MR. SAENZ: Thank you, Bob. So yes, sir, an RMA can form and build this project.

MR. WILLIAMSON: Other questions, members?

(No response.)

MR. WILLIAMSON: We do very much appreciate your hard work. I've been on the commission six years now and I think the first time I got a chance to make the report, I was obviously at that time uninformed about the project and I asked, in retrospect, what were some pretty stupid questions or some uninformed questions. And you've done well managing this project under difficult circumstances, and we appreciate it.

MR. GORNET: Thank you, sir.

MR. HOUGHTON: Congratulations.

MR. GORNET: Thank you all.

MS. ANDRADE: Thanks very much.

MR. BEHRENS: We'll move on to agenda item 3(b) and this will be a report on the department's cash flow situation, and this will also include some of our gas tax revenues coming in and also our federal reimbursements. James Bass.

MR. BASS: Good morning, commissioners. I am, for the record, James Bass, CFO at TxDOT.

To start off on the report on the cash flow, I thought we'd first look at just an overview of where we are on some of our different financing programs that are available to TxDOT. If we start off with the Texas Mobility Fund, the revenues that have been dedicated by the legislature over time, we believe will produce at least $5.3 billion in bond proceeds at some point, likely to be higher than that. Our timing has been quite fortunate in that the interest rates we're paying on the debt are less than what we had originally assumed, and so that allows us to get even more proceeds than originally planned.

MR. WILLIAMSON: And James, I don't want your testimony in this presentation to be contentious or too drug out -- for which I'm responsible the most of -- but be real clear, you started out saying the projected capacity is $5.3- and then you went on to say it's likely higher than that. Don't tell me it's likely higher than that if that's not what's here. Because when we go across the street in 62 days, these numbers have to be dead-on this is what it is. So if it's likely to be higher, tell me. Is it $5.3-?

MR. BASS: I believe it's higher than that. We have not recalculated it based upon the last issuance that we did, and that last issuance was lower in debt service, the interest rate, than what we have the assumed rate. So it's higher than that, and I apologize, we have not calculated it but we will do that in the next 62 days to have one firm unchanging number.

MR. WILLIAMSON: Please do.

MR. HOUGHTON: That's a calculation, though, based upon interest rates.

MR. BASS: Correct, and based upon the assumption, and over time it's going to float and vary depending upon the changes in the market.

MR. HOUGHTON: But what we're authorized by the comptroller is what?

MR. BASS: What we're authorized by the Bond Review Board is the next line there, the $4 billion, and of that $4 billion authority, we've issued almost $3 billion of it. You can see here in another three or four weeks, we're going to issue another $200 million of variable rate debt, and so out of that original $4 billion current approval from the Bond Review Board, we have about a billion dollars in authority remaining. Our cash flow projections in the development of those projects tell us that in the summer of '07 we'll issue that last billion dollars and then need to go back to the Bond Review Board at some point after that to get approval for the additional capacity.

If we then look at the State Highway Fund revenue bonds -- that are sometimes referred to as Prop 14 -- unlike it, we know what the capacity is on this program because in statute it's laid out and it is no more ever to have any more issued than $3 billion. And in May 2005 we issued just over $600 million, last month we issued a billion, we are capped at no more than $1 billion in any one fiscal year, so that's why the number you see there is right at a billion dollars. There's about $1.4- left, we'll issue another billion in September of '07, and then the remainder in September of '08.

Looking at our short term borrowing program that allows us to manage our cash flows more effectively, the limit on that currently that we have in place is $500 million, and back in early Fiscal Year 2006, September-October of 2005, we actually issued $300 million in this short term borrowing commercial paper. The reason we did that, the timing of that was that Congress was going through their federal budget process, we had bills and invoices that were eligible for reimbursement, however, the feds were allowed to reimburse us in a timely fashion. So while that was being deliberated and discussed, we went out, borrowed this money on a short term basis, were able to keep the projects going, and then began to pay it off, and to date we'd paid off just over $215 million of it and have slightly more than $80 million outstanding right now.

We then move to the actual cash balance of the State Highway Fund, and at the end of October the cash balance was just over $290 million. And the reason I started with that number is because if a staff member or someone in the comptroller's office or state auditor's office runs a report and looks at the State Highway Fund, that's the number they're going to see. However, within the State Highway Fund there are accounts that have monies reserved for specific purposes.

One of them that we're most familiar with is the State Infrastructure Bank, and there's almost $54 million in there, and the reason we account and look at that differently, that $54 million is not available to pay the day-to-day operations of TxDOT or DPS or any of the other agencies who operate out of the State Highway Fund, so for our cash forecasting purposes, we set that money aside. Same thing with the bond proceeds from the Prop 14 program, those are available for only specific projects, not available to pay the salaries or travel of employees, so we've set that aside.

So what we're left with after we do that is just over $200 million, and as a reminder, almost $90 million, or 40 percent of that number is from borrowed receipts through the short term borrowing program. In addition, I would point out that this is just the cash balance of the State Highway Fund. It would be similar to getting your monthly bank statement on your checking account and then ignoring the fact that, well, I've already written seven additional checks that haven't cleared through the bank yet and I know I'm going to get my paycheck tomorrow. So just focusing -- which we have a tendency to do in state government -- on the cash balance doesn't give you the complete and full picture that an annual financial report or a balance sheet gives you.

We then move into the primary revenues going into the State Highway Fund, and going back with actuals from 2001 through Fiscal Year 2006, as well as our projections through 2010, and you can see that there's a steady increase in this particular revenue source. It's been interesting in the past few years on a fiscal year basis it's kind of gone up and down. It's continuing to grow but the rate of growth has varied from 2-3/4 percent in 2002 to just about a half a percent in '03, and then back up to 2 percent in '04, and just under 1 percent in '05.

Projecting it going into the future, we've kind of looked at that recent trend and we're projecting a 1-1/2 percent growth going forward, but it was interesting, particularly in 2006, that with the sudden increase and spike in fuel prices that we did not see a decline in the deposits or the receipts that we receive. It doesn't mean that people didn't react and respond to that, and I think we'll see that on a next slide, but overall, just because of the increasing population and everything else going on in the state, overall receipts continued to increase.

MR. WILLIAMSON: Wait a moment. Under the able guidance of former Commissioner and soon to be Senator Robert Nichols, when did the commission succeed in persuading the legislature to overhaul the collection of motor fuels tax?

MR. BASS: I believe that was during the session in 2003.

MR. WILLIAMSON: And when did it take effect?

MR. BASS: So the first year we would see the impact of that would be in 2004 which we had just about a 2 percent increase over the prior year.

MR. WILLIAMSON: So that would have been almost a permanent 2 percent increase as a result of that revision of tax collection.

MR. BASS: Correct. You would re-establish the baseline upon which future years would grow from.

MR. WILLIAMSON: Has anyone projected the total impact to the Highway Fund as a result of that change?

MR. BASS: I'm not aware of that number.

MR. WILLIAMSON: Thank you.

MR. HOUGHTON: The other question is are these net receipts to us?

MR. BASS: These are deposits to the State Highway Fund so not total collections for the state.

MR. HOUGHTON: What's the total collection?

MR. BASS: The figures you see here are roughly 72 percent of the grand total, so you could just extrapolate to get to those figures in each of the years. Of course, 1 percent goes off for collection and enforcement, another 25 percent goes to help fund education, and then there's another 2 percent or so that's refunded because the money we receive, in theory, is only the money that's used to propel motor vehicles across the state highway system, so gasoline tax for boats on a lake do not eventually end up and get deposited to the State Highway Fund. So this is about 72 percent of the statewide total.

If we look at the next page and see how this is made up, the top line in the blue shows the taxable gallons that have been sold in the state of Texas -- and these are just actuals, we don't have a projection on this -- for 2001 through 2006, and you can see that in 2002 we had an increase of about 4-1/2 percent from the prior year, but from that point forward it's been really flat. In some years it's actually gone down a little bit and in other years gone up, less than half a percent in each case, one way or the other.

So gasoline has been relatively flat, so all of the increase in revenues has really been driven by the increase in the number of gallons of diesel. So I think thanks to an improving and ever-growing economy in the state, the diesel fuel tax is really what's driving the increase that we see in the State Highway Fund.

Then we look at our state vehicle registration fees. These are shared with the counties who collect it and they use it to help fund their county road system, and then the remainder, through a series of formulas, comes in to be deposited to the State Highway Fund. Thanks to the population increases in the state, we've continued to see growth in this area, more people, more cars, more traffic on the network, but more revenues coming in through the registration fees.

We forecast that to continue to grow at roughly 4 percent going into the future, and that's a combination of just the natural growth in it as well as an unwinding by the legislature of a previous transfer. There was a transfer that affected the State Highway Fund back in the early '90s but recently the legislature passed law to unwind that and we're seeing the benefit of that unwinding through this revenue stream.

If we then look at our federal reimbursements, one thing I'd like to point out here, sometimes it gets confusing for people when we start talking about federal dollars, oftentimes when we're talking about federal dollars, we're talking about the federal apportionments that we see in the transportation bill passed by Congress. When we move and actually start implementing the program, what we see deposited into the State Highway Fund are reimbursements. Unlike many other federal programs where agencies and states may receive a block grant of funding up front, within the transportation program it's all on a reimbursement basis. So if there's an increase in apportionment, it would take a couple of years for that to flow into the cash flow and actually show up on this graph.

And you can see from 2001 through 2005, we really see an increase in the receipts through the reimbursements, then we have kind of a leveling off for '06 through '10. There's somewhat a little bit of an anomaly there in 2008. That's what the model was producing, and it really gets back to what it's producing in the expenditures, but that might shift one month or the other as we get closer to it and show up in a different column. So even if we just flattened that out, you can see it's kind of stabilizing and maintaining.

One of the primary reasons for that, if you recall, several years ago we moved forward on a plan to use the tapered match approach from the federal government that allowed us to receive these federal reimbursements sooner than otherwise which allowed us to advance development of a number of projects. That's the uphill slope you really see from 2001 to 2005. As we knew, as we planned, that was not going to be an everlasting climb, it would level off at some point and actually start to come down a little bit, and that's what we see included in the forecast here.

One thing I'll point out, since we do have a projection for reimbursements there on 2010 and obviously we have one beyond, you're well aware of the reports from the U.S. Chamber of Commerce as well as, I believe, the General Accountability Office, that their forecasts show the Federal Highway Trust Fund will run out of money in the 2009-2010 time frame unless Congress takes some action to move forward with that.

MR. WILLIAMSON: And while the terminology is often we'll run out of money, actually the projection is receipts will fall below disbursements under the current law.

MR. BASS: And I believe that the current balance, cash balance in the Federal Highway Trust Fund will diminish down to a zero cash balance amount.

MR. WILLIAMSON: Right. What will that mean, James?

MR. BASS: What all that means is it affects --

MR. WILLIAMSON: When that happens, what will it mean? Does that mean that the current apportionment will be reduced or we'll be out of the current apportionment?

MR. BASS: The current apportionment would be reduced. What currently is happening in SAFETEA-LU and perhaps in some of the earlier bills, what's being distributed through apportionment is not only the incoming revenue to the Federal Highway Trust Fund, but in addition to that, the balance of the Highway Trust Fund. And so they're distributing both current revenues and the built-up balance. Well, obviously you can only distribute that balance once, so once that balance hits to zero, the apportionment levels would have to go down to closer align to just current revenues. And so we would expect, unless Congress does something between now and then, that the apportionments in the next bill would be lower than SAFETEA-LU, simply because the balance would no longer exist.

MR. WILLIAMSON: And have we begun to reflect that in our cash flow projections?

MR. BASS: We have not yet, no, sir.

MR. WILLIAMSON: Except for the one that I used in my testimony in front of the Senate.

MR. BASS: Yes, sir.

MR. HOUGHTON: And why?

MR. BASS: I guess we're a glass is half full kind of group.

MR. HOUGHTON: No, not why haven't you done it, why do you feel that the Trust Fund is in the shape it's in?

MR. BASS: Well, I think it's because Congress has not changed the fuel tax rate or looked at other revenue sources to bring into the Federal Highway Trust Fund, and there's been the needs in Texas and other growing states have continued to grow, so rather than sitting on this large balance or, I guess, addressing the problem front-on, what they've done to increase the money going back to the states is eroded away that balance. Well, that's a temporary method to increase the expenditures on transportation, not a long term solution.

And so we're seeing the benefit of that temporary solution now by additional revenues coming in, but we're aware that that's not going to solve the problem going forward.

MR. WILLIAMSON: This is actually an education moment.

MR. HOUGHTON: That's right.

MR. WILLIAMSON: One of our objectives at the federal level in our influence policy effort was to achieve a greater -- we're a donor state and our effort was to achieve a greater amount percentage of reimbursement than we had enjoyed in the past. We had considerable congressional help on the House side, and the resolution to not taking, not literally reducing money to, for example, Massachusetts and giving us some hope of increasing our reimbursement as a donor state in Texas, was to, in effect, spend the balance and let the Congress in 2008 worry about it.

Is that a fair assessment?

MR. BASS: Yes, sir.

MR. WILLIAMSON: So while we will benefit somewhat in Texas over the next few years -- or let me restate that -- while we thought we were going to benefit somewhat over the next few years from getting a piece of the balance, of course now receipts are falling and the federal government is reducing the apportionment to everybody, so it's probably going to end up not really having had much effect on us, but that was the theory at the time.

MR. BASS: In addition to that, and you're saying receipts coming in lower, in addition to the projections of a declining balance in the federal highway trust fund -- I know you're all familiar with the rescissions coming through Congress of here's what the state will receive in apportionment, but then sometime later, well, we're going to have to take some of that back to help fund other programs or to try and balance the revenues and the apportionments better over time.

So it just proves more and more, as we go into the future, the reliability and sustainability of what the federal program is going to be, how it's going to look in a few years is highly uncertain.

MR. WILLIAMSON: And how much, James, has been rescinded so far from Texas.

MR. BASS: I'm not sure of the exact -- three oh five.

MR. WILLIAMSON: $305?

MR. BASS: $305 million.

MR. WILLIAMSON: Million dollars. Do you think many people are aware of that?

MR. BASS: No, sir. I'm not sure that many people are aware of the fact that Texas is a donor state and is the largest donor state through the history of the program and that a lot of the tax money collected here in the state of Texas never sees its way back through the federal system.

MR. WILLIAMSON: Please continue.

MR. BASS: So looking at our projections for the revenues coming into the State Highway Fund, how does that translate and what does that mean for our highway contracts and the awards that we can look at going into the future? If we just look at the traditional sources, both the revenues from the State Highway Fund and the federal reimbursements, you see here on this rather flat line the traditional sources in the amount of contract awards that would go in here. I would point out this is both preservation and construction contracts all together in one.

MR. WILLIAMSON: And preservation means maintenance?

MR. BASS: Yes, sir.

MR. WILLIAMSON: And traditional means gas tax?

MR. BASS: Gas tax, vehicle registration fees, and federal reimbursements.

MR. WILLIAMSON: Again, in preparation for 62 days from now, let's use terms that are more commonly understood. So traditional means tax receipts.

MR. BASS: Yes.

MR. WILLIAMSON: And preservation means maintenance.

MR. BASS: Yes.

MR. WILLIAMSON: So if all we had to exist off of, if our only cash flow was tax receipts, this is what our contracting would look like.

MR. BASS: Yes, sir.

MR. WILLIAMSON: Okay. Continue.

MR. BASS: And one of the reasons why it's flat, even when revenues are coming up, because we also have some in-house maintenance and other costs that are experiencing inflation due to fuel prices, roadway materials that are increasing, and so that's taking away some of the growth that we see. There's additional responsibilities of the State Highway Fund as we go into the future that some of the funding will go to programs that it hasn't historically gone to that will take some of that growth away. And as well -- as you'll see in another slide -- some of it, in future years will go to paying debt service on some of the programs that we have.

We then start to look at some of the programs the legislature has provided to us over the years and how that's affected the amount that we've been able to award and contract. If we add, then, to it CTTS -- being the Central Texas Turnpike System, the toll roads here in the Austin area -- in 2002 and 2003 we were able to award additional projects through the issuance of project revenue bonds to get those projects going that just opened here within the last month. So that added to the gas tax funding.

The next program to look at is the Texas Mobility Fund, and through the dedication of the revenues, the projects and awards we've been able to do because of that program.

MR. WILLIAMSON: Now, James, I think commission members like this presentation, we see these types of charts and graphs every day so we're real familiar with them. One of our goals in this presentation is to develop a methodology that's easy to understand across the street.

Members, I seek your comment on whether your view is that this will jump out to the normal person that's not accustomed to looking at our stuff every day.

The way I see this is the top line represents the amount of money used to preserve and expand our system.

MR. BASS: Yes, sir.

MR. WILLIAMSON: If you wanted to compare how much money are we spending maintaining and expanding our system, you would look at this top line, and if you wanted to know the source of cash, you would look below to the colors to see how much is gas tax, how much is Central Texas Turnpike debt, how much is Mobility Fund debt, and so on.

MR. BASS: Exactly.

MR. WILLIAMSON: So traditional funding, we would have seen a slight increase in construction contracts, and thus, congestion relief, improvement of air quality, and preservation of the system, followed by a decline from 2004 forward, but because we did Central Texas Turnpike, we actually saw an increase in construction through 2004 estimated, and then we started with the Mobility Fund at that point, and we're seeing an increase all the away into 2006. That's what I'm looking at right now.

MR. BASS: Yes, sir.

You raised a point I'd like to highlight, just focusing on the traditional or the gas tax funding, looking at 2010 there, you can see it's roughly equivalent to the dollar figure in 2002. This is just gross and has not been adjusted for actual inflation or projected inflation going forward, so the number of lane miles that would be improved or expanded in 2010 with that same amount of money as in 2002 would be much less because of inflation. So even though if you just focus on the numbers it looks relatively flat, the amount that would be able to be produced and delivered would be in decline primarily because of inflation.

The next program to show as the source of funding for our total would be the State Highway Fund, or Prop 14 program, backed by the gas tax receipts.

MR. WILLIAMSON: That's what we internally refer to as the Ogden Bonds?

MR. BASS: Yes, sir.

If we then look and kind of draw a line to help us distinguish between actuals and future projections, focusing just on some of the programs of the department, you can see if you look at that top line, we've been in a steady growth in awarding contracts from 2001 through 2006. Well, we're almost at the top of the peak from those programs and we're going to start going down because the Highway Fund program has a total of $3 billion, we're going to exhaust that, the Mobility Fund only has a certain amount that it will be able to support, we'll exhaust that and it will go away as we begin to pay debt service. So we've reached the peak and are almost coming down from these particular programs.

We then look at some of the additional more recent programs. If we look at the pass-through toll program and the projects that have been advanced by cities and counties throughout the state, you can see that adds another layer to our total line, and we project that to continue going into the future.

I would point out that of the ones that have been approved so far to date -- and you may hear more of this from Amadeo in a few minutes -- the anticipated annual expenditure on the pass-through toll payments to those entities is roughly $80 million, and so if the commission direction is to utilize a large portion of most of Strategic Priority, that means you could do almost three times as much as we've done to date, that $80 million would go up to around $240 million per year if that over time is the desire of the commission. That's why we have that projection going throughout 2010.

MR. WILLIAMSON: Again, a teaching moment, I think. The line we're focused on represents construction dollars, so one would want to point out, at least if not today, certainly in 62 days, that that actually represents the risk that Montgomery County and Cameron County and the others have been willing to take with their own debt capacity to construct or improve the state highway system, and the reason why we include this in our construction program is because all of these dollars are being spent on the state highway system. Okay.

MR. BASS: If we then look at the last slide and the last figure being built into that is the improvements to the state highway system coming to us through the concessions through the CDA program, and in 2007 we would expect the construction on State Highway 135, or at least the development of that, to begin in earnest, same as 121 in the Dallas-Fort Worth area, and we see other projects in the future years coming on line.

And this number here I want to highlight that's on this graph is just that initial construction, so the secondary benefits, if you will, from the projects that will be built and advanced from the initial concession payment and the revenue share component over time is not yet factored into that graph.

MR. HOUGHTON: Can I ask a question?

MR. WILLIAMSON: Please.

MR. HOUGHTON: Michael, when we had our meeting in Denton, you showed what was going to be generated off of 121. What was that number on all those brand new roads up in North Texas?

MR. MORRIS: Michael Morris, Dallas-Fort Worth region. I think, Commissioner Houghton, Mr. Bass would indicate in the brown that you'd have probably a billion and a half dollars already included, and then the concession payment, to your question, would be another probably $2-1/2 billion through concession fees in excess revenue over time that he's indicating haven't been added yet to the graph. So the CDA has a bite at the apple to build the roadway, Mr. Bass has included, then the concession fee and excess revenue is about another $2- to $2-1/2 billion.

MR. HOUGHTON: And this will be the first one, correct, except for the 130. The 130 we did 25-, and then we have an ongoing revenue stream. So this will see a huge pop on this chart when we, in fact, get the bids in and then we award the successful bidder.

MR. BASS: So in addition to those secondary benefits not being reflected on here, also projects from regional mobility authorities are not on here, one of them being advanced, we're all aware of, 183A. It's not on here, it's not part of the state highway system, it's obviously delivering improvements and mobility to citizens of the state, technically it's not on the state highway system, it's not on here, but as the other RMAs move forward with their projects, we have a better idea of which ones and the dollar amount of that construction we would add to that.

A couple of things I'd like to point out just for clarification, to go back to an earlier slide, and Commissioner Houghton, our discussion on the net figure of the state gasoline tax. My figure that I showed up there was roughly 72 percent of the statewide total. I just want to clarify that that 72 percent and the numbers that were on there go to the State Highway Fund, not to TxDOT necessarily. They go into the State Highway Fund, and as the legislature decides, can be shared among different agencies who operate out of the State Highway Fund. So I apologize if I mis-spoke on that.

The other thing I'd like to point out again, on the traditional line --

MR. HOUGHTON: You brought that up so opening here. Do you know what those dollar numbers are?

MR. BASS: For the Department of Public Safety?

MR. HOUGHTON: The gross comes in, everything, and we get our net, our bite at the apple or what's left over.

MR. BASS: All of the revenues that come into the State Highway Fund, state motor fuel tax, vehicle registration fees, federal reimbursements, of the grand total I think it's roughly 7 percent are expended by other agencies.

MR. HOUGHTON: What in real dollars?

MR. BASS: That would be $600 million, in the neighborhood of $600 million per year.

MR. HOUGHTON: Per year.

MR. BASS: Yes.

The nice lime green there, slice of key lime pie for the Ogden Bonds, obviously with that has debt service associated with it. So again, looking at the earlier slides we saw revenue increasing but the traditional line from gas tax and vehicle registration fees is flat. One of the reasons it's flat, in addition to the inflation in other areas, is the debt service requirements for the Ogden Bonds. So some of that revenue is going to go to that.

I had to cut the chart off at some point, but if we get into 2011-2012, that blue line would go down approximately another $100 million, in part because of that and part of the other pressures that are on the funding sources. So it's stabilizing there but then what we're showing soon after 2011, it's in decline.

MR. HOUGHTON: So what I can surmise from this chart, what's going to sustain us in the future are the CDAs.

MR. BASS: Yes.

MR. HOUGHTON: Or another program akin to the Texas Mobility Fund.

MR. BASS: Right.

MR. WILLIAMSON: Cash is cash.

MR. BASS: Cash is cash. If the legislature, through their deliberations, decided to put more revenues into the transportation program, either through unwinding some earlier transfers from dedicating additional money to the Mobility Fund or State Highway Fund or any of the programs, we would able to expand.

MR. HOUGHTON: But the big pops are in your CDA and because a CDA has recurring income, toll revenues, excess toll revenues.

MR. BASS: Under current law, current dedication of revenues, the future is on the public-private partnership side to really deliver large amounts of infrastructure, yes.

MR. WILLIAMSON: Other questions, members?

MS. ANDRADE: I have a couple. James, I want to make sure that I understand this. So we have not calculated from excess revenues what projects will be built in the future on these charts. Right?

MR. BASS: Correct.

MS. ANDRADE: And then on the traditional funding on highway contracts, what we spent in 2002 for those projects, what we spend in 2007 may be less projects because of the cost. Is there any way that we could translate that into lane miles just for the normal person to understand?

MR. BASS: Yes, we could do that, and our Construction Division track a highway construction index that really tracks the inflation experienced in the construction sector that would do that over time, and I think in our Planning and Programming, looking into the future, we build in an assumption of what the inflation rate is going to be, so we should be able to look at that and come up with lane miles over time.

MS. ANDRADE: Just so I think that our citizens understand that we have experienced, just like any business, an increase in cost. And then back to the short term borrowing, when we borrowed the $300 million -- and I understood that it was because of the delay of the federal funding and so forth, we weren't able to pay it back once we got the monies?

MR. BASS: What happened, even when Congress came through, they had continuing resolutions that would be for 30-60 days going into the future, and when you issue this short term borrowing, you can't pay it off just whenever you want, it has a set and predetermined maturity date. Of that $83 million, it will mature coming in December of this year, and so we'll look at it, see what the cash balance is on that day or around those days and see if we're able to then retire it at that point, but the payments are spread out over time.

MS. ANDRADE: But we do have a plan on paying it.

MR. BASS: Yes, ma'am.

MS. ANDRADE: All right, that's it. Thank you.

MR. WILLIAMSON: Commissioner Andrade asked for vehicle lane miles so our citizens would understand the impact of this, and we should produce that. And this instruction is less directed to you than it is to Amadeo. I think we ought to be less and less concerned about lane miles and more and more concerned about congestion, safety, air quality, economic opportunity and the value of our system.

And the reason I say that is because from this, the first meeting after the voters of this state have had the opportunity to render a decision about the future of the large responsibilities of government, we will talk, as long as Governor Perry is the governor, in terms of tax, toll and transit. The whole purpose of what we've been about the last six years is to look at the transportation of goods and services in this state from the citizens' perspective: what's the tax cost of our decisions, what's the toll cost of our decisions, and what's the transit cost of our decisions, and not in terms of building highways.

Don't get the wrong impression, Amadeo, I'm not against building highways, but a modern society doesn't view transportation in terms of road miles built, it views transportation in terms of how much congestion confronts its citizens each day and how much do you reduce that congestion with decisions you made. Whether it's building a road with taxes or tolls or building a train or buying a bus or even providing a bicycle lane -- a favorite alternative of my executive director -- what's important to our citizens -- you know, we get wrapped up in what we think is important down here, the average guy working in Weatherford, Texas really doesn't much care who owns the road, really doesn't much care who collects the money, what he really cares about is getting the traffic out of his way, what he really cares about is are his children breathing poison, what he really cares about is somebody going to run over him because they're in such a hurry to get someplace and because of congestion they drive stupid.

The average Jane in my district wants a high-paying job as a result of the good transportation at work, and they don't really much care if it's a road, a railroad or a bus that gets them to that job. And the average corporation in this Texas really wants roads that don't tear up the infrastructure they buy to transport their goods.

So I understand about lane miles because that's the environment most of us have been raised in, but it's a new day in this state. Our focus is on our goals and the indices that measure our progress or lack of progress in reaching those goals, and I want to begin to see that in this forum.

I also want you to go ahead and take your chart out ten years. This is wonderful, I compliment you on this approach. I've been after you for four years to get something the normal person can understand, and this is it.

MR. BASS: I became normal yesterday.

(General laughter.)

MR. WILLIAMSON: I think it would be of benefit for across the street, because if one looks at this chart and focuses on it, it's breathtaking, the non-tax impacts on Michael Morris's job, it's breathtaking, and they need to see those secondary impacts. Because one of the criticisms about, for example, 121, that we've all heard from House and Senate members who give us guidance about how they want things done, is well it just seems unfair. Well, you know, when I was the 12-year-old son of a working class union family, the gas tax seemed unfair because the wealthy guy across the street paid the same rate that my dad did. So anything can seem unfair at any moment in time if it's not explained, and I think if they have the opportunity to see that the impact of this stuff is to create a better infrastructure for everyone on a pay as you choose to pay basis, not on a pay as government tells you you will pay basis, it might seem a little bit more rational, the decisions we're making might seem a bit more rational. So I would like to see that imprinted on this chart.

MR. BASS: Okay.

MS. ANDRADE: Well, then I have one other thing. Well, then maybe we should restate this as back then in 2002 what we spent in lane miles, and now because we're trying to be truly multimodal -- which I completely support -- is what does this mean in today's dollars is yes, some of it is going into lane miles but also into other modes of transportation. So I just want to be able to help our citizens understand that what we were doing in 2002 is very different than what we're going to do in 2007 and thereon.

MR. HOUGHTON: Michael, can you help with that information? You're a beneficiary of really the first big CDA. We've negotiated the first one but you're going to be the beneficiary.

MR. MORRIS: I think Mr. Bass can do it just as well. We'll provide whatever assistance he needs. I think the two elements you're all asking for is what is then the value of secondary and tertiary benefits of CDAs, and we'll work with Amadeo and Mr. Bass to get that in there.

And then, Commissioner Andrade, I think your question is very simple and it's very important in our region. I think you need to translate these regional values into purchasing power, and that blue line in 2010, even though it's the same height as the line on 2001, at the inflation in which we're buying things, that will buy 50 cents on the dollar. And I think you can just add one element to say okay, now in equivalent purchasing power, not is it just freeways or whatever you're buying, equivalent purchasing power, what is it, and I think the really cool thing is it basically just buys you maintenance.

And I think the point in our region, what we have sold is the blue box, the maintenance of the existing infrastructure. If you ever want to build anything again, you've got to get into the innovative tools that add capacity or rail systems or things in your region.

MR. HOUGHTON: When we go to the legislature and when we go to communities like Houston or San Antonio or El Paso and you look at that burnt orange line -- is that what you call it?

MR. BASS: The one on top? Yes.

MR. WILLIAMSON: They figured us out, James, they caught us.

MR. BASS: Just on top of the maroon line.

(General laughter.)

MR. HOUGHTON: So when we go to the legislature for a community like the Dallas-Fort Worth Metroplex, the profound effect it has, a CDA, and Houston is maybe just starting to figure that out with negotiation Amadeo is having with them on the concession opportunities, on how that's going to sustain us in the future and not the gas tax receipts.

MR. MORRIS: And Commissioner Houghton, the one thing it adds is, and Mr. Chairman, it gives you the flexibility then to go ahead and put the money into the remaining elements of the rail system or to help solve Tower 55 or sometimes great projects in Texas have waited for 23 cents out of a dollar because that person didn't have their money in time. The important part is the CDA funds, maybe with some legislative help, are very fungible to get you across the goal line in lots of different areas, where your blue box can only be used for certain elements because it's not eligible for transit or eligible for goods movement. So there's different fungible benefits here, and the UT color is very fungible and the blue color is not very fungible.

MR. HOUGHTON: Well, I've said it many times, you can't pave your way to prosperity, it's got to be multimodal.

MR. WILLIAMSON: I compliment you, James.

MR. HOUGHTON: This is outstanding.

MR. WILLIAMSON: This is exactly -- well, almost exactly what we've been building toward in the '07 session. We've got a story to tell to, in some cases, some bruised and battered guys and gals who stood with us, and we want to carry this story across the street real clear that this is the successful result of what you've done.

MR. BASS: Thank you.

MR. HOUGHTON: Congratulations.

MS. ANDRADE: Thank you very much.

MR. BEHRENS: We'll go to agenda item number 3c and this will be a status report on where we are on some of our pass-through toll projects. Amadeo.

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

This item, I'd like to give you a little status report of where we're at on our pass-through toll program. Of course, the pass-through toll program was established as a means to benefit local areas by accelerating improvements that are needed in mobility and safety for projects that are on the state highway system.

Transportation Code 22.104 authorizes the department to enter into an agreement with a public or a private entity for the payment of pass-through tolls for reimbursement of costs associated with the planning, the design, the construction, and operation and maintenance of a tolled facility or a non-tolled facility, and again, it must be on the state highway system. The pass-through tolls basically are reimbursed and are paid based on the usage of the vehicles that use that particular facility once the facility is opened. In essence, what we're doing is a local entity comes to us, they want to build a project, they then will take the risk, finance the project, build the project, and after it's built then we will reimburse them based on the people that drive on that facility.

To date we have had 25 applications, we've received 25 applications. We have carried 21 forward to you all. It's a two-step process. The first step is to allow us to negotiate or authorize us to negotiate with the developer. Of the 25, we had 12 applications that came from counties, eight applications that came from cities, we had two other governmental entities that submitted applications, and we also had three applications from private entities.

Gone through the first step is the 21. Eleven of the twelve from the counties have received authority to negotiate, five of the eight for the cities, both of other governmental agencies have gone through the first step, and all three of the private entity proposals have moved forward.

For private entities, I'll remind you that we have to go through a procurement process once we get an application, so we have to go through a procurement, and I'll talk about that process in a little bit.

To date, then of course, the second time we bring it to the commission is to give us authority to execute the agreement after we have negotiated. And to date we have negotiated eleven agreements, five of those agreements have been signed. I'll give you a status as to why the other ones have not been signed. In fact, there are six, we just received the sixth one earlier this week.

When we look at how much money we've been talking about, we've received applications that total about $1.8 billion of projects, and you all have approved $834 million in pass-through toll projects. The contracts that have been executed equal $573 million.

And of course, the way that we set these up, we set up a minimum reimbursement payment and a maximum reimbursement payment, and so that way we're able to track how much of the dollars the department has could be encumbered in any one year. Usually the projects pay between 10 years and 20 years. Some of the projects that were small that have a great amount of traffic do pay in much less time.

As James mentioned, if you look at the maximum payout for all the projects that we've approved to date, we probably would encumber about $80 million a year from the department from Fund 6 to reimburse those projects. But that would require that all the projects get built, all the projects get built on time, all the projects have traffic that exceeds the maximum amount, and then that would be the maximum that would be encumbered.

As a minimum, we do set a minimum that also is put in there to help protect the locals so that they know they will get at least so much, and we would encumber them anywhere from $22- to $40 million a year based on minimum traffic.

Just in going through these projects and kind of giving you a status report, the first project, if you recall, was Montgomery County. Montgomery County is moving forward with their projects and they've let some contracts to do some utility adjustments as well as clearing some of the right of way, and they're moving forward. Grayson County is the agreement that we just received. The project in Port Arthur, because of the hurricane, the City of Port Arthur has kind of taken a step back and is re-evaluating whether they actually want to proceed in this direction. We're still working with them on that; they haven't started their project. The other two that we have executed, of course, Williamson County, San Marcos and also Hays County, they're beginning to start setting up their projects.

The projects in the Rio Grande Valley, the Mission Redevelopment Group, and that one was a project that was tied to the construction of an international bridge, and we've been working with them. We've decided to help them and not try to tie them down to a cost because of the unknown of when that international bridge is going to be built. We will wait and negotiate that as that deadline becomes more critical and coincide so that the road and the bridge can be built at the same time. Tying them to a number at this time would not be fair to them, would not be fair to us with respect to determining the actual reimbursement.

The projects that are unique are the projects that come in from the private sector. Our first one that came in was a project in Laredo that you all approved. It was to build an overpass on Loop 20. That project, as we've negotiated with the contractor and with some negotiations also that have come in from the city and the county and the district, the developer has decided to put that project on hold and instead of trying to do a pass-through toll project, he's willing to contribute to a bigger project that the locals want that incorporates what was going to be built, and he would contribute that money and not expect any kind of reimbursement. So we're trying to rework that project to see how we can make it work, still leaving the pass-through toll approval that we've gotten from you all. In case plan B does not come through, then we will go back to try to negotiate a pass-through toll project.

The project in Laredo, when we went out for competing proposals, we did not get any competing proposals. So really we evaluated the initial application, and once we didn't get any competing proposals, then we only had one person to continue to negotiate with.

The project in El Paso also we went out on competing proposals and we received those, and as we received the proposals, we learned, since this was the one when you get two proposals, they were very unique in nature and different, so we've been working with the developers to try to get some clarifications so that we can evaluate those proposals on an apples to apples comparison instead of trying to evaluate on a very different basis. We're moving forward, and we hope by the end of this year -- which is next month -- to bring to you a negotiated contract with one of the two private developers.

The other projects that we have are in different stages of being processed. We still have a few that we're just still reviewing. We have a project, for example, in Collin County that has come to us. We've been working with the county and the county has taken back their application and is looking at how they can incorporate some tolling elements into the project. The project that was submitted was huge, and they had not taken into account any potential of tolling capacity or tolling feasibility, so they've taken that back and are restructuring their project where it can be a combination of both so that the pass-through toll program, in essence, does not circumvent the potential for building a project that is toll viable.

The last one we just received was the City of Lubbock, and of course, we're just beginning to review that. We'll bring that to you hopefully in December. We're working with the City of Corpus Christi on their Spur 3, Ennis-Joslin Road to get some additional clarification to make sure we understand exactly what they're asking for.

A couple of projects that we have approved, of course, are projects where the locals are just financing a portion of a project. We did that for Comal County and we're also doing that for the City of Brenham. The City of Brenham project will come to you all for final approval next month.

All in all, we've moved forward. The program has been getting a pretty good foothold and gaining in popularity. We review the projects, we look at the projects from the nature of is it a short term, a long term or a mid term solution, is it a local project, is it a regional project, and then we determine that since the projects are being funded primarily from Commission Strategic Priority, we determine whether that project, one, qualifies for the use of that money that you all have for yourselves and you have determined that we'll use it for emergencies, for BRAC, for economic opportunity, and of course, you wanted to use it for pass-through tolling. So that is the first check we make. Then we determine as to when that project would be built by the department and at what cost, and that is our basis that we use to negotiate these contracts.

We will continue, and I'll be happy to answer any questions. Just a quick summary of where we're at.

MS. ANDRADE: Are we comfortable in stating that we're still open for business in pass-through tolls?

MR. SAENZ: Yes, ma'am.

MS. ANDRADE: Communities that are interested had better get their act together and start submitting applications.

MR. SAENZ: As we said, right now I've been using Commission Strategic Priority, we have about $240- to $250 million a year that we set aside in that category. Right now, at a maximum, I've encumbered about $80 million a year starting in about 2010, moving forward. If we wanted to encumber the whole thing, we could do an additional $160-.

MS. ANDRADE: Total?

MR. SAENZ: $160- more per year which would be between $1.6 billion to $3 billion program.

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Just a couple of things. I think the program in the early going was a bit misunderstood, and again, this is an educational moment, plus we need to sharpen our presentation for across the street. Prior to Governor Perry, how were Strategic Priority funds awarded?

MR. SAENZ: Prior to Governor Perry, what we would have is we would take all of the delegation requests that would come to the commission, they would come to you all, they would make their presentation. We would put those in a list, as well as other projects that the district had submitted. We used to ask the districts to submit to us. When Commissioner Nichols was on the board, he liked to have his top two projects, two $10 million projects, so he would ask the districts, and from that list you all would go through and select those projects on an annual basis.

We now are looking, since we've gone through and asked the locals to come up with their program, we've also allocated the resources to the MPOs, like Michael. For the next 30 years they now have a plan and a program, and sometimes now we'll use it to try to leverage some of their projects.

MR. WILLIAMSON: Would it be fair to say -- not putting words in your mouth, but would it be fair to say that prior to Governor Perry, the Strategic Priority funds were awarded on a subjective and some would even say political basis?

MR. SAENZ: I would say yes.

MR. WILLIAMSON: And have we established enough of a filter with our current approach that we have all but eliminated the subjective and political considerations?

MR. SAENZ: Yes, sir. As I mentioned, we look at it and we're basing it on our five goals and our indices that we put in place, we evaluate the projects to make sure they meet at least one or more of the goals, the more the better, so that we can make sure that the projects we bring forward are projects that, one, meet the criteria and also are accomplishing or meeting one of our goals that we're trying to develop.

MR. WILLIAMSON: And have we done a good job of educating our partners in the regional and local arenas that at least with regard to Governor Perry -- we can't speak for who might follow him -- it's real important to understand that the first test of a project is tax viability or toll viability. If this is a tax viable or toll viable project, we'll never even consider it for pass-through tolling.

MR. SAENZ: If it's a tax viable project, then that project probably should have been a priority of the region because we've allocated money to them, and they should, in essence, look at that because it needs it. If it's a toll viable project, what we want to make sure is that we do not give up an opportunity to be able to bring in another revenue source to fund that project so that we can save the meager resources that we have to do projects that are not as toll viable.

MR. WILLIAMSON: And unfortunately, because the source of cash for the pass-through toll program is the gas tax, we can't put the transit viable test to it because we can't, generally speaking, spend gas tax revenues on a transit project.

MR. SAENZ: We can spend some money for transit but it has a lot of caveats or requirements to do that.

MR. WILLIAMSON: And if it passed those tests, if it's not tax viable and it's not toll viable, then we can begin to ask the question will this, first of all, save a military base. That's our first priority. Our second priority is is this a unique economic opportunity, not economic development, but a unique economic opportunity, and what's the example we automatically think of in the back of our minds for a unique economic opportunity?

MR. SAENZ: Toyota coming to San Antonio.

MR. WILLIAMSON: Toyota coming to San Antonio. It's not Wal-Mart -- not that I don't like Wal-Mart, I love Wal-Mart, I shop at Wal-Mart, let me be on record as saying that I shop at Wal-Mart -- but we're not talking about expanding the local grocery store, we're talking about Toyota coming to San Antonio.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And then the third is a unique emergency and what would be an example for John Esparza to think about for a unique emergency in the state of Texas?

MR. SAENZ: Unique emergency could be a project that is on a hurricane evacuation route, one of the designated routes that maybe has a bottleneck, or a relief route that we can go around a community instead of going through a community, so we could do something like that.

MR. WILLIAMSON: And the whole theory behind the pass-through toll is if a local government can persuade its citizens that this project is worthy of encumbering your local tax base, and if a local government knows that the only way they're going to get reimbursed by the state is by the actual number of cars that use the project, then that must mean that it's a project that the market is ready to have built. Otherwise, county judges wouldn't encumber their tax base and risk the political ramifications of that, particularly if they weren't positive that there were enough cars or trucks or trains crossing the electronic light to get their reimbursement from the state.

MR. SAENZ: That's correct.

MR. WILLIAMSON: Other discussion, members?

MR. HOUGHTON: What you've done, Amadeo, or what everyone collectively has done is turn a $250 million program to an over $3 billion program, I mean, if we fully fund all these projects. So we've leveraged these dollars as we had on James's chart, instead of the political patronage that occurred years ago.

MR. SAENZ: That's correct.

MR. HOUGHTON: Thanks.

MR. WILLIAMSON: Any more?

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Thank you.

MR. SAENZ: Thank you.

MR. BEHRENS: We'll now go to agenda item 3d which is another report and this report pertains to our statewide public transportation coordination initiative, and this will be brought to us by Michael Morris from the Dallas-Fort Worth area.

MR. MORRIS: Thank you very much. Michael Morris from the Dallas-Fort Worth region, today representing the study group who brings forward to you this particular item.

Mr. Chairman, you talked earlier today about the importance of transit. Commissioner Houghton said it's important this time of year to reflect on what is important. This topic, and I think the one that preceded me clearly is important because this often involves people who either have mobility or not. Where a roadway system can save you 10 or 15 minutes with an improvement, there are lots of people in this state that without these particular programs, they would have no mobility at all.

If you have worked on, in the audience, this barriers and constraints report or on the 24 transit plans from across the state, would you please stand for the commissioners.

MR. WILLIAMSON: Heck, I thought those were all contractors here to see who got the money.

(General laughter.)

MS. ANDRADE: Mr. Chairman, would you join me in a round of applause for these folks.

MR. WILLIAMSON: Yes. Thank you.

MS. ANDRADE: Thank you.

(Applause.)

MR. MORRIS: Mr. Chairman, Commissioner Andrade has not missed a meeting in the last year of a study group, of a strategic meeting, of a critical conference call, or any of our meetings where all the 24 delegations from across the state have come to Austin to give status reports at critical times. This report would not be as far along and as polished if Commissioner Andrade had not taken a lot of her personal time over the last year. She asked for your particular support and she's delivered it.

Let me give you some definitions, barriers, constraints and opportunities. When you hear us use the term barrier, this is where we need your particular help. It could be your muscle, it could be a change in the administrative code, it could be your communication to our congressional delegation on federal legislation, or your help with regard to your legislative program next month for what we need across the state.

We have inventoried several hundred barriers and constraints with regard to transit operations, a handful or so fall into the category where we need your assistance. Eighty percent of the items that were inventoried are what we call constraints, and these are constraints where we do not need policy or legislative change, we just need communication and planning and innovation within each of our urban regions to deliver projects.

I'm not going to focus a lot on the solutions today because this is a status report, but we have lots of new opportunities. It is a very blue sky today with regard to how we can take a barrier or a constraint, leverage it in a policy program, and create a new Texas with regard to these particular initiatives.

These opportunities are actually the drivers that create the change, and you're going to hear about one particular policy that you have on alternative fuel vehicles. It's a barrier, so we're coming to you for some aid. It's a tremendous opportunity to adjust that particular policy and get your air quality benefits through a whole host of other initiatives that can be leveraged in that particular situation.

Overview of the presentation. We're going to cover four topics quickly. I want to give a quick background since the last time I was here and what we did over the last 14 months. Several areas have already jumped out. The plans aren't even due till next month. We had an early deliverable of barriers and constraints so we could get on your legislative agenda. Several regions have already implemented solutions to their problems, and you'll get a quick status report on that today.

After you hear their successes, I'm going to inventory the barriers and emphasis areas. This is a short list on which we're seeking your assistance. Again, most of these are constraints I'm not inventorying. Those are the things through technology transfer we're helping each other back within our region. This could be your muscle, this could be a policy change, this could be a state initiative or a federal initiative. We'll work those out with you over the coming weeks in the case of your legislative program, months if it's an administrative change. And then we have some draft recommendations in the next step so you understand where our study group is going and what we're looking at.

Quickly as background, you know the state legislature put in 3588 the initiative for the statewide coordination of public transportation. It is to coordinate all public sector users and private sector users who use public sector funds. So the legislature, in their wisdom, has put everyone in the same tent to coordinate services with regard to transit delivery in the whole state. It's to eliminate waste and duplication, increase efficiencies, and further the state's effort with regard to reducing air pollution.

One thing that is important to keep in mind -- and my experience is from a certain perspective and others in this room have a different perspective, and this is like taking Methodists and Catholics and the Jewish community and others and put them in a room to get along -- it is amazing the short time it has taken us to accomplish this. But those of us with a transportation experience focus on systems, we're trying to develop seamless delivery of systems. You talk about the seamless goods movement or just in time delivery, you talk about seamless delivery of transit, you talk about not having toll plazas on toll roads to create seamless transmission of revenue streams. Transportation is the goal, there are no faces on it because there are markets that are known, you don't know the individual face.

Client-based transportation which you now have authority to manage, both in Health and Human Services and in workforce development boards, have a completely different, and by the way, appropriate focus, and they're dealing with an individual who needs assistance and being retrained so his family can get jobs and daycare assistance while that occurs, or someone in the Health and Human Services community who is seeking dialysis treatment or cancer treatment or something else. The transportation efficiency is a much secondary impact to that particular face as they try to get that family to a more sustainable situation.

Now that the legislature has placed these three non-traditional disciplines under your authority, traditional transportation which you're used to managing, Health and Human Services, and workforce development which is client-based, this is what creates the new, frankly, opportunities and excitement in Texas with regard to how we can accomplish this, and you'll see some early successes of this.

I think it important to talk about sort of where we've been. In 14 months, 24 regions across the state have developed transit plans which will be sent to you next month. We have had three major products: one, early implementation of actual integration and seamlessness of this particular initiative of which you'll hear early success stories; two, the barriers and constraints report which I'm going to give you a summary of today, barriers, we need your assistance, constraints, we've got lots of work to do in each of our regions to help each other; and third is the operating plans that will come in next month as part of this process.

So as a result of that, coordination is focused on lots of things: people from different agencies working together, all focused on the customer, again throwing their name badge away, not standing up and saying I've been doing this for 18 years, I want to continue to get the money, how can I be part of a team to deliver what the service is in this particular 16-county region or rural transit district, or whatever it may be. How we all can be held more accountable in this particular process -- accountability is a good thing in government. How we can share responsibilities and share resources and become more partners instead of adversaries in each of our particular communities.

We think it's critical to demonstrate to you how we can leverage scarce resources before we knock on your door and say this is just simply an issue of more money because, frankly, I don't think you should give away very much more money until you see some of these constraints resolved in particular communities and maybe think about a pilot program -- which I'll talk about -- rewarding those communities who have resolved those particular constraints.

We have a huge opportunity to include the private sector in the delivery of these particular services, and of course, we have an opportunity to support the five laminated goals that the Texas Transportation Commission has on every agenda item.

I thought it nice, in the men's room, by the way, the paper towels now have the five goals. I'm kidding.

(General laughter.)

MR. MORRIS: I want to move into the second part of the presentation which is some early success stories. Before they come up, I'm going to introduce them all as they come up and talk about this. You asked us 14 months ago to develop plans and here are communities that have already developed solutions as part of the plans before the plans were even complete.

Rob Stephens will come up from Concho Valley and talk about how they took a huge risk which he's our shining star in coordinating and consolidating services in their part of the state.

We have Sarah Hidalgo-Cook who is our champion in an area that has to provide very long distance services. It's going to shock you how far some of the citizens have to go to get medical treatment and how they've developed a logistics plan of coordinating these services over long distances from southwest Texas.

And then Kari Hackett will talk about the innovations that Harris County is doing with regard to areas that have no service at all, their County Rides program, and how maybe purchasing things.

You're going to start seeing a glimmer of an exciting Texas that's going to have hundreds of these types of things in the next year.

So let me turn the podium over to my colleagues. Rob, why don't you come up first, and then when Rob gives his quick presentation, Sarah, and then Kari.

MR. STEPHENS: Good morning. I like the analogy about the bright shining star, but I'm a little afraid of that because sometimes those are big balls of fire that plummet the earth and explode in a big meteor. So thank you for that, Michael.

Good morning. My name is Rob Stephens with Concho Valley Council of Governments and representing the Concho Valley Transit District. I want to explain to you a little bit about what we've been doing.

Beginning in 2002 we began some multimodal terminal planning in our region, and evolving from those discussions, the City of San Angelo -- which is a major urban hub in our area -- and the rest of our counties began working and talking together about ways to work together that we've never explored before. We had shared experiences and some challenges and for the most part we worked independently, not working to solve our problems together but just working independently.

Collectively we understood that our urban and rural transit system coordinate to achieve greater efficiencies, to compete for the federal and state funding and to be more effective in service delivery, but how was that coordination going to look. So our challenges were numerous. Our goal was simply how do we provide effective services in an always expanding, demanding market, and giving our very best effort with limited resources in a competitive environment.

From a state and federal perspective we found incentives and tools to do more with what we already had. The regional service plan initiative and the forum for coordination discussion it provided was one of those unique opportunities. At the local level we did find some courage to pursue coordination opportunities that we had not previously considered, and in our efforts we found support from the district office, from the division, and from the commission, and we thank you for that.

What we found to be a solution for our shared challenge in our region was to consolidate -- I should say consolidating. Although we did it September 1, we're still going through some growing pains. Both our rural and our small urban system merged and what we got by merging the systems met some coordination goals. It increased total funding available for our public transportation system in our region, did this by integrating these two distinct and separate funding sources under one umbrella, under one agency, allowing for some flexibility, improving the leverage of local share by maximizing our federal funds with total available local funds in our region.

Our systems were financially structured to be complementary. Our urban system was heavily funded on the federal side, our rural system was a lot of state and local funding, so putting those together complemented very well being able to leverage local funds for the federal share.

Improvement in operational efficiency, dispatch, reservations, eligibility and scheduling became very easy and with mixed-use vehicles it became a simplified process being under one agency and under one umbrella. We also enjoyed leveraging personnel and decreased overhead cost, once again, by bringing these together, eliminating some duplicate functions and some positions and sharing some professional expertise within the systems.

In the end, what we achieved was more service options for both rural and urban systems, and by blending these services providing these separate demand response systems and ultimately feeding our fixed route system in our urban area and being able to work in ways together we had never really been able to do before.

So we thank you for that support and we respectfully ask that you continue your support, and thank you, thank you very much.

MS. ANDRADE: Thank you.

MS. HIDALGO-COOK: Good morning. I'm glad that I can be up here and talk about successes. At the time when we began this process, it was mainly out of survival of two rural transit districts in our region, an inner-city bus carrier, and a community action agency. Basically our coordination was based on rising insurance costs, decreased funding, and basically a stagnant economy in our area where three of our counties are in the top 10 percent of the poorest counties in the United States.

It was a need to consolidate long distance trips. Most of our drivers are on the road as early as 2:30 or 3:00 in the morning, trying to get passengers to dialysis, doctors appointments, work and other basically lifesaving medical appointments. At the time before we began our coordination, it took a dialysis patient up to 12 hours to leave their home, go to dialysis and travel back home on one mode. Now our dialysis patients can use up to three or four modes and get home in seven to eight hours. So basically their wait time has been cut down from five hours to one hour.

An example would be Mr. Perez who, through the City of Del Rio Rural Transportation District, is provided services to Uvalde Dialysis, and from Uvalde Dialysis, Southwest Transit picks him up, takes him back to Kerrville Coach USA bus depot, they take him back to the City of Del Rio, and the City of Del Rio takes him back home. Versus in the past he would ride City of Del Rio, City of Uvalde for six or seven hours till City of Del Rio came back through from San Antonio to take him home. This is just an example.

We have different types of clientele that ride our vehicles, not just within our own rural transit district but from transit district to transit district, from veterans groups to medical transportation clientele, rural public transportation, elderly and disabled, MHMR and workforce, and they all ride one mode to somewhere, can come back home on three or four different modes, but they're back home within a short time frame versus being on the road constantly.

For us in our area, this led to other coordinating efforts, training, use of property, equipment, use of people. It's kind of opened the door for us as far as being able to coordinate in other genres of transportation. And basically that's what it's about, it's getting people where they have to go, getting them back home in a short length of time, it's seamless, they have no idea what the paperwork is, all that is taken care of behind the scenes, and they're happy. And basically that's it, in order to fully coordinate you've got to share people, money and property. And that's my spiel.

MR. WILLIAMSON: It's a great story.

MS. ANDRADE: Thank you. Sarah, I have to tell you that this morning you're not short. All of us involved in public transportation are standing very tall this morning.

MS. HIDALGO-COOK: Thank you. I'll remember that.

(Applause.)

MR. HACKETT: I'm a little taller. Good morning. My name is Kari Hackett. I'm a transportation program manager with the Houston-Galveston Area Council. I'm also one of the new members to the Public Transportation Advisory Committee.

This morning my remarks are going to focus on three activities that are underway in our region, the Gulf Coast planning region. First I'll talk about the Harris County Rides program, second, a coordinated training effort that has started as a result of the process that we're involved in right now, and third is an emerging opportunity related to a cooperative purchasing program that's sponsored through the Houston-Galveston Area Council.

I also want to bring to your attention what I consider to be a challenge in terms of the process that we're involved in and what it means to some of the people that are being impacted by not only what we're doing but the potential benefits of what we're doing.

A few years ago Ivory Soap used to have a commercial, 99.44 percent pure. Now, mathematically that's real close to 100 percent. A few years ago someone mentioned that in regards to public transportation in Texas we ought to have a goal that 100 percent of the trip requests get met, and when I heard that notion at first I thought well, that's impossible, I mean, we can't possibly serve 100 percent of the trip demands that are out there. But in terms of a goal, in terms of something that we can stretch towards and try to achieve over a longer period of time, I think it's important to at least think about it, and I'll provide a real-time kind of personal example of that in my closing remarks.

The Harris County Rides program was developed over a period of years. It started with a planning effort that looked at some of the best practices nationwide that tried to focus on the customer perspective, what would make this type of service more feasible, more convenient to the customer. And so it includes options, they can call a cab company or a transportation provider within the county. And keep in mind this is primarily in the part of Harris County that's not covered by Metro by the Metropolitan Transit Authority, and so they don't have fixed route bus services available.

But it's important that, again, the customer has various options which would minimize their wait time, and that's fine in an urban area where you have these choices available, but in many of our rural counties they don't have those choices, there might not even be a cab company in town that they can utilize. And so in some of our more rural areas, different strategies are going to be needed.

One of the emerging opportunities that came about by some of the meetings that we were having in this coordination process was that some folks were sitting around the table and they were talking about the need for training in passenger assistance for the drivers that are taking these people from where they are to where they need to get to, and it just so happened that one of the members of our committee representing Brazos Transit said, We have a trainer on staff and we could basically make that trainer available to other transportation providers to utilize at a much lower cost so that a larger group of people could participate in those classes and receive that necessary training, again, to improve the services that are available to the customers.

So as a result of that conversation, the folks sitting around the table got together, they made it happen, and it's going to be expanding in the future.

The third item I want to talk about is related to the H-GAC buy program, and that's a cooperative purchasing program that's been in existence for a few years. It's set up as an enterprise fund and they've actually been purchasing transit vehicles for a number of years, about seven years -- which I wasn't aware of and I work there. The point that I'm trying to make, though, is that a lot of times things are happening, and Michael mentioned the importance of communication within the buildings, within the departments, interagency communication is very important.

They ran into an obstacle, and right now I'm not sure if it's a barrier or a constraint and we can talk about it more. Capital Metro is one of the organizations that has actually purchased vehicles through this cooperative purchasing program and they're starting to get calls from other entities outside of Texas that have seen how this structure is working and they're interested in participating in it, however, Federal Transit Administration has a requirement related to the procurement process that makes it difficult and challenging to work with this type of program the way it's set up. So that's one of the opportunities I think that's out there that we're going to be pursuing to try to implement solutions to that potential barrier.

The last thing I wanted to bring to your attention is what to me is a real-time, real life example of some of the frustration that some of our customers are facing. It just so happens that some relatives of a person who lives in one of our rural counties got my contact information, so it's personal, off of our internet and contacted me directly by e-mail, explaining that one of their relatives, a niece, was in a situation where she was stuck, she's unemployed, she's physically challenged, she may be mentally challenged as well, but the result is that there are service providers in this particular county that can take this person from where they are to where they need to go, however, in her attempts to utilize those services and to find out exactly who she needs to talk to and with me trying to help her and I'm on the inside, I referred her to three or four different organizations so far and we're still working on it.

But I'm just bringing it to your attention because many of us have parents that are still alive or we have an elderly person in our family or somebody that we know that is in a similar situation where they're stuck, and I think that if we adopt this goal of trying to make sure that nobody is stuck, at least in the state of Texas, within the sphere of control that we have -- in other words, if we can do what we can to try to improve the situation, I think over time it will make a difference. So again, the objective would be that no person is left behind.

Thank you for your time.

MR. WILLIAMSON: Thank you, sir.

MS. ANDRADE: Thank you very much.

MR. MORRIS: We didn't have time for all of the folks to give their presentations but there are compelling stories from other of our colleagues with regard to success stories. So you can see that the planning process is ahead of schedule with the implementation already of some of these particular elements.

Let me shift into the third part of my presentation, the barriers and emphasis areas. We've inventoried hundreds of items from 24 regions. They have been evaluated, a half a dozen or so fall into places where we need your help, most of them fall into our own areas. What I want to do is just flag for you at 30,000 feet where the areas are where we need some assistance. I'm going to cover this very quickly and then ask Carole Warlick to come up from Central Texas.

You have a policy, a very well-intended policy with regard to alternative fuel vehicles, what goes in the engine. Similarly, the Dallas-Fort Worth region used to have a policy like that until hybrids and hydrogen vehicles and other things were invented, and we changed our policy from what goes into the engine to what comes out of the engine, and I think there's going to need to be some adjustment or opportunity of how you could adjust that policy in exchange for air quality benefits, other elements that could be accomplished.

So Carole Warlick, would you come up and highlight for us from Central Texas some real life face on this particular issue.

MS. WARLICK: Thank you. Good morning. My name is Carole Warlick. I'm general manager of Hill Country Transit District located in San Saba, Killeen and Temple area.

I would really rather have talked about successes but I suppose someone needs to present some of the things that the transit providers across the state have identified as issues regarding alternative fuels.

Let me first state we really are firmly committed to good air quality, protecting our environment and doing those things that are good for our state, but we also believe that there are, as Michael stated, some unintended consequences of some of the policies that are in place and that maybe we could revisit those and modify some of them so that we still protect our air quality and our environment but we alleviate some of the inefficiencies and problems that it's creating for transit providers.

Some of the problems that have been encountered statewide include the following -- and you'll note that many of these are in the rural areas of the state where we have limited access to alternative fuels. Some of those problems are cost of vehicles. It costs about $10,000 more to purchase a propane vehicle due to the weight by the added fuel tanks and the cost of shipping and so forth. It has greatly affected operating costs. Propane buses are averaging about four miles per gallon so that's not been good during these high fuel prices.

Cost of maintenance and failure of critical components. Components are often not readily available, and the critical component which has been the compu-valve runs about $2,500 apiece and many of those have had to be replaced.

Mechanics, they require specialized mechanics that are often not available in our rural areas. Sometimes the failure of the vendor to stand behind their product and to assist in identifying the reason for the mechanical failure has been an issue.

Quality and availability of fuel. Quality varies widely in our rural areas, some of it is farm grade, some of it is commercial motor grade. We don't have any way to control that and often don't know which grade is being placed in the vehicles.

MR. WILLIAMSON: Are you saying the farmers get a better grade than the truck drivers?

MS. WARLICK: It's really been an issue that many of our rural areas have farm grade available only, I think.

MR. WILLIAMSON: Oh, so the farm grade is less quality than the commercial.

MS. WARLICK: Farm grade is less quality than the commercial motor vehicle grade, and often that's all that's available.

MR. WILLIAMSON: Do you reckon they pay taxes on that?

(General laughter.)

MS. WARLICK: Limited fuel range. This is especially important on our long distance medical transportation trips where refueling is often required. It makes the vehicles less suitable for emergency evacuations and hurricane situations and so forth.

Service interruptions, lack of skilled mechanics, trying to identify problems, and waiting on parts has created major downtime for many systems and created hardships in adjusting resources and scheduling trips due to lack of vehicles.

Passenger safety and comfort. The law requires that no passengers may be onboard while fueling a propane vehicle, and on a recent Medicaid trip in our area, the dialysis center that they were going to in Round Rock, the roof collapsed due to a rainstorm and there were issues with that, so they had to reroute their trip and the passengers had to be unloaded during the rainstorm and while the vehicle was being fueled, so this created some real problems and concerns for our passengers.

Regarding ULSD, it isn't available in our rural areas and there is limited availability in the small urban areas, so it requires purchase and installation of our own fuel tanks which, of course, is very expensive, and sometimes there are problems associated with fuel delivery. Access to alternative fuels in the remote areas of the state, as I said earlier, is very limited.

So in summary, we recognize that many of the issues mentioned do occur in the more rural areas of the state but that's also the systems that have the tightest budgets, the least technologically advanced staff, lack of technology and infrastructure. So we suggest that one size doesn't necessarily fit all. A good policy for air quality in urban non-attainment areas may not be the policy that should be in place in the rural attainment areas, so therefore, we feel flexibility is very important in looking at this issue.

I appreciate your time and your consideration of these issues. Thank you.

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Thank you.

MR. MORRIS: I think, commission, it gives you an opportunity to say okay, you can solve the air quality objective through technology or changing the operating plan or other strategies and look forward to working out with you those options. What you do in the Dallas-Fort Worth non-attainment area may be very different than what you do in rural Texas, and I think there's a way to maintain your air quality objective with other ways to accomplish that.

Some other barriers and constraints, one is with regard to you have an industry -- and you're all familiar with private sector business -- that has under-capitalized its infrastructure and has all the classic situation, especially in rural Texas, where we have vehicles that are on 250,000 miles, way past their design life, breaking down all the time, where you should be investing the capitalization of new vehicles, you're now in breakdown, unreliability, customer service, operating costs.

It is a huge problem. It is one that I think we should tackle together, meaning your urban regions where MPOs have STPMM and CMAQ funds that can flex to this problem. Where you have more limited dollars, I think there's an opportunity to create a funding partnership where the urban areas stretch out into their areas to help fund, you take your limited dollars, put them in the more rural areas. I think one major breakthrough, we've got to get on the other side of this capitalization curve very quickly or more customers in Texas are going to be stranded with regard to it.

So this is one that's probably a funding partnership, I'd put it into that category, it's not legislative, and I think you can look forward to your transit division coming forward with some recommendations shortly.

Lack of coordination with other agencies, I think this is where a little of your muscle may help. There are some legislative issues that we think will pop up on your list in December. I remember at the time Chairman Johnson held a joint meeting with the Railroad Commission and you held that joint meeting to try to get into the goods movement issue which I think later on created all the goods movement breakthroughs you've had in the last four years. I'm not suggesting that you necessarily have to escalate it to a joint meeting of the HHS commission and you, but there's been activities going on for ten years at the staff level with no breakthrough, and we will be seeking some ability for you to use your influence with Health and Human Services to come to the table, do better accounting with regard to the money that they are putting into transportation so we can see where we can leverage assets and work together on the medical elements.

These are organizations that have their own fleet of vehicles and could be integrated better in the coordination. Commissioner Andrade, I think, has put some pressure on them to participate and things have improved. One of our recommendations is we still have a barrier and we may need some additional assistance. There's restrictions in the Health and Human Services area that I think need to be overcome probably through legislation, some of that may be in the state, some of that may have to be in Washington and we may need to be more patient.

We have jurisdictional boundaries. A lot of this I think is through administrative rule, maybe some legislation. We probably need to adopt a serve it or lose it notion. What often happens both in metropolitan regions and in rural regions, for a whole host of unintended consequences, is transit services are only provided in a portion of that jurisdiction's boundary. In the case of a rural area, 16 or 20 counties, we have funds to provide service, County X doesn't have local match, County Y does, so the services are provided in the county that has the local match. Even though there's federal funds allocated for service in that other county, they don't get service.

Well, we've got to break through those particular barriers so service is provided equitably through those service areas, and you'll see some potential legislative direction with regard to that.

Final two barriers, state and local funding. We will probably be coming towards you with the notion of toll credits, this may be a way to get at this local match problem. Maybe you could preserve a portion, call it a program, a transit program where you preserve a portion of toll credits. I think we have to work with your attorneys with regard to I think your legislation is you fund a project, but we may have hundreds of projects that are using these toll credits so you may want to reserve some until we bring those projects forward. But a little bit of toll credits, especially in the rural areas, will do wonderful things with regard to the coordination of services and introduce service in counties that some of the counties previously have not put local match into them.

You will see the sales tax notion. Dallas-Fort Worth, I was in Longview yesterday, I'm here today, there's a lot of rural areas. We originally thought there wouldn't be interest in rural areas with regard to raising potential sales tax for transit. What the barriers and constraints report is, there's such a crisis with regard to funding transit in small urban and rural areas, you may see more and more of those areas talking to their legislative delegation to look for potential sales tax to help fund transportation above the flexibility we're going to have in urban regions of flexing toll road revenues to those purposes. Most areas of the state, 90 percent of the state don't have that flexibility of flexing funds because they don't have the toll road revenues or the CDAs to start that particular effort.

And then federal funding restrictions, Mr. Bass, I think on the roadway side highlighted that those similar cash flow elements exist on the transit side with regard to the instability of their funds, things like you can only use these funds for capital purchases but you can't use these funds for operating purposes. There's a little bit of micro-management that occurs at the federal level that should be more tested by the outcome, not necessarily the input to the particular process.

Let me conclude, Mr. Chairman, with some draft recommendations. We ask that you do re-examine TxDOT's alternative fuel policy, and our committee is willing to work with your staff on options that we think could address this. I look at this as a terrific opportunity to leverage your flexibility to accomplish other coordination activities that we're seeking.

I think we need to provide incentives for public-private partnerships so there's a greater role in the private sector, and I don't even think we've scratched the surface with regard to what role the private sector could do. For example, when you go to a Super Bowl game, the cost of transportation is folded into the cost of that particular ticket. There's no reason why we can't work with our medical community to include the cost of transportation in the service delivery of those particular elements. These are elements we just haven't thought of yet and these are customers that we haven't yet engaged in that particular service. I think the rural areas have engaged them more than urban regions. We think we should publish our fixed transit routes better so the private sector who is locating services may actually locate the medical services on the routes that have transit, be it a rail route or a rural transit route. I think there's lots of things that can be done there.

I think there is opportunity for project funding. Again, I think you're going to see your Transit Division come back with some new innovative ideas in response to these particular plans. I think the urban regions stand ready to partner with you in some new innovative way to create seamless public transit delivery across the whole state.

I think you're going to see more pilots. I think the best way to create change is often to introduce it with a carrot and say we'd be interested in funding a certain element. You saw three examples of presentations today that didn't need a carrot so you don't always need a carrot for a pilot, but why aren't we using centralized maintenance; why do we have to paint all of our vehicles differently; why can't we maybe use H-GAC's purchasing program; why don't we find three or four standard vehicles and colors and be able to purchase them across the state and then share those vehicles over time in some mutual partnership way. There's dozens of strategies that can be developed to accomplish that. We will try to get into your legislative package two or three of these for your next month's agenda.

My last graph, I think it's up to both of us to continue increasing communication. As I say, most of the issues we face are constraints within each of our regions. We have met together a few times to learn from each other and borrow those ideas across the whole state. We do need to provide additional funding for planning efforts. First of all, thank you for the funds you've put into the plans that have been developed. We think you should cut that funding back maybe 50 percent to start weaning yourself off of that and put more of that continued planning on the backs of regions to continue to be innovative and do that.

And you probably should preserve some of your money for pilots so you can have little areas of the state do specialized things in the planning area. You don't always have to solve these problems with projects, you can develop programs or policies to do that, and I think over the coming year you'll see innovative leveraging things.

Dallas-Fort Worth, you like CDAs and you like the flexibility. Well, we'd like you to partner with some of your CMAQ funds and help us with this critical transit vehicle problem in your nine counties. Wouldn't you like to be a partner for something like that? It's that type of nudging that I think the state needs to get into where previously the best model was hey don't alienate the local regions too much, let's be customers of theirs. Well, at some point when these plans are developed and you create new good government principles, the state needs to be more of a nudger with regard to those particular initiatives. You certainly have done it on the roadway toll road side; there's an opportunity I think you can help us on the transit side across the state as well.

As a result of that, we indicated to Commissioner Andrade -- she has assigned us responsibilities on the study group -- we think we should stay on for another two years; we should make her available to the legislature for testimony during the session; we should make our committee available to the staff if they wish to engage in policies or programs that come before you; we think we should continue to work on the technology transfer of ideas and initiatives in one part of the state that can maybe work in another part; we could work on common purchasing of vehicles, common purchasing of scheduling software, common principles that can help us with advance notification in Health and Human Services, and the like.

So we think this is what I guess I would call a mid report. The first barriers and constraints are in, we're working on those particular elements. Two or three of them may make it into your legislative program, two or three of them may make it into your policy program.

The plans will be in next month that will begin or continue the implementation of early delivery of services within the state. We think we should then be available to help you through the legislative session, if you request it, continue the technology transfer. Your division will be coming forward with the implementation of projects and programs and incentives. We can continue to communicate those or back the state up as they go through the nudging process and stand ready to prepare you for the legislative session after this if, in fact, there are any remaining issues at that particular point in time.

So Commissioner Andrade, this is our particular report, and members of the commission, we'll be happy to take any questions if there are any.

MR. WILLIAMSON: Members, we have one witness. Do you wish to dialogue with Michael at this time?

MR. HOUGHTON: I'd just like to thank Michael. Once again, stellar, stellar presentation. Outstanding.

MR. MORRIS: Appreciate the opportunity.

MS. ANDRADE: I'll wait until we hear from the witness.

MR. WILLIAMSON: I agree, Michael, you're remarkable. We appreciate your contribution.

MR. MORRIS: There's a whole army behind us that did all the work, so they should be given the credit.

MR. WILLIAMSON: The thing I like about the report, the interim progress update and what I know will be the final report, is it's focused on identifiable outcomes, these are things we can do. And your comment about the toilet paper and the goals will be repeated throughout the state. But one of the things that struck me when I first came on --

MR. MORRIS: I think I said paper towels.

MR. WILLIAMSON: Sorry. Paper towels.

MR. MORRIS: If the story is going to be repeated, I'd like it to be closer to paper towels.

(General laughter.)

MR. WILLIAMSON: It is important for an organization to have common goals, everybody kind of knows what they're supposed to be working towards. Clearly, the important outcomes to the representative group can be better reached if everybody kind of understands where they want to end up.

MR. MORRIS: And I think, Mr. Chairman, more people that come to these task forces are receiving more than they're giving. It's really nice to belong to a group of people, both in the study group and in the extended group of 24 regions, where we're coming together to help the whole state. So someone will raise a particular question and someone will offer a solution from some other part of the state. This issue has been such a longstanding issue, we need to spend lots of time with each other to get those early success stories out.

So yes, you may think it's a lot of sacrifice on the part of the people that are here, but we're bringing back ideas to our region and sharing and facilitating a one Texas mentality that I think has dividends not just in what we're doing but in lots of things in transportation and lots of things outside of transportation are outcomes of procedures like this.

And you did it in the TMMP model, both for urban regions and now small urban regions, you've done it in the transit model, this may be a model that can be used to continue that education, communication, dialogue, especially in areas like this that need such radical change in the old way of doing business.

MR. WILLIAMSON: I agree. Well, Commissioner Andrade will reserve her comments. Glenn Gadbois.

MR. GADBOIS: Glenn Gadbois, Just Transportation Alliances. And I just want to take a minute or two not to distract at all from Michael's presentation, but I guess to make sure that a couple of things are done here.

When we first talked about this, Chairman, you weren't chairman. I guess late in 2002 when you raised this idea of coordinating public transportation, I immediately thought it was a terrible idea but agreed to trust you that, in fact, this department could do this. I'm here, I guess first, to admit I was absolutely wrong -- right in trusting you, wrong on my initial assessment -- and to thank some of the people who have helped make this happen along the way.

The first thing I want to do is specifically around this coordination, Commissioner Andrade has been an absolute hero in helping to make sure people stayed focused, kept their eye on the prize, traveled around this state doing this, and when problems needed to be solved, either she or Shawna were absolutely amazing in making sure that people kept on task and focused on what needed to be done. And I hope this entire room, a large number of whom have been working on this, take a moment or two at the end of this presentation to give applause to both of those.

The other thing she did that was absolutely amazing is put probably the one person who is uniquely qualified to lead this in charge of leading this. Michael Morris is so uniquely qualified for a number of different reasons: sentiment, expertise, ability to articulate, keep on track, so many different reasons that Michael also deserves a great amount of appreciation.

And then lastly, some of the objections that I noted along the way, this department wasn't really prepared, had no staff talent, expertise, anything to do this project, there wasn't any money, a number of objections like that, have been taken care of along the way, and this commission has led that charge, and I want to make sure that this commission gets appropriately recognized for that.

All of the new leverage money that James Bass pointed out and you talked about, all of that you have made sure is not constrained by the old tax constraints, that it needs to go for road construction, maintenance or enforcement only, it can be used for any mobility option, public transportation and rail being a couple of those. And that has largely been because you all have articulated the importance of doing that, you all and the governor have articulated to the legislature how important it was to make sure that we're moving people and goods, not vehicles. And so I hugely appreciate that as well and just wanted to make sure that all of that was wrapped into this one occasion. Thank you.

MR. WILLIAMSON: That was nice of you, Glenn. Anything for Glenn?

MS. ANDRADE: Thank you, Glenn, thank you very much.

MR. WILLIAMSON: Thank you, Glenn. I think the commissioner has questions.

MS. ANDRADE: Not questions but just compliments. Michael, we couldn't have done this without you. I sit here and I'm just so proud. I guess I'm like a proud mother that just is gleaming from ear to ear. But I also want to thank Chairman Williamson and Commissioner Houghton for supporting this effort. We couldn't have done it without their support.

I have to share with you, Chairman Williamson, that the energy, the passion, the commitment that I personally witnessed at these meetings was incredible, and we're so fortunate to have such a great group of people that care so much for public transportation in the state of Texas, and I want to thank you for two years, almost two years of hard work and commitment and for believing that we could get through this process.

But I want to assure you that our work is not done, in fact, it's only begun, and we're committed to these constraints and barriers that have been brought up, we're going to turn them into opportunities, and the fact that we all could gather in a room and talk and share and learn has been incredible. So for that I thank you.

Please don't give up, we have to continue. Look at what we've accomplished just by thinking differently, and that's what we've done. So thank you so much.

I also want to give a special thanks to Shawna. I couldn't travel to every meeting, so thank you so much for being there and representing us.

And to Eric, I hope that we've gotten the message that coordination is the future, that funding is going to be based on this coordination effort, so perhaps at some point in the future, Eric, we can bring this up as a discussion item.

And we'll keep working together, Michael, to make this happen. And let's not forget the most important, and that is to keep the public involved. We don't want them stuck, not in this state. So again, thank you for everything.

MR. MORRIS: Commissioner, thank you.

(Applause.)

MR. WILLIAMSON: Hope, is there any direction you wish me to give staff at this point, or do I need to wait for a while?

MS. ANDRADE: Well, I think the three things that we do need to revisit, things that are simple that we can immediately get started on is revisiting this alternative fuel. I think that's something that we could immediately help. I'm excited about the pilot programs. I think that if we commit to some funding for pilot programs, it forces everybody to start thinking. Everyone is going to want to come in and say I've got a good pilot program that could set the example for the rest of the state. And just assuring that we will continue to have some planning funds so that we can continue our meetings.

But I believe those are simple things, Mr. Chairman, that we could at least have the study group understand that this acknowledges that we're committed for all the hard work that they've done.

MR. WILLIAMSON: And will the action that we need to take on those items occur through recommendations from Eric and we'll wait to receive his recommendations?

You know, John Johnson, back in the old days when Strategic Priority money was awarded by the commission directly, he was fond of telling the presenters we never make a decision on the day you come here and we appreciate you -- you remember that. And we try to maintain or adhere to the principle that you shouldn't make decisions quickly, you should think about what you're doing, but we also have found that it's not a bad thing to give the constituency that we serve some ideas of where our thinking is.

And I think it's fair to say that the governor is very focused on looking at transportation as a system and not, as Glenn said, a vehicle or a road. And this commission is interested in reflecting the governor's vision and your recommendations are always well received here. I expect your participants will be well satisfied with their effort.

MR. MORRIS: And Mr. Chairman, if I could, and to Commissioner Andrade, I think our first duty would be to work with your staff to see if there's two or three legislative items that affect the legislature so we could get those words into your legislative program that I believe you're endorsing next month to make sure that it's a seamless legislative program and not that transit is hanging along in some other supplemental document, and we pledge to work with the commissioner and your staff. I don't think there's lots of them, I think there's two or three good government principles that we would like to add to the list, and we'll work those through with your staff in the next 30 days.

MR. WILLIAMSON: Well, thank you for your work, and through you thank all of you who participated in your work.

And Hope, I spend a lot of time thanking you but you're just doing your job.

MS. ANDRADE: That's right. It's them that did the work for us. Thank you.

MR. WILLIAMSON: So we appreciate it very much.

MR. MORRIS: Thank you.

MR. WILLIAMSON: Proceed.

MR. BEHRENS: Agenda item number 3, again we have our last report under 3e and this will be a report from the Texas Transit Association, and I'll ask Eric Gleason to introduce that report.

MR. GLEASON: Good morning. That's a hard act to follow. I'll have to remember that, the next time we put the agenda together, to come before Michael Morris.

My name is Eric Gleason, TxDOT director of Public Transportation, and this is kind of a transit day for us here, but the Texas Transit Association is here today to provide you with an overview of the status of public transportation and issues concerning public transportation before the upcoming legislative session.

But before I introduce the speakers, I think it's important to reflect on the many decisions that the commission has made over the past year supporting public transportation. Over $71 million has been awarded for a variety of purposes and programs in support of the commission's five goals. In June, new rules governing the distribution of state and federal funds in support of public transportation were adopted, significantly increasing baseline distributions to non-urban systems and placing an increased emphasis on performance in the years to come. Rules guiding two new SAFETEA-LU programs, JARC and New Freedom, are in place and RFPs will be issued in the near future for projects consistent with the commission's goals and program objectives.

And finally, as you've just heard, through Commissioner Andrade and her work, you're actively engaged in shaping the future through the regional service coordination planning process, some of the results of which you've just heard. And I do have to say, for a lot of the folks in this room, coordination is not a new thing, it's just a matter of doing good business, and the people who will speak to you today are people that have been in the business for a long time and they have a lot to offer, and it is just good sound business decision to do this kind of thing.

The state delivers over 275 million products a year in public transportation -- that's the number of trips people take on our programs -- and by any measure in any business, that's a huge number of products to produce and there's a lot of thought that goes into it. So I think these folks, it's a lot better for you to hear from them than from someone like me. They're the ones actually doing the work.

You will hear from two speakers today. The first will be Fort Bend County Commissioner James Patterson. Commissioner Patterson is a former educator and high school principal; he's just finished his second term as county commissioner and was re-elected unopposed on November 7. Fort Bend County has gone from having no public transportation four years ago to a system of shared-ride, demand-response services providing trips within Fort Bend County and trips to the Houston Medical Center, and commuter service is providing connections into Houston, carrying over 42,000 riders last year. Commissioner Patterson is also the vice chairman of the Transportation Policy Council at the Houston-Galveston Council of Governments.

The second speaker today will be someone to whom you need no introduction, Mr. Ben Herr, the executive director of the Texas Transit Association.

And with that, I will turn it over to Commissioner Patterson and the Texas Transit Association. Commissioner Patterson, welcome.

MR. PATTERSON: Ms. Andrade and Mr. Williamson, thank you for allowing us to come today. I'm a little nervous because I've been sitting here for two hours and 46 minutes watching experts up here, and as he said, I'm an ex-coach so I'm a little bit nervous here because they told me I was supposed to be an expert, and I understand that an ex is a has-been and a spurt is a drip under pressure.

Mr. Williamson, I concurred with you a while ago. I thought Michael said that they had laminated the toilet paper and that concerned me immensely.

(General laughter.)

MR. PATTERSON: The second thing is, sitting here watching, I believe that the way to fund many of these projects is to put something out in the lobby area where you can put a dollar in and get three quarters to go get your car from being towed, because that's why I've been running out of your meeting constantly trying to make sure that the county car doesn't get towed.

I would like to tell you all that Paulette Shelton, if you have technical questions, Mr. Williamson, be sure and look that direction. If you have political questions, ask Ben. Just make sure that we get this all straight before we start out. And my goal is to be stepping down from here at twelve o'clock, so hang on.

You will see that public transportation is extremely important, but I will tell you before I stepped into public transportation that what Ms. Andrade has led the charge on is extremely important. When we started into the idea of coordinating transportation in Fort Bend County, the first thing we had to do was to get five or six people to unfold their arms. The sixth person in that was the county commissioner because I kept telling them you've got to be willing to coordinate, you've got to give up your transportation and give it the coordination piece, and that was great until they walked in and said, We need that two-county buses that the parks department has and we're going to put that in the pot. And I said, Wait a minute, that's the county commissioner's buses. No, you've got to put those in the pot. So coordination is extremely important.

We have to be able to say that Medicare/Medicaid funds, area agency on aging, the AAA funds, the TxDOT dollars and fares can all be mixed. So some of those I didn't hear a while ago but those are critical, those are the pieces that have gotten in our way as we go.

What you see up here is the trips in Texas, 267 million trips, and that's how they're broken down, either by urban or rural. Notice that the passenger trips by the metropolitan transit agencies are huge and the cost per ride is greatly decreased over what you would do in a personal vehicle down to $10.11 per trip.

There's the laminated toilet paper screen for you -- paper towel. Well, you were out when I told Mr. Williamson. I always try to agree with him after coming in here watching him on the Highway 59 process one time. Don't ever disagree with Mr. Williamson.

(General laughter.)

MR. PATTERSON: Reduced congestion, an example, The Woodlands Park & Ride has 2,000 spaces with an average commute of 70 miles round trip. You can't imagine that being to downtown Houston, but that's what a round trip is. The benefits of 30 million reduced vehicle miles traveled, 321 tons in emission reduction, and that's critical for H-GAC in that our area is constantly being tagged for the air quality, enhanced safety. Transit is 26 times safer than a car, transit vehicle drivers are trained and tested -- as long as they're not a wrecker driver in Harris County, we're all right. Transit vehicles are built more substantial.

And last, the note that we really need to be aware of is that our population is aging and we need to be aware that our folks that are both physically and mentally challenged are increasing in numbers and public transportation is a great need there.

Expand economic opportunities, the idea that we would be talking in the state of Texas about transit-oriented development, even as long as six or seven years ago, many of us good old boys cringed, we were going to try to convince a developer to work with us. Well, today Metro is working with a developer out north of Houston to build a community where the parking part of the commercial development will be a Metro parking lot. So the idea is catching on.

Access to jobs, medical facilities and shopping, education and job training. In the metropolitan areas like we're in -- I'm in Sugar Land which is on the southwest corner of Houston -- education is extremely important and getting there is becoming more difficult all the time.

At this time I'd like to let you hear a little clip from Lufkin.

MAYOR BRONAUGH: (Audio) Recently a multimodal transit facility was built in downtown Lufkin. Our dream is for that to be the center of transportation for the multi-county area, to feed students to our local junior college, help with transportation to the VA clinic which is being expanded next year, and the multitude of jobs that are created in our community and will be created in the future. Half of the folks that work in Lufkin live in surrounding counties, and each of you know, transportation is becoming more and more critical to the way people live, and this part of Texas has some of the neediest people, so if we can help them get a good job and get to work and back and forth with their doctor, what better way to help grow our economy and increase the quality of life in our area.

MR. PATTERSON: I will tell you that I had the privilege a couple of weeks ago of speaking to the group that included this mayor over in East Texas about the process to form a rural transit district, and their needs were very obvious as they are trying to get people over not as many miles as the lady from South Texas but over lots of miles.

Expand economic opportunity. Federal funding can be utilized to enhance pedestrian linkage, and this is an example of The Woodlands and what they've been able to do there, sort of rolling some things together. Sometimes I argue with them a little bit because they sort of compete with Fort Bend County.

Again, every dollar invested in local transit generates an average of six dollars in the local economy, $10 million in capital expenditure equals 314 jobs, and transit industry employs people.

At this time I would let Galveston speak for themselves.

MR. LeBLANC: (Audio) I've been with the City of Galveston for twelve years, I've been the city manager for ten, and during my tenure as city manager, public transportation in Galveston has been very important and critical to our citizens, our tourists and just the general economic development of the island.

Public transportation is critical for Galveston's economic base because many of our citizens rely on that public transportation to get to and from work. In fact, that's one of the big programs that we use here in Galveston. It's job access, as grant funding provides a lot of that. We have many facilities, we have convention centers, we have hotels, many restaurants that our citizens work at and rely heavily on that public transportation to get to their place of employment.

MR. PATTERSON: Medical transportation. Up to 50 percent of the rural transit trips, as was discussed by the mayor of Lufkin, are related and not Medicaid. If you go down to that last bullet, only 7 percent of ambulance trips are actually required. The average cost of an ambulance trip is $600.

Folks, this is a critical issue for Fort Bend County from the standpoint that we're one of the few counties in the state of Texas that operate a county-wide EMS program, and as a county commissioner, it's recommended that I keep an 800 radio with me and listen to the number of times that I know an ambulance goes to a place where a person knew they didn't actually need an ambulance but they didn't have any other way to get their relative to the doctor, so they call for an ambulance. The ambulance gets there and they're just a little bit sick, maybe they knew they were going to go to the doctor a long time ago, so they're taking advantage of the ambulance system.

From that standpoint, we have gone from two demand-response vehicles to six since Paulette came onboard. Paulette Shelton has only been with Fort Bend County for a little over a year, and you will see in a slide later the growth that's gone on in Fort Bend County as far as public transportation. But that's the number one area we are being able to recognize -- we can't document it -- that we are being able to say to people if you call this vehicle, they will come and you won't have an ambulance flashing lights in your front yard, they'll come and pick you up and take you to that doctor, it's a loss less expensive. And then if we could, on top of that, coordinate the MHMR vehicles, the ARC, the Red Cross vehicles and our vehicles to where that same vehicle is not going down that dirt road five times but they're only going once, then we would really be making a huge step in the right direction.

University of Texas Medical Branch believes in public transportation.

DR. RAIMER: (Audio) We have a large number of employees who live off-island. Overall we have about 1,300 employees and certainly over half of them live across our causeway into north Galveston County. The extension of a transport system into that area would be a tremendous advantage for us in being able to recruit more individuals from the mainland area because we would be able to mitigate the issues related to automobile transportation and crossing the causeway.

MR. PATTERSON: This is not a brilliant new statement to you guys, but transit miles on a transit vehicle like this is going to create a loss less pollution. When I became a county commissioner in 1999 and folks came to me and said we need public transportation in Fort Bend County, I was assured that I would not only not be re-elected the following four years but I wouldn't make the first four if I talked about bringing Metro to Sugar Land. We've worked very slowly, we've used vans that have, as the man said a while ago, a multitude of colors on them. At this point they would get rid of me if I let the commuter routes and demand-response route go away because they now see the advantage. In fact, this past month we have over 8,000 rides on commuter service, so it is making a huge difference in the pollutants that we're having to deal with.

Increased value of transportation assets. The last time I was here before this group I was trying to convince Commissioner Williamson and two other gentlemen that we should have a chunk of money for Highway 59 expansion. We graciously accepted that project, but we can't pour concrete fast enough, no way, to keep up with additional cars, we have to take a multimodal approach on this, and public transportation is a big piece of this. We're not sold yet, everybody in our area, on a train, but they weren't sold on a little bus a few years ago.

The regional coordination increases transportation assets. This is, again, just a simple repeat of what we've already talked about in that your whole presentation prior to this was about coordination. It is critical that we do that. There are simple things that we're being able to do. We have a fairly nice fuel system in our county, many locations, we have a very nice repair and fix-em-up location, and it was great for our county trucks and tractors and so forth, wasn't any reason that we couldn't let senior citizens vehicles come into that same location and that Texana Mental Health and Mental Retardation couldn't fill up out of the same pumps and that we couldn't take over repairing their vehicles.

We're doing that, and with a little bit of flexibility that we're working with TxDOT on, we think we'll be able to pull down -- it's very important that we pull down more of those federal dollars. The 5307 funds, we can pull down by being able to use our county barn, so to speak, and our county fueling stations and put together some at least 60/40 match, we'd prefer 80/20. So you're going to see a slide later that you see Fort Bend County is putting a great deal of money in but you're also going to see we'll show you how much difference in federal funds that we're pulling down, because that's critical to us. As you're well aware, that idea that we're a donor to Massachusetts does not fit well with a boy from Normangee, Texas, at all.

I'm going to let the man from Deep East Texas speak.

MR. DIGGLES: (Audio) I'm Walter Diggles, executive director of the Deep East Texas Council of Governments, and our agency is completing a regional transportation study which underscores the need for increased transportation resources in our rural communities. That includes access to job centers, medical facilities and social services which continue to be a top priority for the rural communities we serve. And the state has clearly identified gaps in services and opportunities for partnership which can help to fill these gaps, and the COG can play a very critical role throughout the state of Texas in bringing these partners together so that available resources can be reallocated and transportation services can be extended and enhanced.

TxDOT can play a very strategic role in the elimination of these barriers that prevent cost effective transportation solutions. The elimination of these certain barriers will require remedial legislation, others will require changes in procedures and practice. Ultimately more state funding will be necessary to help match available federal resources that we understand are available and must be matched with local and state resources.

MR. PATTERSON: This slide is a little bit of a brag on Paulette and what she's accomplished in Fort Bend County. As you can see, the purple line -- Mr. Houghton, it is a maroon line today -- you can see that our commute serve has grown, that shows a little over 7,000, our October report is over 8,000 rides, we're almost 8,200 rides. Our demand-response has gone up to almost a thousand rides per month, and demand-response is growing, again, communication with our community to let them know that it's there.

Those two commute rides right now are strictly to the Galleria area and Greenway area. We are working with Metro to be able to make a seamless ride to downtown and to the Medical Center so that a person in Fort Bend County simply picks up a card and gets on our vehicle and doesn't know any difference when they step onto that next vehicle. Public transportation is extremely important for Fort Bend County.

You will note that this is the funding that's gone on in Fort Bend County. I would only point out to you folks that if you notice in FY '06 we're going to pull down $191,600 in state funds, in 2007 we're only going to pull down $86,000 in state funds. That's not a trend that I would want the rest of the commissioners court to see. Please don't report that back to Fort Bend County because they put me responsible for these kind of actions and they would say you've got to go to the state and get more.

We do need to be able to pull that match up to a better level. We're spending over $1.4 million in Fort Bend County of local funds. Some of the things that tie our hands are the fact that fares do not count for match, so as we're talking about federal legislation that we need to work on, we can't use fares to go over and count against that blue line, so we need that to occur. Even though we don't charge much, it would make a difference, it would make us be able to pull down more of that federal dollar, and that's what we're all about is how do we get more of that gasoline tax back to the state of Texas.

I have gone through this with a little bit of a lighthearted approach. You all have spent three hours of very intense presentations. If I have left you in any way thinking that I do not think this is extremely important, let me clear that up, I do.

At this time I'd like to have Ben Herr talk to you about the myths versus reality of public transportation.

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

To the commission, I'd like to say one more time thank you very much for your support of public transportation in the state, and especially for your support of the public transportation providers that do provide the rides to the citizens of Texas. We very, very much appreciate everything that you do for us.

TTA, Texas Transit Association, has read and has studied the TxDOT plan. We've just shown you how public transportation supports the five TxDOT goals, but I'd also like to emphasize that we support the mission of working to provide safe, effective and efficient movement of people and goods in the state. And in a moment you'll see, and I'll talk about that we're interested in supporting the strategies that you've identified, at least two of those, and that's using the available financial tools and empowering the local and regional leaders.

As part of this presentation, I'd like to ask for your support in our legislative agenda, and we want to work with you to help achieve your vision that you've identified in delivering a 21st Century multimodal transportation system. And with that, I'd like to talk about some funding issues and there's a myth and some reality that I'd like to talk about for just a moment.

One of the myths that we've identified is that local governments and communities do not contribute to public transportation, but in our analysis and looking at available numbers that were provided by the Public Transportation Division -- and this is a snapshot of what's most recently available, this is FY 2005 -- you'll see that the local funding that is provided is very close to what's provided at the state level.

And then what we did is we took it one step further and we added in the local fares. Now, as has already been identified, your fare box revenues cannot be used to match your federal funding, but if you count the local fares because it is coming from the local and you add all that together, you'll see the local contribution to public transportation exceeds the state contribution to public transportation.

So TTA believes that we have a shortfall, especially when it comes to state-level funding, and we think that this is preventing us from achieving that vision of being a 21st Century public transportation system for the state.

So what we've identified here are some of the problems that the operators have had: the increased cost factors that continue to plague them, and then we also talk about the capital stuff -- and this has already been identified in some of the earlier presentations -- that we have identified, in fact, a critical need for capital equipment. We are, in fact, on the threshold of a serious need for vehicle replacement. In the past and what we expect in the future, these are the compensation measures that the operators have had to take in meeting the increased costs that have plagued them.

As previously stated, we don't believe the current state funding levels are adequate for our needs, and so just to see how we were doing, we compared ourselves to some of the other states. And these are statistics provided by TxDOT to the American Public Transportation Association. They have an annual survey that they do.

As you can see, our per capita spending, we're only 33rd in the nation, and if you add a total amount of state-provided funding, Texas is only 30 in the nation. And I'd like to emphasize the differences between us and other states similar to us -- which is California -- that gap has just gotten bigger and California has approved an additional $4 billion in state funding. I'm not asking for $4 billion from the State of Texas but I use that as an example to show how Texas falls behind some of our peers.

What the Texas Transit Association is prepared to do is go to the state legislature and ask for some additional funding, and we feel that this is critical for transit to support the TxDOT plan, and again, this is what we're prepared to ask the legislature: basically, an increase of $16 million, and we're talking about general revenue funding, for a total of $90 million for the next biennium.

These are the two key points to our legislative agenda: we want to increase the state general revenue funding, and we also want to provide for increased local funding.

As previously stated, the TxDOT strategy is to use all available financial tools and to empower local and regional leaders, and we feel that this is contributing to that strategy.

Why do we need this money? We're trying to match the federal funding, we don't want to see any of the federal funding go unmatched and lose that funding, go back to the feds. We have identified there's increased operational expenses and we do know that there is a critical need for increased capital for bus fleets.

To empower the local and regional leaders and give them the financial tools to increase their contributions to public transportation, we would like to ask the legislature for a vehicle registration transit fee, and this outlines the details of that fee. It's an optional fee the counties would have up to $10 to support transit. There would be an opportunity to take off 10 percent for administrative costs on their behalf, and the bottom line is this allows the communities to increase their local contribution to transit.

In summary, we believe that public transportation supports the TxDOT plan and we'd like to request your support in using financial strategies so that we can go, in fact, to deliver a 21st Century multimodal transportation system to the citizens of Texas, and we think that this is the future of public transportation in the state of Texas.

Thank you again for your support of public transportation, and I'm prepared to answer any questions you may have.

MR. WILLIAMSON: Members, we have no witnesses on this presentation, so any dialogue with this speaker or the previous speaker or Eric is now in order.

Are things better now than they were six years ago?

MR. HERR: Currently, sir, we've enjoyed some increases through the past six years, and collectively across the state, things are very well for public transportation. We are, in fact, providing rides to people. But the problem is as we get better at what we're doing, the need is increasing, there's more and more demand for the service.

MR. WILLIAMSON: But compared to six years ago, our partnership is stronger and we're doing more, even though there's more to do.

MR. HERR: The partnership between TxDOT and the Texas Transit Association, yes, sir. I'm encouraged and the board of directors is encouraged by the partnership that we have currently. We know that the commission is a strong supporter of public transportation. We appreciate especially the efforts of Commissioner Andrade and everything that's being done with regional coordination. I enjoy working with the members of the TxDOT staff, I'm enjoying great support from them. So yes, sir, in the past six years our current state of cooperation and partnership I think is very good, and I appreciate that.

MR. WILLIAMSON: There's always a tendency, whenever I probe about those things, to think that I'm trying to get you to say that I'm doing better, but the truth is we think our partnership is better because you're very good. We feel very strongly that you do a very good job of representing your association's viewpoint and what we need to do to help you. That was the point of that question. You're very good at what you do.

MR. HERR: Thank you, sir. I appreciate your support.

MR. WILLIAMSON: Mr. Patterson, you are always welcome here, you've always been a straightforward guy. We rely on county officials to candidly and honestly and sometimes pretty sharply tell us where we're wrong and what we need to do better, and you enjoy a great reputation with this commission. Any time you bring something to us, we pay very close attention.

MR. PATTERSON: I want to tell you that from time to time I've had opportunity to speak to commissions -- not this one but others -- and the fact that all morning long you have paid strict attention to every speaker is noticed by those of us out in the audience, and I appreciate it. I have to sit behind the wall sometimes and sometimes that long a time is real hard, and really appreciate your honestly trying to pay attention to what everyone has to say. Thank you.

MR. WILLIAMSON: You'll find us to be good partners in the next session. You know, we don't ever get into tax policy up here, Ben, we leave that up to you to make that argument in the legislature. The guy we work for prefers to speak for himself on taxes, and so we don't mind talking about user fees up here but taxes are a different matter. But I think you'll be pleased with the support you'll get. I think I'm comfortable in saying that the commission will be very supportive of trying to get you where you need to be.

MR. HERR: Thank you, sir. It will be a fun legislative session.

MR. WILLIAMSON: Yes, it should be.

MR. PATTERSON: Mr. Houghton, you asked a question earlier, and I wouldn't interrupt, but on the Grand Parkway it's very important to Fort Bend County, and the Sections C and D, much of that right of way has been acquired through cooperation with the county. So always remember as you're discussing with these guys can you make this all one piece, remember that each one of those counties, as you go around, whether it be Chambers County, Fort Bend County or Harris County, have got a huge piece of flesh in there because we're going out to our people and saying please give us this right of way, and they've done a great job up till now. Now, people are getting greedy now, don't get me wrong. Seven years ago there was a lot of people wanting to give us right of way and today they want to talk to us about the square inch and not the square foot.

(General laughter.)

MR. WILLIAMSON: Eric.

MR. GLEASON: Well, thank you. In closing, I'm not sure there's anything I can add to the conversations you've heard from folks that are dealing with these issues on a day-to-day basis.

I think you will hear more from me in the future on two topics which I think are very important. One is coordination and how we can encourage and facilitate those things happening here in the state.

And I think the other topic you'll hear from me a lot about will be fleet because that is an area that I believe very strongly we need to do some quick work in, not only with respect to the alternative fuel policy but I think with respect to the condition of the fleet. You heard about fleet issues in the context of coordination today, and that is one thing that is the heart and soul of any transit operation is the fleet, and if you can't rely on your fleet, you haven't got anything to sell to your customer. So I'll be back in the near future for some action for you on that.

MR. WILLIAMSON: Well, I've said it to you before, the commission is very pleased with your work and when you make recommendations, we take them very seriously, and particularly in light of the fact that you've done such a good job of bringing people from diverse viewpoints into the tent of transportation. We've always thought that the road-building world has something to offer the transit world, and ultimately the transit world has something to offer the road-building world. So you've done a good job of keeping everybody rounded up and headed in the same direction.

MR. GLEASON: Appreciate that. As long as we keep talking about moving people, we'll be fine.

MR. WILLIAMSON: It's not about vehicles, it's about people.

MR. GLEASON: That's exactly right.

MR. WILLIAMSON: Well, thank you very much.

MR. BEHRENS: Eric, don't leave because you're up next. We're going to agenda item number 4, our Discussion items, and the first one will be to discuss funding requirements for transportation services for Health and Human Services agencies and the Texas Workforce Commission. So if you would, Eric.

MR. GLEASON: My purpose here today is to provide the commission with an update on some of the responsibilities the department assumed as a result of House Bill 2292 and 3588, and as amended by House Bill 2702 in the recent legislative session.

We acquired responsibility for providing Fund 6 support for transportation services for recipients of programs operated by the Health and Human Services Commission and the Texas Workforce Commission, and in addition, TxDOT assumed management responsibility of the Medicaid Non-Emergency Medical Transportation Program.

What I'd like to do today is provide you with a status and update on these responsibilities, a summary of Fund 6 expenditures to date, and a look forward to the future and the challenges it holds for managing these programs.

Essentially, this legislation has been implemented through a series of inter-agency contracts. We have an inter-agency contract with the Texas Workforce Commission, and under that agreement we provide up to $6.8 million annually to support transportation services provided through the Food Stamp Employment and Training Program and the Temporary Assistance for Needy Families Employment Program. And we also work closely with the Texas Workforce Commission on Job Access and Reverse Commute projects, or JARC, to increase services for clients.

With the Health and Human Services Commission, we have an agreement with them that provides just over $20.3 million in Fiscal Year 2006 to support eligible transportation services provided through programs administered by the Department of Aging and Disability Services, known as DADS, Department of Assistive and Rehabilitative Services, or DARS, and the Department of State Health Services.

TxDOT serves as a joint chair of an oversight committee with HHSC to address issues relating to transportation services, and this is the group that would also continue to work on some of the barriers and constraints that Michael Morris referred to during his presentation with respect to these programs.

The third inter-agency agreement that we have is around the Medical Transportation Program, and under this agreement with HHSC, TxDOT assumed management responsibility for arranging transportation services for eligible recipients of the Non-Emergency Medical Transportation Program, Children With Special Healthcare Needs, and Transportation for Indigent Cancer Patient programs. And staff responsible for administering this program, including call center operations, were transferred to TxDOT from HHSC.

And just to give you a sense of the size, annually, on average, the Medical Transportation Program receives approximately 1.5 million calls through our call centers and provides approximately 3.5 million one-way trips through transportation service vendors.

And then following a successful transition of program administration, an enormous amount of effort over the past two years has been expended in making necessary changes to meet the many challenges of providing these services, and some of these changes have included Transportation Services Center reorganization. There have been two of these, the first of which in June of 2005 all calls for services to clients 21 years or younger were consolidated into the Transportation Services Center in San Antonio, and then one year later, in June of 2006, six of nine call centers were closed and all call center operations were focused on the Dallas, San Antonio and McAllen Transportation Services Centers.

The second area of effort has been with respect to new service contracts, and as you know, we recently completed a procurement of Non-Emergency Medical Transportation Services in 24 areas of the state. That was the first such procurement of its kind in five years, and it also represented a significant realignment of services areas to match with the regional coordination planning area boundaries that you heard about earlier today.

This procurement reduced the number of contracts that we have and also simplified the rate structure from 300 rates statewide to two rates per contract. As a result of staff efficiencies realized with the call center consolidation, we have also created new contract management specialist positions to significantly increase our ability to provide in-field oversight of service delivery on contract compliance in each of these areas.

The list goes on, but I think the message that we'd like you to hear is that we are actively engaged in managing this transportation services program, and yet at the same time, many, many challenges lay ahead.

From a funding requirement standpoint during this time period from 2004 through 2006, Fund 6 has contributed just over $157 million to provide client transportation services associated with these programs through these inter-agency agreements. In Fiscal Year 2006, just over $32 million was spent on medical transportation programs, $20.3 million on HHSC programs, and $6.8 million on TWC programs, for a total of just under $60 million.

When I look ahead and I think about next steps from a program management standpoint, I really do think that we're emerging from a period of dramatic change within the program and it's time now to focus our attention on a number of critical areas of program management.

We need to continue to work with our partners at HHSC and TWC to address issues relating to the funding and provision of transportation services, and you head about some of those areas today. This work could include changes to policy and administrative rules impacting these programs, as well as ensuring that Fund 6 dollars are being used as match to maximize federal program dollars available to the state for transportation services.

The second area is that we need to increase our efforts to assess opportunities for clients who call to use our services to use already established public transportation systems for their trip. This program that we manage is considered to be a last resort program for folks. If other options are available to them, then the policy and the notion is that they would take advantage of those options and the services that we contract for would be used only as a last resort. And so one area that we have to do some work on is with our already established public transportation systems, and this includes looking at opportunities to develop our public transportation systems through other programs we administer in ways to accommodate a growing number of these kinds of trips.

The third area of focus will be focusing on ways to continue to improve our cost our call center operations: increasing our call handling capacity to accommodate program growth, ensuring consistently high levels of customer service rendered to program clients, and managing costs through efficient use of program resources.

And a fourth area is that we have in place now several different models of service delivery through our contracts, and we have an opportunity over the next several years to evaluate which model works best in Texas, and we'll evaluate those models with respect to the quality of the service they provide and the cost-effectiveness with which they provide the trip.

And so that concludes my comments on this item, and I'd be happy to answer any questions that commission members might have on this topic.

MR. WILLIAMSON: There are no witnesses on this, so our dialogue with Eric about this matter is appropriate, if you desire.

MR. HOUGHTON: Eric, thank you very much for a very detailed outline. You said out of Fund 6 we're expending $100 million plus?

MR. GLEASON: For a three-year period.

MR. HOUGHTON: For a three-year period. I'm sorry.

MR. GLEASON: We expended just over $157 million. In Fiscal Year 2006, just under $60-.

MR. HOUGHTON: Okay, that's it.

MS. ANDRADE: Eric, thank you very much for this report. I also want to make sure that we thank Cheryl. Is she here?

MR. GLEASON: She's back there. Cheryl.

MS. ANDRADE: Cheryl, thank you very much. We took on this program and we did not have an interruption of services, and I jut think that her work and expertise brought real value to this agency, so thank you.

And thank you for everything that you've done because I know it's been challenging and it's got its challenges, but I think that we'll keep working on it to make it better.

MR. GLEASON: I appreciate that, and I'll accept those for my staff. The first time I met Cheryl was actually over the phone. I was still up in Seattle when I called in for a staff meeting, and trying to imagine these folks the first time I met, and I could tell right away we had a lot of work to do because I just didn't understand anything that was going on down here with this program. I don't know where I'd be without her, so I appreciate.

MR. WILLIAMSON: Maybe you just didn't understand the way we were talking. Howdy, Eric.

MR. GLEASON: I didn't want to say that but that was part of it as well.

(General laughter.)

MR. WILLIAMSON: Were you through, Hope?

MS. ANDRADE: Yes, thank you.

MR. WILLIAMSON: A couple of matters. We expended $60 million out of Fund 6. Did any of that qualify for a federal reimbursement?

MR. GLEASON: Yes, sir. All of it qualifies to some extent, it all matches, it all has the potential to match federal program dollars.

MR. WILLIAMSON: And will those federal funds flow back into Fund 6 or will they flow to the HHS agencies?

MR. GLEASON: The federal funds flow to HHS agencies and then we are reimbursed.

MR. WILLIAMSON: The legislature had two goals whenever they asked us to take on this responsibility. The first goal was primarily House members had some concerns that the true cost to deliver the medical component was being too much blended, perhaps, with the cost of the medical service itself, and it then posed a question to the legislature is the medical component being cost-effectively administered. And from that, thus, came the decision to send the medical piece to us because we're the transportation experts in the state.

I think the second perspective was more from the Senate side which was to what extent can we eliminate duplicated efforts between agencies and local governments, not to save money but to then extend service to more citizens, the stuck person the man referred to. So without asking you to deliver a sub-report you're not prepared to deliver, just kind of comment on from here back we've focused getting our hands around it, from here forward we're going to focus on tightening up the true cost of the medical piece itself and eliminating duplication, or do you feel like we've already done some of that?

MR. GLEASON: I think we have a lot of work ahead of us in that area, and I think you heard today from the coordinating planning effort that there are some barriers and some constraints that need to be overcome to even further that effort, but I think that it really is true that the first part of this effort on our part has been just trying to get our arms around the program. We inherited old service contracts that needed to be renewed with old rates, old models of delivery in them. Those have changed dramatically. We have a new set of contractors in place, we have a new set of relationships.

We have, I think, tremendous opportunity. I think if we look at our other responsibilities as a department with respect to how we develop those public transportation systems to whom we give state and federal funds, if we look at how we allow them to develop and what kinds of rules and what kinds of policies we have in place to encourage that development, that an area of growth for us which will impact directly on this program will be the extent to which these systems can be developed to accommodate more and more of these kinds of trips.

I think really that's where we need to go as a state. We need to reduce the emphasis on a program of last resort, if you will, and we need to develop regular public transportation systems that more and more can accommodate a larger range of different kinds of trips to different destinations.

I also want to focus on a comment that Mr. Morris got into, and that is that these aren't transportation systems but rather land use decisions that have a tremendous impact on how well we can deliver services, and that is decisions made at the local community and regional levels about where some of these service centers are located: are they located in areas that have good existing public transportation, are they easy to get to. That kind of thinking impacts tremendously on our ability to deliver cost-effective service.

That's a satisfactory answer for now. I just think that ultimately, if not in '07, in '09, many of those legislative leaders will still be around, and ultimately they're going to ask the question to what extent did you sharpen the true cost of transportation in this area and to what extent did you end duplication which resulted in more trips to a wider clientele. I think that will be the barometer they will look at to determine success or failure, and we're all aware what that should be.

MS. ANDRADE: Mr. Chairman, let me add to that. I can tell you through the coordination efforts, I think that's going to happen, but also through the work the department itself is doing with Eric's leadership is that we are working and I think the residents of the state that use these services can feel comfortable that we are actually investing time and effort in making those services better.

MR. WILLIAMSON: Well, we would never want to give the impression -- Eric knows this, but to the broader audience -- that we didn't actively want this responsibility, we did. We wanted the opportunity to show that the department was more than a highway constructor. We just want to be cognizant of what I suspect we'll be measured by and focus on that. Thank you very much.

MS. ANDRADE: Thank you, Eric, thank you very much.

MR. GLEASON: Thank you.

MR. BEHRENS: We'll go to agenda item 4(b) which is our continuing discussion about recommendations of potential statutory changes that would improve the operation of the department and recommendations that we'll be making to the Texas Legislature. Coby.

MR. CHASE: Good afternoon. For the record, my name is Coby Chase. I'm the director of TxDOT's Government and Business Enterprises Division. I'm here today to discuss with you the commission's proposed legislative agenda for the 80th Session of the Texas Legislature. As it's been said before, the Transportation Commission is authorized by law to make recommendations to the Texas Legislature on statutory changes that would improve the operation of the department.

The purpose of this ongoing dialogue is to make these issues public. I have been before you now each month since January of this year to discuss the contents of this upcoming report to the legislature. Today I'm presenting to you, for your initial consideration, the draft report to the legislature on statutory changes.

This document has been provided to your assistants last week and I trust you've had the opportunity to begin to digest its contents. However, I would like to iterate at this time that there is not one issue in the report that has not been previously raised with you during my month-to-month discussions. I believe that the purpose of this ongoing dialogue has been successful and that we have indeed been as inclusive as possible in soliciting input from interested parties.

Before I start diving into the contents of the report itself, I wish to state that we will today place this draft document on TxDOT's internet site for the purpose of soliciting further comments on its substance. The document will be available for review and comment for two weeks, through November 30. Interested parties may select to provide comments directly through the website, should they so choose.

I would be remiss if I didn't mention my colleagues in the Government and Business Enterprises Division who got us to this stage: Patrick Marotta, Cady North, Caroline Love, Denise Pittard, John Sabala, Chrisy Currier, Ron Hagquist, Jefferson Grimes, and Tonia Ramirez. We also worked closely with OGC on all of these matters, and of course with the administration as well.

The process of taking comments from interested parties has been productive. We've heard from about 50 or so interested parties, and have been very pleased with the fact that we've met with such diverse groups as Texas Motor Transportation Association, Texas Association of Realtors, North Texas Tollway Authority, the Midland-Odessa Transportation Alliance, we've met with a number of cities and counties as well -- I'll leave it there.

The first thing I want to tell you is what is not in this draft report. To begin with, we had proposed and researched an issue regarding possible placement of CDA concession fees and surplus toll revenue into the Texas Mobility Fund for the purpose of ensuring that the proceeds are constitutionally protected. During the course of our research, we discovered that simple statutory dedication to the fund does not, in and of itself, satisfy this approach, rather it is the issuance of debt based on that revenue that ensures its constitutional dedication. But because it is questionable that we would be able to issue debt based on an inconsistent flow of revenue, we have recommended that the issue not be pursued, and therefore, it does not appear in the draft report.

Also not in the report is a recommendation to seek a more precise definition of an MPO, or a metropolitan planning organization, and their membership composition in state law. It does not appear that a clarification is needed at this time. It seems that federal laws governing MPOs do address issues such as membership and responsibilities.

We have also recommended against placing motor carrier fees in the Texas Mobility Fund. The amount in question was negligible, even if the fees were raised by 50 percent.

Something that just arose came from the Automobile Theft Prevention Authority which is housed over at TxDOT's Vehicle Titles and Registration Division. They would like to apply the dollar fee to more than just automobiles, expanding the base that the fee can be applied to. At this point we have no recommendation but I expect we will bring this to a resolution before the final report is issued next month.

And now this is what is contained in the report. The Rail Relocation and Improvement Fund must be capitalized, and we can argue, at least without any degree of credibility, that there isn't a problem. Train traffic, vehicle traffic and dense urban centers are a bad mix -- just ask San Antonio. However, I will say that we're unable to engineer any sort of elegant financial solution. We spent a tremendous amount of time and agency resources trying to find an appropriate revenue source that didn't take a bite out of the railroad.

In our report we make three recommendations to capitalize the Rail Relocation Fund: first is to redirect the business and/or sales taxes the rail industry currently pays to the state into the Rail Relocation Fund; two, provide a direct appropriation from General Revenue to capitalize the rail fund; and three, allow TxDOT and local governments to enter into an exchange of assets for the purpose of relocating rail lines, and any fees arising from this arrangement can be deposited into the Rail Relocation Fund.

MR. WILLIAMSON: Stop. Up until the election this month, it was my recollection that the comptroller had staff attending all of our meetings. Is there comptroller staff in this meeting by any chance?

(No response.)

MR. WILLIAMSON: I guess not. Is there anyone in the room who can volunteer to give this commission an opinion about the impact of the recent expansion of the business tax to railroads? Maybe somebody from the railroads. Anybody from UP or BNSF out there, or Kansas City Southern?

(No response.)

MR. WILLIAMSON: I'll ask you, I don't want to embarrass you because I didn't warn you I was going to ask you this question. Do we have any idea if the expansion of the tax -- maybe Kris knows -- when we expanded the business tax or redefined it, is that going to generate likely additional state taxes from the railroads?

MR. CHASE: I don't have an answer to that precise question, but let me tell you what I do know. One of the railroads, one of the Class One railroads is interested in the idea that they do indeed pay into -- I'm just going to call it General Revenue -- taxes that they don't see any direct benefit from. It's nothing new and it wouldn't be anything more or less than they're currently paying, they just don't see anything coming back to them. And their accountants looked at their books and they said, Ballpark, that's about $10 million that we anticipate paying into the state coffers.

And at this point, Chairman, we're simply guessing, but if you look at the universal railroads in Texas, it would seem to be that would be the whole source of all three railroads probably in the $30- to $35 million per year. That's simply a guess on our part.

MR. WILLIAMSON: I guess one should ask the question if they weren't paying, for whatever reason, under the old tax, if they were all Delaware subs or whatever all those escape hatches that I never took were, if they weren't paying anything and now they are going to pay starting in January, $50- or $100 million a year, and if we are sitting on, as a state, the surplus that we all suspect we're sitting on, it might be entirely appropriate for us to ask the legislature to dedicate those fees to the Rail Relocation Fund. You're dealing with a surplus anyway, if I'm correct in this, it's not a tax that had been paid into the coffers to begin with.

MR. CHASE: Correct.

MR. WILLIAMSON: That would be -- to use your words -- it would seem to me, an elegant solution. Let's research that unless there's objection from my colleagues.

MR. CHASE: Absolutely.

MR. WILLIAMSON: Now, on the direct appropriations from General Revenue, that's just simply in recognition of the fact that there's going to be a surplus and the question is is rail relocation important enough to the legislature to allocate a portion of the surplus.

MR. CHASE: Yes, sir.

MR. WILLIAMSON: Now, on the third matter, my understanding is the rules and regulations and statutes regarding property controlled between state agencies, surplus property, property being held in reserve for future transportation use perhaps is all a bit confusing to us, but we believe that ultimately property that's not going to be used to build a highway or railroad or provide a bus route ends up or could end up at the General Land Office as surplus and then sold as surplus.

MR. CHASE: Yes, sir.

MR. WILLIAMSON: And your recommendation there basically says go through the statutes, figure out what barriers exist or don't exist to permitting us to trade with the railroads their real estate that they own in downtown Texas, but do it in such a way that the surplus property doesn't end up over at the General Land Office which defeats the purpose of trying to do the swap. That's basically the recommendation.

MR. CHASE: Yes, and I'll be honest with you, we just recently started kicking that around internally since some folks in our state legislative section started to kind of hit on an idea, and we think there's something there, and in essence, we're asking for your permission to dig deeper into that issue.

MR. WILLIAMSON: So in theory, with regard, for example, to the Cintra proposal to go ahead and build a freight line from west Fort Worth to south San Antonio on TTC-35, if a barrier existed to us going to UP, for example, and saying our partner is going to build this line, we think you'd like to have access to it, our partner and us will swap you access to that line for fee title to your real estate in lines from San Antonio through Temple, that would fall within the purview of this potential recommendation.

MR. CHASE: Yes, sir. And if I can take that a step further, I would imagine we'd be looking at for its potential uses beyond rail or maybe a different type of rail in a different place, but a roadbed or commuter rail in roadbed, or whatever the case may be. It's certainly a concept we've discussed a lot in the past.

MR. WILLIAMSON: My theory of swapping around is that we get to a point that those inner-city lines no longer carry hazardous material but commuters and people who drive right next to it on highways we might build.

MR. CHASE: Right.

MR. WILLIAMSON: That's all I want to explore on this, but I saw my colleague Houghton jump at one point. Do you have more you wanted to add?

MR. HOUGHTON: I jumped back.

MS. ANDRADE: I'm fine.

MR. WILLIAMSON: Please proceed.

MR. CHASE: The agency should be granted the authority to issue low interest loans out of the Rail Relocation and Improvement Fund. We should be granted the authority to plan, design and construct non state-owned rail lines. We should be granted the ability to obtain funding from the Texas Enterprise Fund for rail improvements without having to wait to obtain a direct appropriation.

Regarding comprehensive development agreements, we have several recommendations: elimination of the 2011 sunset date for CDAs; elimination of the present cap on expenditures for CDAs which is 40 percent of federal obligation authority in any year; elimination of the present 50-year cap on the duration of the concession; authorizing TxDOT to issue bonds to fund a CDA which has been terminated prior to completion; authorizing TxDOT to enter into CDAs on non-tolled projects; and clarify the contract claims process for comprehensive development agreements; local tolling entities should be authorized to compete for TxDOT CDAs.

We have several regional toll road issues that are in the draft report: first is granting the authority to local toll road entities, such as regional tollway authorities or county tolling authorities, to evolve into an RMA; second is the ability of the state to acquire toll roads from local entities when mutually agreed upon; and then third, grant clear authority for TxDOT to lease its highway rights of way to an RMA for the purpose of the RMA constructing a tolled facility.

MR. WILLIAMSON: Stop again, please.

I was accosted -- and that is the correct word -- by an active member of one of the tolling organizations in the state and I think it was about the item that was second in that paragraph. He or she said, Why are you trying to pass a law that permits you to put us out of business? Now, because I'm aware that the broader audience watches us from time to time, are we recommending that the legislature pass a law that lets us force one of these tolling organizations to go out of business?

MR. CHASE: No, sir, not under any circumstances.

MR. WILLIAMSON: Why would he or she have said that?

MR. CHASE: In his or her defense, when the Government and Business Enterprises released a summary of these -- remember the one that had the red "Draft" stamp on it and we sent it to 3,000-plus organizations -- that issue was described in one sentence and it could lead someone to believe that -- it didn't say only in a willing selling situation but you could assume in there or you could have led yourself to believe that wanted to take over tolling systems which we don't, and we've gone to great lengths to meet with individuals throughout Texas to explain that's not the case.

MR. WILLIAMSON: Okay. So perhaps he or she was way more within their common sense boundaries to come accost me.

MR. CHASE: Yes.

MR. HOUGHTON: I was similarly accosted, not by one, by six in the northern Texas region of this state, and went to all lengths to dissuade that we are not, in fact, going to do that.

MR. CHASE: Right. And speaking of that region of Texas, Jefferson Grimes and I made many trips up there personally and explained this many, many times. I find it hard to believe at this point that anyone would think that would be true.

MR. HOUGHTON: This was a week prior to the election.

MR. CHASE: Well, okay. But we have clarified it.

MR. WILLIAMSON: Thank you. Proceed.

MR. CHASE: We recommend in the report that TxDOT be granted the authority to enforce the collection of tolls in a comprehensive manner. This would be accomplished through the suspension of drivers licenses and denial of motor vehicle registrations for those who do not pay outstanding tolls.

MR. WILLIAMSON: Oh, that will go over well.

MR. CHASE: Yes. We're not in this job to be popular.

Due to recent federal initiatives, TxDOT should be granted the ability to conduct its own environmental reviews under certain conditions, and this is to match up with the new federal authority we were granted in SAFETEA.

Counties should be granted the authority to require developers to set aside properties for established future transportation corridors. Concurrent jurisdiction for eminent domain proceedings should clearly be established for all counties that have both county courts at law and state district courts.

TxDOT should be granted the authority to acquire highway rights of way from willing sellers in advance of the environmental process, and again let me stress this would only be from a willing seller.

And now the billboard relocation issue. In those instances where city ordinances prohibit the relocation of billboards as part of a highway project, TxDOT's outdoor advertising rules should supersede those locally imposed ordinances unless the city wants to pay the fair market value of the billboard.

MR. WILLIAMSON: How will that contrast with the way we do it now?

MR. CHASE: The way we do it now is the department entirely picks up the cost for relocating or paying for a billboard that can't be put back up. Last commission meeting, I believe it was, you instructed our division to contact the metropolitan planning organizations and ask them basically what should occur, what do they think in this case. And I apologize, I'm looking for the piece of paper that explained it.

How it basically broke down is the ones who responded, one responded that they would have to ask their board to vote so they couldn't give us an opinion, others tended to be along the lines of, well, the state should pick up the cost. There was not a follow-up question asked of should it come out of the allocation that you currently receive, the agreed-upon process that sends out construction dollars. But we're happy to follow up with that question, if you'd like.

And then there is the utility relocation issue. We have spent a significant amount of time and energy this interim working with utilities on matters of common interest, and somewhat successfully, I might add. Staff recommends here that the requirement that the state pay for utility relocations along interstate highways be eliminated and that the method for reimbursing utilities for those relocations be the same as on any other class of roadway.

The procuring of engineering services should be amended. TxDOT is undertaking an unprecedented initiative to construct highways at a level previously never seen. The laws governing the department's procurement of engineering services do not allow us to consider both price and value when obtaining these services. This situation should be remedied.

The authority to provide for automated camera enforcement should be clarified. State law should be clarified to allow local jurisdictions and the state to use automated enforcement technology for traffic offenses. Specifically, the law needs to provide for civil administrative penalties for these traffic offenses.

The Department of Public Safety's Crash Records Bureau should be moved to TxDOT. For the most part, TxDOT funds this program and it is the chief beneficiary of those data. Therefore, we recommend that the legislature consider transferring the program and the applicable FTEs to TxDOT.

State law should be clarified to authorize the establishment of exclusive truck lanes. TxDOT may establish exclusive truck lanes on the Trans-Texas Corridor but it is unclear as to whether we may do this on the rest of the state system. This authority should be clarified.

State law should be amended to allow for sobriety checkpoints for the purpose of detecting and deterring impaired drivers.

Flexibility should be granted to TxDOT to administratively establish variable speed limits. This authority would provide greater flexibility in changing speed zones to fit actual field conditions.

There are several recommendations regarding our non-highway properties: first, TxDOT's non-highway properties should be exempt from the General Land Office oversight in the similar manner as our highway rights of way; second, other governmental entities should be able to negotiate exchanges of land with TxDOT in a similar manner as private entities may now; and then third, state law should be clarified to reflect that the proceeds from the sale of all surplus property, both real and personal, should be deposited to the State Highway Fund.

State law should authorize TxDOT to pay exempt employees for unused compensatory time, similar to some of the other agencies.

There remains uncertainty in state law regarding the separation of authority over the Medical Transportation Program between TxDOT and Health and Human Services agencies. This needs to be clarified to reflect that TxDOT is solely responsible for the transportation component of the program, not the social services side.

The state's Lemon Law Program should be amended to ensure that everyone residing in Texas can avail themselves of the process. Presently this prohibits some military personnel and other newcomers to the state from filing under the state's law.

Regarding temporary tags for automobile dealers, state law should be amended to ensure that a secure system is set in place. Ideally this would be through a system where the dealer issues the tags electronically.

The terms for dealer license is presently set in statute for one year. This should be altered to allow the commission to establish the duration of the license period.

We have several motor carrier enforcement recommendations. Present law provides for the assessment of fines for violations of the motor carrier registration and insurance laws, however, there exists no mechanism for revoking or denying registration for failure to pay these fines. In addition, the state should be granted the authority to investigate violations of oversized and overweight permits and then to assess fines and penalties accordingly. This should be remedied in statute.

The fuel collection administrative fee that distributors retain should be reduced from its present 1.75 percent to .1 percent. Distributors were allowed to retain this amount even after the point of collection was shifted to the suppliers.

And then finally, state law provides that the comptroller has until the 5th day of the month to transfer motor fuel taxes into the State Highway Fund. With today's technology, these transfers should occur on a daily basis.

As I've said previously, we need to be clear what our goals are and what problems we are trying to solve. The issues contained in this draft report in some manner support your goals of reducing congestion, improving safety, expanding economic opportunity, improving air quality, and increasing the value of our transportation assets -- soon to be read on our paper towels.

(General laughter.)

MR. CHASE: I will, of course, be back before you next month to walk with you through the final adoption of this report. Before you see it next month, it will have been posted on our website for further public comment, we'll notify something on the order of 3,000 people and organizations that it's there, our professional editor, Tiffany Becker, will make sure that it's easy to understand, and our graphic layout professional, Donna Habersaat will format it.

These are my prepared remarks for today. I'll be more than happy to answer any further questions you might have.

MR. WILLIAMSON: Do you have questions or comments?

MS. ANDRADE: Thank you, Coby.

MR. WILLIAMSON: Coby, I thought last time or the time before we had an exchange between commissioners on demonstration projects, or maybe that wasn't when you were here, maybe that was one of Amadeo's transportation projects or transportation items came up. But is it the case that if a United States congressman or a United States senator takes a portion of the state's apportionment and sets it aside for a demonstration project, even one that doesn't support the state's transportation system, even one that requires additional state money that we don't have, that that set-aside is on top of the state's apportionment back to the metro areas?

MR. CHASE: Yes. That conversation occurred a long time ago, now that you mention it, in a discussion of demonstration projects. As you know, the agency, working with the MPOs, divided up the construction money -- using an unsophisticated term -- and when SAFETEA-LU, for instance, is passed and Congress divides up -- and I'll be talking about this in a minute -- a constant sum amount of money, the individual pots of money that go to each MPO isn't readjusted at that point, it's just put on top. And actually, truth of the matter is, the MPOs don't do it themselves, the members of Congress do it, they take it away from each area and whoever is the hungriest part of Texas gets the most money.

MR. HOUGHTON: What you just said was during SAFETEA-LU there's a pot of money given to the State of Texas.

MR. CHASE: Yes, and California and New York.

MR. HOUGHTON: After that has occurred, there's a demonstration project in El Paso, that then reduces the amount that would go to the eight major metros in Category 2 construction money, is that correct, to the rest of the state?

MR. CHASE: Yes.

MR. HOUGHTON: Do earmarks do the same thing?

MR. CHASE: Yes.

MR. WILLIAMSON: So earmarks and demonstration -- well, you said you're going to get into it when discuss the federal?

MR. CHASE: Yes, sir.

MR. WILLIAMSON: Well, I think I'll withdraw and I'll wait for you to do that.

MR. HOUGHTON: Well, I want to take that just a little bit further, and I may get in trouble for doing this. If we're so concerned about that, why are we not equally concerned about the peels coming off the State Highway Fund through our legislature?

MR. CHASE: I think we are concerned about that.

MR. HOUGHTON: I don't see anything in our legislative package that says we need to go the other way now and pick up those peels that have been taken off over the years.

MR. CHASE: Having done this for 13-some-odd years, the legislature is fully aware of that, and to the Senate Finance Committee's credit, at any rate, they're starting to take a long hard look at that. There is a degree of momentum in that issue and we've been asked for a lot of information about it, however, in the entire time I've been at this agency -- and you could probably go back all the way in the agency's history -- those efforts have never once paid off, ever.

MR. HOUGHTON: Well, I mean, we're very critical at the federal level, we continue to send missiles that way, and I'm not saying send a missile, it's a matter of we're doing it to ourselves in our own state and we seem to kind of arm's length it.

MR. CHASE: I would say that we have more aggressively pointed this out on the federal level very recently, we've done it for many years at the state level, as have many of the groups that surround the Texas Department of Transportation, transportation advocates.

MR. HOUGHTON: So in other words, toll roads are a byproduct of the peels and the federal peels that have taken place.

MR. CHASE: Toll roads, in my opinion, are a byproduct of many things, both the diversion at the state level, and it's not just the diversion of the funds at the federal level, it's the ability to really spend money in an effective way on the federal level. The federal level has no focus, Commissioner. Unlike the EPA, we know exactly what happens if our air gets too dirty, there's nothing that happens if we get too congested, nothing. And I'm not a big fan of penalties but the EPA model certainly focuses one's attention on cleaning the air.

MR. HOUGHTON: Okay.

MR. WILLIAMSON: Proceed.

MR. BEHRENS: Okay, Coby, why don't you go to 4c which discusses some of these federal initiatives.

MR. CHASE: Yes, sir. Again I am Coby Chase and I am still the director of TxDOT's Government and Business Enterprises Division. Today I will discuss the formulation of your priorities for the 110th Session of the United States Congress.

My appearance today represents the first of what I anticipate will be three public discussions in preparation for adoption of your legislative agenda for the first session of the 110th Congress. Today I'll provide an overview, next month I will present a draft that we will lay out for public comment, and in January 2007 it will be brought to you for a vote, probably close to about the time the Congress convenes.

Given the results of last week's elections, the environment in which we will operate will be different than the one that led to the passage of SAFETEA-LU. What has not and will not change is our commitment to working with Congress and our federal partners to achieve the commission's goals for our state's transportation system.

I'm going to begin today by discussing the bigger or more broad-reaching issues. None are new, and as a matter of fact, all, in one way or another, are a reflection of our commitment to achieving the department's five goals: reducing congestion, enhancing safety, expanding economic opportunity, improving air quality, and increasing the value of our transportation assets.

On that note, I will say that our call for a national transportation system with real defined goals underpins most every action we intend to take on the federal level.

I'm not going to start this discussion on a high note, I'm going to discuss congressional demonstration projects. We're really not certain that most people understand just how corrosive authorization bill, and to a similar extent, appropriation bill demonstration projects are to building adequate transportation infrastructure.

In SAFETEA-LU the congressional delegation earmarked $669 million which, in and of itself, sounds like a lot of money, but in order to complete all of those projects, Texas taxpayers will have to spend $7.5 billion of their state transportation funds on top of that $669 million. My staff tells me that a third of Texas's SAFETEA-LU earmarks, about $220 million, weren't on any planning organization's transportation plan. Meanwhile, we will have to pull about $1.4 billion from someone else's plans to pay for those $220 million in unplanned earmarks.

This phenomenon is not isolated to Texas alone, every state DOT is getting hit with this problem. Here in Texas we have tried everything from arguing against them, to trying to help select projects that make sense, to working with locals who propose them. A couple of organizations do it extremely well: MOTRAN out in Midland knows exactly how to do it and doesn't waste a penny doing it; NETMOB in Northeast Texas actually has a good handle on these things. But it's impossible to replicate that success all around the state.

The appetite for these is insatiable. As we discussed, the nasty little secret about SAFETEA-LU demonstration projects is that they don't bring in more money to the state, we simply rob each other in this constant sum game, so if one region of the state's congressional delegation obtained more earmarks than others, it's taken away from other Texas communities, not New York or Massachusetts or any other state. This upends the process the agency went through with the metropolitan MPOs to allocate construction funds to regions.

One other thing I'd like to bring to your attention, Texas has had to forfeit over $300 million in the last year or so because the federal government can't afford everything it needs to do, like wars on terrorism and hurricane relief. When it comes to the rescissions that we've discussed many times before, please remember that none of the money that we are required to turn back can come from congressional demonstration projects. So to make matters worse, they have a disproportionate impact on everything else.

I know you've said you plan to take a long and hard look at whether or not some criteria need to be met before the agency releases any funding to future demonstration projects in an effort to focus those resources on meeting TxDOT's five goals. We stand ready to assist with that examination if you would like us to do that.

MR. WILLIAMSON: Okay. So stop for a second.

MR. CHASE: Yes, sir.

MR. HOUGHTON: I have a question.

MR. WILLIAMSON: Please go ahead.

MR. HOUGHTON: The allocation system that was put in several years ago to allocate those dollars out of the twelve categories, seems like it is now being compromised by demonstration program projects and earmarks, so truly we're not to a true allocation, as you would call a block grant, to the state of Texas.

MR. CHASE: That is a perfect way to look at it, yes, sir.

MR. HOUGHTON: So in other words, we're pitting community against community, my congressman against your congressman, or my senator against yours, whatever the situation.

MR. CHASE: Unlike the legislature, as much as we have open and back and forth dialogue, they fund a program, by and large they fund a program over here, and we've established goals for it. The federal government funds a process, they just want to make sure you're following a process, and many things are predetermined on the federal level and they don't really ever -- maybe not ever, but they don't tend to have the outcomes that they think they're getting.

MR. WILLIAMSON: When we say federal government, we mean the United States Congress.

MR. CHASE: United States Congress, yes, sir.

MR. HOUGHTON: And then on top of that, if the total project cost is $200 million and the earmark or demonstration allocation is $100 million, in your example, and we sit here with a decision to make and it's not generally the right type of decision we should be making. That goes away, again, from the allocation and the locals, the things that the chairman adequately describes time after time, local control.

MR. CHASE: I mean, the question can come down to -- I've never ever contended that every single demonstration project is misguided or not well thought out, for instance.

MR. HOUGHTON: This is tantamount to political patronage, but do you think we'll every get the crack-heads off the cocaine or not?

MR. WILLIAMSON: I'm glad you said that. That's normally something I would say but he said that.

(General laughter.)

MR. HOUGHTON: Well, it's what it is. It's just bringing money back and not fully funding these projects and it's giving them false hope, in some respects.

MR. CHASE: What is a choice is if somebody said I'll give $669 million but you're going to have to spend $7.5 billion to get it, the question becomes why would you spend the $7.5 billion. You come out almost $7 billion ahead by not touching them.

MR. WILLIAMSON: So to turn the apple and look at it from a different direction, in the apportionment process the United States Congress says Texas, you have access to $100 million, however, $5 million of that is reserved for a project in Dallas that's not in the MPO's planning document and will cost an additional $10 million to finish, so the only way you can get to the $5- is to spend the $10- which means you're spending $15- on a project that may or may not reduce congestion, improve air quality, improve safety, attract a business, or preserve the value of the system.

So what are our alternatives as a commission, what you just said, just don't spend it?

MR. CHASE: Don't spend it or set very stringent criteria at the state level that if they're not met, we won't spend any money on the project, or of course, I would imagine we would urge Congress to try to do it better.

MR. HOUGHTON: Well, what happens to the money that's earmarked or allocated to that demonstration project?

MR. CHASE: If it's not obligated over a certain time, it goes away.

MR. HOUGHTON: Goes away to whom?

MR. WILLIAMSON: Goes back into the principal for redistribution to the other states?

MR. CHASE: That is the answer I intended to give, and I believe that to be true, however, I want to leave this an open question, Commissioner, because there may be a way but it would take a number of years to get it back into the system, but I want to make sure I fully understand that before I say it out loud.

MR. HOUGHTON: Okay.

MR. WILLIAMSON: Well, getting back on my different way of looking at the apple, why would the Dallas MPO then cooperate in their earmark, or is it the case that they don't?

MR. CHASE: Right. Every time I've met with an MPO -- and a few years ago we used to get in a room and talk about the federal program -- they are very like-minded, unless something has changed and I would be very surprised to see an MPO executive director stand before you and say demonstration projects are a good thing. They look at them the same way, they cause the same amount of problems for them too. But I'm more than happy to be corrected by anyone.

MR. WILLIAMSON: So what happens in the real world is there are organizations in the state, and I guess in the nation, either non-profit, have-their-own-agenda organizations, or perhaps for-profit consulting or lobby firms who must go to cities or counties within the MPO and say: Congresswoman X wants this museum in the city, I will hire you to go to Washington and lobby for that earmark or that demonstration project outside of the MPO process or the state's planning process, and what difference does it make to you because the money is coming to Texas anyway, it's just you're getting your share of it.

MR. CHASE: And it can get further convoluted by trying to convince somebody that it brings in more money and things of that nature, but yes.

MR. WILLIAMSON: So it looks to me like our response to that is either communicate to Congress we will no longer spend a penny on a demonstration project or an earmark, or communicate to the MPOs we're going to redo our apportionment system and deduct that from your apportionment at the state level so you need to get involved in this stuff.

MR. HOUGHTON: I think it will be a combination of both, Mr. Chair, if they so choose to ignore us and continue to go back to the well. If they do get that earmark, then they do get reduced as to their allocations.

MR. WILLIAMSON: Or focus your demo and earmark on things that are in your MPO's plan.

MR. CHASE: Right, and making very sure that it doesn't upset. You can go so far down in a plan that's something is so far away in the planning stages that it would have an effect of stopping funding for projects that are closer to go, closer in the queue.

And just as subtlety here, there is a slight difference in an appropriations demonstration project but we're not historically big winners in that program, the amount of money is not quite the same level.

MR. HOUGHTON: Annual appropriations?

MR. CHASE: Annual appropriations.

MR. HOUGHTON: Those are on top of?

MR. CHASE: Yes. Of all the gas tax dollars, a certain small percentage the appropriators dole out every year.

MR. HOUGHTON: But it's on top of the SAFETEA-LU.

MR. CHASE: Yes, sir. If we were going to seek demos on the highway side, that's where we would want to do it, but also have to make sure we have the money to go behind it too.

MR. HOUGHTON: The fill-in, I call it.

MR. CHASE: Yes, sir.

MR. WILLIAMSON: Continue.

MR. CHASE: I just made the point that of the $305 million over the last year we've had to give back in rescissions, none of that can come from congressional demonstration projects. So the worse that problem becomes, the bigger the impact they have on the budget here back home.

MR. WILLIAMSON: So wait a minute. Here's your apportionment, $7 billion, and of that $7 billion, $700 million is reserved for earmarks and demos, can't touch it, leaving you with $6.3 billion in process, and a year later we're going to take $300 million of that back, but you can't take it out of the $700 million reserved for earmarks and demos. You can only take it out of maintain your roads, expand your roads, implement safety programs, and so forth. Nice.

MR. CHASE: When TxDOT looks at funding we receive from the federal government, our watch word remains "flexibility". In September, the National Surface Transportation Policy Review Study Commission held its first field hearing in Dallas. Chairman Williamson was among those invited to address the so-called 1909 Commission and offered suggestions for reforming the federal process that helps fund transportation infrastructure.

In his testimony he urged the commission to upend traditional thinking and embrace innovation. His testimony offered ideas for achieving a more results-driven process like we have here in Texas, as well as examples of how to fully take advantage of the new strategies and opportunities available.

As most everyone in the room has heard us say, the best thing the federal government could do would be to send us however much money they're going to send us, tell us what goals they want us to accomplish, and then hold us accountable to those goals.

Over the years there's been no shortage of studies and blue ribbon panels that have tried to answer the questions that have been raised about the future of the Highway Trust Fund and fuel tax, and it is our hope that now that the wolf is at the door, so to speak, that the 1909 Commission will actually come up with realistic answers to those questions. For that to happen, the commission will need to keep meeting beyond its current deadline of July 1, 2007. Newly sworn-in Transportation Secretary Mary Peters -- who I know we are all excited to work with -- has called for the commission's charge to be extended to the end of the year. We support that extension and remain ready to share details of the Texas experience with our federal partners.

Speaking of SAFETEA-LU, the most recent authorization bill also called for the creation of a Technical Advisory Committee that will assist the secretary in the implementation of federal policy. TxDOT's deputy executive director, Steve Simmons, has been nominated to serve on that committee. We're confident that Steve's experience and perspective will be a real benefit to the committee and to the secretary. But on the matter of federal funding, we will continue to carry our goal-oriented message to Washington.

Let me talk a little bit about federal aviation reauthorization. Vision 100 or the Century of Aviation Authorization Act, in spite of its name, expires on September 30 of next year. As Congress begins work on the aviation reauthorization bill, we will emphasize the need for a more stable source of funding for general aviation airports and opposing any efforts to divert funding from the Airport Improvement Program to other initiatives such as enhancing security in our nation's larger airports. Please note -- I need to say this very clearly -- we do not under any circumstances oppose increased safety and security at the larger airports we all use every day, we simply don't think our state's smaller reliever and general aviation airports should bear the cost.

It's worth remembering that Texas is a block grant state for aviation funds and has been for almost a decade. The advantage of being a block grant state is that all formula funding is provided to the state for distribution providing us with a stronger role in making funding and policy decisions with our local partners. The Government Accountability Office continually praises this block grant program. I should note, that in a similar vein, we would also like to be the first state to have a similar highway program.

The Water Resources Development Act. Congress has not passed a Water Resources Development Act, or WRDA, reauthorization since it expired in 2002. Efforts to pass a reauthorization bill in 2006 stopped short of completion. WRDA is traditionally a project-driven process, the 2006 bill being no exception to the rule which is to say it does little or nothing to alter or expand water resource policy, it is simply a way to bring federal dollars to projects.

As I discussed earlier, we don't like to get into the earmark game, however, WRDA is a little different. The money comes out of the Army Corps of Engineers budget and most projects are entirely federally funded. So in working with our Transportation Planning and Programming Division and our local partners, we have provided our delegation with a list of projects throughout the state that are in need of funding. I should note our biggest concern, however, is ensuring adequate funding for the continued operations and maintenance of the Gulf Intracoastal Waterway.

Public transportation. Since the passage of SAFETEA-LU, we have been and will continue to work with the Federal Transit Administration and key national associations to ensure the interests of our state's transit operators continue to be both protected and expanded.

Again, we don't like to get in the earmark game, however, we believe that when it comes to public transportation, TxDOT is in a position to help our rural and small urban providers on this front. Transit is an earmark game, kind of like WRDA, and if some of you remember, when Senator Gramm was chair of the Senate Banking Committee a number of years go, he actually proposed turning the transit program into a formula program, and you should have heard the howls, even here in Texas where we would have been a huge beneficiary. It was an interesting exercise but it was not successful.

As individual units, our state's small providers simply do not have the ability to force or actively pursue federal funding -- in this case appropriations earmarks -- for much needed capital funding, however, as a collective group they are much more powerful. We believe the pursuit of a statewide earmark for transit vehicles is both worthy and important and we'll continue to work with our Public Transportation Division and the Texas Transit Association to achieve this goal.

As with FHWA, the FTA is now in the process of proposing and promulgating new administrative rules based on actions from SAFETEA. Just recently TxDOT submitted comments expressing our concerns and suggestions to the administration regarding their proposals for the new Job Access and Reverse Commute, New Freedom, and Elderly Individuals and Individuals with Disabilities programs.

Rail relocation and improvements. SAFETEA-LU established a grant program, at much the insistence of Texas, to authorize $350 million per year for local rail relocation improvement projects to mitigate the adverse effects of rail traffic on safety, motor vehicle flow, or community quality of life. Unfortunately, the program has not yet been funded.

Earlier this year we worked our delegation in support of an amendment that would have actually put a few dollars, $30 million, in the pot for FY 2007. Unfortunately, the amendment failed by a handful of votes. There is obvious congressional interest in the program and we'll continue to push to fund the program as well as pursue federal funds to help meet our state's approximately $15- to $17-billion in rail relocation and improvement needs.

In the last year we've seen substantial gains in our efforts to expand and improve the infrastructure in our border areas that our state shares with Mexico, thanks to the efforts of the congressional delegation and the formulizing of the Corridor Program -- yes, I said formulizing. In the past we had to rely on earmarks. With the split of the Corridor Border Program and the making of the Border Program a formula versus discretionary program, Texas has indeed come out a winner. My hat's off to our congressional delegation for that.

We are committed to working with our state and federal partners to expedite commercial and private vehicle flow through our ports, while still doing our part to ensure that our borders are safe and secure. Despite what some might say, we do not view those goals as mutually exclusive.

The transportation committees in Congress have a long history of bipartisan cooperation, with conflicts breaking down along regional and population related factors rather than partisan disagreements. However, the new Congress might express a preference to rely heavily on the gas tax which means it will be diluted and redistributed by Congress and retrieve back the micro-management of Trust Fund money over recent trends to provide more flexibility to the states and encourage new approaches to generating revenue.

With the Highway Trust Fund likely to bankrupt near the end of this decade, as Mr. Bass pointed out earlier, we must educate both sides of the new Congress on the benefits we have already seen from programs such as private activity bonds and transportation development credits. More importantly, we must move quickly to defend SAFETEA-LU's important new programs that are starting to show promise, such as tolling, design-build, and environmental streamlining.

Transportation is in need of additional sources of capital. With the passage of SAFETEA-LU, Congress expanded our ability to issue debt and eased a variety of associated restrictions allowing for greater private sector participation in transportation infrastructure. It has come to our attention that the equity capital community has taken a direct interest in transportation investment. Pension funds, both public and private sector, have something on the order of $7 billion of capital and comprise the largest potential source of investment for our projects. We're working with our financial partners to bring this issue forward.

TxDOT worked hard to get federal law amended in SAFETEA-LU to allow for the use of design-build contracting and now we're in that soft world of rules promulgation. The design-build rules that were supposed to be out for comment last year, November 2005, came out this summer. They were supposed to facilitate public-private partnerships but in certain respects the opposite is true and the proposed rules would impose cumbersome restrictions that would actually further delay the development of critical projects. The proposed rules, if adopted as drafted, would ignore congressional directive. The congressional directive came from Congressman Michael Burgess.

You should know we worked closely with our partner states and associations and submitted comments to the USDOT detailing our concerns with the rule. We also sought and received letters of support from Governor Perry and Chairman Krusee. We are currently awaiting for FHWA to issue amended rules which we expect to occur in the next few months. Again, design-build is going to be one of those areas that we will have to monitor and guard carefully in 2007.

SAFETEA-LU expanded the use of private activity bonds, or PABs, to include highway infrastructure. PABs reduce financing costs due to their exemption from federal tax and are used to attract private investment for projects that have a public benefit. Last month the U.S. Department of Transportation informed us that Texas can move forward with plans to raise more than $1.8 billion for work on State Highway 121 outside of Dallas. However, it has come to the realization of our bond counsel, that an obscure provision in the U.S. Tax Code may inadvertently limit the state's use of PABs. It doesn't prevent their use, but it does appear that it limits their full potential, at least to some degree.

The provision would invoke arbitrage limitations on project revenues such as concession agreements. There are also issues with regard to use of PAB funding for reimbursement for existing project development and the sale of bonds and its application to total right of way purchase. We've begun to work on both the legislative and regulatory fronts to remedy this matter in the most expeditious manner possible.

As you will recall, the ability to earn transportation credits, formerly known as toll credits, on a pro rata basis was one of the wins in SAFETEA-LU, thanks again to Congressman Michael Burgess. Texas could receive up to $2.1 billion in additional toll credits under the new pro rata formula system. However, there has been some discussion of imposing regulatory restrictions on the program by tolling opponents. As with all of our SAFETEA-LU gains, we will be on the defensive this next year to ensure the intent of SAFETEA-LU is preserved.

SAFETEA-LU expanded the ability of state transportation departments to utilize tolls on some federally funded projects. We have seen other states follow our lead on tolling to meet their state's mobility needs. These aren't easy or popular decisions for states but there is a national movement underway that is indeed consistent with TxDOT's financing goals. The Government Accountability Office released a report in June of this year that cited Texas, and Governor Perry specifically, as a leader in using tolls to reduce congestion. We will continue to advocate for the reduction of restrictions on tolling programs and remove their pilot project status to give states, such as ourselves, as many opportunities as possible for new funding alternatives.

As I have discussed with the commission several times before, the Federal Transportation Enhancements Program forces TxDOT to use 10 percent of our Federal Surface Transportation Program formula funds on enhancement transportation projects, such as hike and bike trails, safety improvements, education, beautification, and some historical preservation, rather than much needed highway construction and maintenance. While these projects are not all bad, the lack of flexibility severely hampers the ability of states with a funding shortfall, like Texas, to maximize its federal funds to meet the most pressing needs.

In response to our experiences with Hurricane Rita, we are also strongly advocating to make eligible projects that provide for disaster and emergency related infrastructure preparedness and improvement to aid in evacuations and disaster mitigation.

At this stage, the best we can do is advocate for more spending flexibility including more of our priorities. Internally we are exploring new uses such as billboard relocation. I have asked our research section to look into this issue and how other states are managing their enhancement funds. It's possible that the answer may already be in our hands.

I talked about a lot of things today. Our federal legislative program covers a broad range of topics from where we get the resources we need to meet our five goals to how we spend those dollars across the state. I know this is a lot to digest. I'll be back to continue this discussion next month, especially the dialogue begun today regarding demonstration projects, infrastructure investment, aviation reauthorization, and funding flexibility.

I'll be happy to answer any questions you may have or take any direction.

MR. WILLIAMSON: I think we hit on the ones that were most important to us early. I suspect our legislative partners kind of want to know what we're saying across the country, so we would want to probably get this ready as soon as we could.

MR. CHASE: Absolutely.

MR. WILLIAMSON: Thank you very much.

MR. BEHRENS: We'll go to agenda item number 5. 5(a) will be rules for proposed adoption, the first one concerning Toll Projects. Amadeo.

MR. SAENZ: Good afternoon, commissioners. Again for the record, Amadeo Saenz, assistant executive director of Engineering Operations.

Item 5(a) is proposed rules for comprehensive development agreements. The minute order proposes the adoption of amendments to 27.2, 27.3, 27.4 and 27.5, and adds new sections 27.7, 27.8 and 27.9 concerning comprehensive development agreements.

The amendments and new sections establish criteria for the qualifications of private entities to submit proposals for design-build projects; it adopts conflict of interest and ethics policies applicable to CDA procurements; it adopts procedures for imposing sanctions on private entities participating in the CDA program that engage in prohibited conduct; it establishes additional requirements for the submission and evaluation of unsolicited CDA proposals; and it makes revisions necessary to ensure consistency in processing of both solicited and unsolicited proposals.

The proposed amendments and new sections will be published in the Texas Register for public comment. Comments will be accepted until 5:00 p.m. on January 2, 2007. And staff recommends approval of this minute order. I'll be happy to answer any questions.

MR. WILLIAMSON: Members, you've heard the staff's explanation and recommendation. What's your pleasure?

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.

MR. BEHRENS: Agenda item 5(b) will be rules for final adoption, the first one, 5(b)(1), is under Contract Management, and Amadeo will also present that.

MR. SAENZ: Thank you, Mr. Behrens.

Item 5(b)(1), basically the minute order before you brings forward for final adoption the rules that will repeal existing 9.2 and replaces it with new 9.2 and also adds a new 9.6 dealing with Contract Claim Procedures.

The rules concern contract claims including specifics relating to a claim under a comprehensive development agreement. Under Section 9.2, the rule would repeal the current section and adopt New Section 9.2. We rewrote the rule to put the procedure in a chronological order to make it easier to understand.

The section also has some substantive changes. It adds a requirement that the contractor shall certify the accuracy of the claim. With respect to a settled claim, the section no longer requires the executive director to place a matter on the commission's monthly meeting agenda for approval. The executive director can either approve the settlement himself or ask the commission to approve it. And it adds provisions on simultaneous contract claims and contract sanction proceedings.

The New Section 9.6 deals with authorizing the department and a CDA developer to agree to the use of a new type of contract claim procedure. The Contract Claim Committee would not consider the claim, rather, a disputes board created under the CDA would consider this claim. The rules set mandatory requirements and authorize certain permissive requirements. This way the rule will set the broad framework for disputes for the disputes board, but the parties may also agree in the CDA to specific procedural details to fit unique needs of the project.

There were no public comments on the proposed rules, there were no changes to what we proposed to the commission back in September. We added one paragraph to the preamble to clarify how the new rules affect the deadline for filing a contract claim. Staff requests approval of this minute order.

MR. WILLIAMSON: Members, you've heard staff's explanation and recommendation. Is there a motion?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you. 

MR. SAENZ: Thank you.

MR. BEHRENS: Agenda item 5(b)(2) is also rules for final Adoption on Contract Management, and Zane will present these.

MR. WEBB: Thank you, Mr. Behrens. I'm Zane Webb, director of the Maintenance Division. Good afternoon, commissioners.

MR. WILLIAMSON: Good afternoon.

MR. WEBB: The minute order before you is a rule change to sections 9.10, 9.11 and 9.17 relating to Highway Improvement Contracts. This rule will allow the department to award a building contract for less than $300,000 to the second lowest bidder if the lowest bidder withdraws its bid after the bid opening. This will eliminate re-bidding of the project, avoid time delays as well as any cost for advertising, printing and associated administrative costs.

There were no comments during the comment period. We recommend 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. Hang on a minute, Zane.

MR. WEBB: Yes, sir.

MR. WILLIAMSON: Mike, when I started reading this a couple of weeks ago, I thought a little bit about the worst that could happen. I think the commission has complete trust and faith in the staff, but there may be times when the commission gets asked about this occurrence and commission members maybe are not prepared to respond. So I think that when this happens, it might be a good idea, you know, Zane, how you or Amadeo sends us a notice of an emergency contract?

MR. WEBB: Yes, sir.

MR. WILLIAMSON: It might be a good idea when this occurs to send the commissioners that same kind of notice, because I'm frequently asked about those emergency contracts -- Senator Ogden apparently reads all of them -- and it would probably benefit us to at least have a piece of paper that just says be aware we awarded this to the second bidder, the first bidder was $91,000 but he withdrew and the second bidder was $106,000, and then we won't get caught off guard by a question from the legislature.

MR. WEBB: We can implement that, sir.

MR. WILLIAMSON: Thank you. I appreciate that.

MR. WEBB: We'll take care of it.

MR. BEHRENS: Agenda item 5(b)(3), continuing the rules for final adoption, under Chapter 18, Motor Carrier.

MR. WILLIAMSON: Wait. We may have a quorum problem and I see my very good friend Mr. Johnson in the audience, and there are some very important things that have to be approved today, so I'm thinking that we're going to wait on this one for a minute, and we're going to approve or disapprove everything else and come back to this.

MR. BEHRENS: All right. We'll go to agenda item number 6 under Transportation Planning and we have three minute orders under that topic. Jim, if you'll take us through those three.

MR. RANDALL: Good afternoon, commissioners. Jim Randall, director of the Transportation Planning and Programming Division.

Item 6(a), this minute order approves the 2007 Statewide Mobility Program of the Unified Transportation Program, or the UTP. The UTP is the basic transportation planning document that guides and controls project development and construction for the department. In order to align the UTP with the operational categories outlined in the 2007-2011 Strategic Plan, the department has divided the UTP into two documents: the Statewide Preservation Program and the Statewide Mobility Program.

The Statewide Mobility Program is part of the BUILD-IT operation category and contains all the department's funding categories which enhance the transportation system. Additionally, the 2007-2009 Aviation Capital Improvement Program, as recommended by the Aviation Advisory Committee at the September 29, 2006 meeting, is being submitted with the SMP for your consideration. Also included in the SMP are public transportation project listings and program information for 2007 through 2010. Actual transit program allocations and grant recipients will be approved by future minute orders.

The 2007 SMP will authorize over $14 billion in transportation projects through Fiscal Year 2010. Along with our major mobility categories, the SMP will allocate $765 million in new programs for congestion mitigation to air quality funding, STP mobility funding for our eight largest metropolitan areas, district discretionary funding and other transportation programs for state parks, railroad crossings, and landscaping.

This SMP also includes Strategic Priority funding for pass-through toll projects. Pass-through toll projects are included in this SMP if the pass-through toll agreement is executed or if the commission has authorized the minute order to execute the pass-through toll agreement.

A 21-day comment period regarding the draft 2007 SMP ended November 2, 2006, with no public comments received. With your approval of this minute order, the department may continue project planning and development for Fiscal Year 2007 and beyond. Staff recommends approval of this minute order.

MR. WILLIAMSON: Members, you've heard staff's explanation and recommendation.

MR. HOUGHTON: Yes, it is a biggy. I have a tough time tying things together, and maybe it's just me, in the planning process. I'm looking through reams and reams of paper of projects in there and a tie-back to those projects to that local district, how it's funded.

I think, Mr. Chairman, the original Texas Mobility Fund was authorized at $4 billion.

MR. RANDALL: $4.2- is our original number.

MR. HOUGHTON: We're going to be beyond that number. Are we tying that new number back into this SMP?

MR. RANDALL: This SMP only has the $4.2 billion program.

MR. HOUGHTON: So it does not recognize anything else beyond that.

MR. RANDALL: No, sir.

MR. HOUGHTON: Does it drop in where those Prop 14 dollars are going to be utilized, or are they just lumped in all in one year, and the same thing with the Texas Mobility Fund?

MR. RANDALL: The program, as in this document, is programmed is by the year, the initial year of construction of the project.

MR. HOUGHTON: When I look at any given city any given year, I can't tell what it is. It says Category 2. I don't know where those Mobility Fund dollars are allocated or programmed or the Prop 14 dollars are allocated or programmed.

MR. RANDALL: Yes, sir. That is not in this document but we do have working papers in which we could show that to you.

MR. HOUGHTON: That is something that I would think would be very interesting to tie it back to James's color graphs that he's talking about the ramp-ups in the different programs that we do have, and then I look at the document that you produce year by year by year in Category 2 and I have no idea where Prop 14 or TMF funds are programmed in there.

And this is a question, that's a statement. The question: Do the districts understand that we have issued -- James is upstairs probably -- $2 billion worth of Prop 14 roughly -- do they understand they're being charged on their pro rata fully loaded into those plans? It's not a matter of I get a choice, it's in there.

MR. RANDALL: When we work with the districts we have various worksheets that we send out. It appears in those work sheets with the individual districts.

MR. HOUGHTON: And the MPOs understand that?

MR. RANDALL: Yes, sir, they should.

MR. WILLIAMSON: You said yes, sir, and then they should.

MR. HOUGHTON: I'm not sure they do. And I'm not saying that's your issue, I think that may be our district engineers' issues to disseminate that we are fully loading and they will see a reduction in Category 2 allocation because we have to pay those bonds back.

MR. RANDALL: I guess one thing I should be mentioning, we have a consensus meeting each year with all the eight metropolitan areas, the Category 2 group as well as the Category 3, and that's where we sit down and start looking at scheduling the projects and the amount of funds they should be anticipating, and that's usually done in the spring of each year. So we're sitting there working with representatives from the district as well as the MPO around a table discussing how we're laying this out.

MR. HOUGHTON: They're fully aware that their Category 2 dollars allocation will be dropping to pay those bonds back pro rata.

MR. WILLIAMSON: They should.

MR. RANDALL: I'm saying they should. Thank you, sir.

MR. HOUGHTON: Okay. Amadeo jumped up, I saw him jump up in the back.

MR. WILLIAMSON: Well, I mean, the reality is -- and I don't say this in any way negatively -- this document is a project planning document, it's not a transportation system planning document, and I found some of the same confusion you did six years ago when I first came into the process. It's big, it's complicated, that's why I said it's a biggy. But in the end, we're in the process of making this department a transportation system planning department but we're required, I think by federal law, I think by common sense, to have a project plan in place to be sure that we don't wake up one morning and owe Mr. Pitcock $500 million and we don't have the money in the bank.

MR. HOUGHTON: Oh, I understand that.

MR. WILLIAMSON: Or we wake up one morning and we've got $2 billion in the bank and congestion in Dallas, and Senator West is saying what the heck is going on. So I guess we can only hope that our MPOs pay attention at the consensus meetings until we get to the point that we're no longer planning projects so much as we're planning transportation system solutions.

MR. RANDALL: And when we were programming, we program Fund 6 money first, TMF money second, and Prop 14 third as we scheduled out the projects.

MR. WILLIAMSON: It's a biggy. If you don't want to pass it, I guess we can start shutting the program down.

(General talking and laughter.)

MR. HOUGHTON: Move to approve.

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. HOUGHTON: I said aye.

MR. WILLIAMSON: Motion carries

MR. RANDALL: That's a big thank you.

MR. BEHRENS: Continue on with 6(b).

MR. RANDALL: Okay, sir. 6(b), this minute order accepts the Border Trade Advisory Committee Report. Senate Bill 183, enacted by the 79th Texas Legislature Regular Session amended Transportation Code Section 201.114 concerning the membership of the Border Trade Advisory Committee. Members were appointed to the committee by Minute Order 110583, dated June 29, 2006.

The purpose of the committee created in 2001 by the 77th Legislature is to define and develop a strategy and make recommendations to the commission and the governor in order to address the highest priority border trade transportation challenges. In addition, Transportation Code Section 201.6011 requires the department to develop an integrated International Trade Corridor Plan. The department is required to update the plan biannually and report to the presiding officer of each house of the legislature no later than December 1 of each even-numbered year. The plan must address implementation of the recommendations of the committee.

The committee met on July 19 and September 8 of this year and formally adopted the Border Trade Advisory Committee Report. The report lists strategies, implementation actions, measures and responsible parties regarding trade transportation corridors, coordination with Mexico, safety and security measures, and economic benefits of international trade.

With your approval of the Border Trade Advisory Committee Report, as shown in Exhibit A, it will be incorporated into the International Trade Corridor Plan as required by Transportation Code. Staff recommends your acceptance of the report and approval of this minute order.

MR. WILLIAMSON: Members, we have one witness, our good friend, Buddy Garcia.

MR. GARCIA: Mr. Chairman, commissioners, thank you for having me here today. It's my duty, my honor, as presiding officer of the Border Trade Advisory Committee, to ask for your favorable consideration of our report of the thirty-one member committee that the legislature created last session. As border commerce coordinator, I was named the presiding officer.

A number of challenges exist along the border, as you are well aware, with a number of priorities now facing border security. It was a cross-section of both public and private sector that made up the committee and it was very revealing to see that the goals of both security and congestion relief and legitimate trade don't seem to be exclusive goals, and so if you could consider our kind request for you to look favorably on this report.

Quite a few long and short term principles were outlined and developed and should be very helpful. It was a very rewarding experience for myself and obviously a long term project. So I am just here to ask for your favorable consideration.

MR. WILLIAMSON: Do you have questions or comments of the witness?

MR. HOUGHTON: No.

MR. WILLIAMSON: You're always welcome here.

MR. GARCIA: Thank you very much.

MR. WILLIAMSON: We appreciate your contribution to the state.

Members, you've heard the staff's explanation and recommendation, you've heard the witness testimony.

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

MR. RANDALL: Item 6c. This minute order authorizes the development of highway-railroad grade crossing improvements in the city of Fort Worth as an amendment to the 2006 Federal Discretionary Program. Minute Order 110542, dated May 25, 2006, approved the FY 2006 Federal Discretionary Program. On September 5, 2006, the department received notification from the Federal Railroad Administration that $379,985 was made available for the elimination of highway-railroad grade crossing hazards. These funds were authorized to be used on the congressionally designated South Central high speed rail corridor in the city of Fort Worth.

To utilize these funds, the department was required to obligate the appropriation by September 20, 2006. After receiving approval from the executive director, the Design Division obligated the funds to assure they would not lapse. Your approval would demonstrate concurrence with actions staff has taken.

Staff recommends approval of the amendment of the FY 2006 Federal Discretionary Program to include these highway-railroad grade crossing projects in an amount not to exceed $379,985.

MR. WILLIAMSON: Members, you have 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, members

MR. RANDALL: Thank you, sir.

MR. BEHRENS: Agenda item number 7 concerns Toll Road Projects, and both of those, 7(a) in Denton County concerning 121, 7(b) in Smith County concerning Loop 49, asking your authorization of toll rates. Amadeo.

MR. SAENZ: Thank you, Mr. Behrens. For the record, Amadeo Saenz.

Agenda item number 7a is an item to approve the initial toll rates for the tolling of State Highway 121 from FM 2281 south to Business 121 near the Denton/Dallas county line. This minute order approves the initial toll rate for that section of highway. This road has been open to traffic since July 7, 2006. The installation of the toll equipment, 100 percent totally electronic, has been in place and has been in a test mode.

The RTC has made a recommendation of the toll rates that have been set. The initial toll rates also take into account the result of traffic studies and revenue studies that have been done to establish the revenue reports and also vehicle classifications. They will toll based on vehicle classifications, and as I mentioned, it is a 100 percent electronic toll system. The RTC has recommended an initial toll rate and an escalation schedule. The toll rate is based on an average rate of 13.3 cents per mile. A passenger vehicle making a trip will pay 75 cents with a toll tag, they will pay an additional charge if they do not have a toll tag.

The minute order only adopts the initial rate. The escalation rate will be addressed at a future time, and if adopted, it will be passed under a separate minute order. Staff recommends approval of this minute order. I'll be happy to answer any questions.

MR. WILLIAMSON: We have no witnesses on this. I've got some dialogue I need to have with Amadeo, if you don't mind letting me have it.

Amadeo, this only affects the portion that's been opened up, or does this affect the portion all the way through the concession after it's been granted?

MR. SAENZ: This affects the portion that has been opened up based on the toll rates that were put in place and recommended by RTC.

MR. WILLIAMSON: And a person watching us from a House or a Senate member's office further north up 121, the subject of the pending concession, would not want to give the wrong impression that this has anything to do with setting either the toll rate or the escalation rate of that portion of 121.

MR. SAENZ: That's correct. This is only the portion that is open today.

MR. WILLIAMSON: And are we getting any better response in our electronic tolling tests?

MR. SAENZ: Yes, sir, we are getting some pretty good response. We're ready to, in essence, start the actual collection. The tests that were run, the checks and balances proved to be good. This is a first of its kind in the nation, totally electronic, this is a video tolling system. This is only a temporary system. As we go through this CDA and we get the CDA developer onboard, they will come back and put in the permanent tolling system on this section as well as construct the section in Collin County and install the tolling system.

So this is a temporary tolling system based on 100 percent video tolling, and of course, it does have the capability, we've been working with NTTA to be able to read the tags as well, but you don't have to have a tag to go on the system, it will take care of it through a video.

MR. WILLIAMSON: And if you go across without a tag probably what you're going to pay is a lot more than if you'd have had a tag.

MR. SAENZ: If you go across without a tag, we have an additional video tolling premium of 33 percent above the tag.

MR. WILLIAMSON: And we will send a bill to the person to whom the car is registered.

MR. SAENZ: That is correct, yes, sir.

MR. WILLIAMSON: And if they don't pay the bill?

MR. SAENZ: Then if they don't pay the bill, then, in essence, it becomes a violation and we have a procedure to go back and to collect as a violation. When we send the bill it says you drove across this facility, you don't have a toll tag, if you had a toll tag it will cost you so much, if you'd like to get a toll tag, here's where you can go get a toll tag.

MR. WILLIAMSON: Members? May I have a motion?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you.

MR. SAENZ: Just as an aside, we've been averaging about 100,000 transactions per day on that section of 121.

MR. WILLIAMSON: What did we initially project or did the area initially project?

MR. SAENZ: I don't have that data.

MR. WILLIAMSON: Less than that?

MR. SAENZ: It was less than that.

MR. WILLIAMSON: And all of the revenue from that particular project will come down to Austin for Strategic Priority?

MR. SAENZ: That money comes into Fund 6, and of course, that revenue above operation and maintenance will then go back to the region for the region to decide how to use it.

MR. WILLIAMSON: In other words, that is local citizens paying the toll in order to further build infrastructure in their area.

MR. SAENZ: That's correct.

MR. WILLIAMSON: Citizens voluntarily taxing themselves in order to improve the transportation infrastructure in their own area.

MR. SAENZ: Right.

MR. WILLIAMSON: Imagine that.

MR. SAENZ: And of course, last month you passed the memorandum of understanding between ourselves and the RTC that, in essence, put in place the mechanism how the money will go back to the RTC.

MR. WILLIAMSON: Imagine that. Proceed.

MR. SAENZ: Agenda item 7(b) is also an approval of initial toll rates. This is for Loop 49 in the Tyler District from SH 155 to FM 756. This minute order also approves the initial toll rates. Segments 1 and 2 of the proposed outer loop for Tyler are open. Again, this is also an electronic toll system, has been open and also under test.

The toll rate for this facility will be based on 10 cents per mile for a passenger vehicle making a through trip and paying with a toll tag, resulting in a toll rate of 50 cents. In setting the toll rates, the commission considered the results also of traffic and revenue studies. We also have a recommendation from the Northeast Texas RMA. They passed a resolution on September 5 supporting the toll rates.

The minute order also only adopts the initial toll rate and escalation rates will be addressed at a future time and will require a separate minute order. Staff also recommends approval of this minute order.

MR. WILLIAMSON: Members, we have one witness on this matter. Would you care to hear from the witness first?

MR. HOUGHTON: Yes.

MS. ANDRADE: Please.

MR. WILLIAMSON: That would be Jeff Austin, III, a familiar face to this commission, a great transportation leader in the state of Texas.

MR. AUSTIN: Thank you, commissioners. I'm Jeff Austin, chairman of the Northeast Texas RMA.

I really applaud Mr. Bass's presentation because what he shared with us is why we exist. We decided in a rural area, one of the first rural areas to really implement a toll. Today will be a great day where we can start collecting them in a couple of weeks and begin to start bringing that revenue back to work on transportation projects in our area.

MR. WILLIAMSON: Wait a minute, I thought that money was coming to us for Category 12.

MR. AUSTIN: It's in the fine print.

(General laughter.)

MR. AUSTIN: Also, we couldn't have done this without our district engineer, Mary Owen and her staff, and the support of the MPO. It's really been a tremendous partnership to get us to where we are. This is just the beginning. I want to say thank you for all of your help, and we'd ask for your consideration.

MR. WILLIAMSON: I think the thanks, Jeff, is directed to you and the leadership of Northeast Texas who decided to take the step. And we say over and over again, and we really believe this, that the public we all serve, not the inside crowd but the outside crowd, has a lot of common sense and if you just explain the problem, explain the solutions.

MR. AUSTIN: We've been like so many others coming down asking for those Strategic Priority dollars, they don't exist anymore, and we've tried to take this in our own hands.

MR. HOUGHTON: We just leveraged them. We're leveraging the Strategic Priority dollars.

MR. WILLIAMSON: Well, we are really appreciative of all the local leaders, from San Antonio to Brownsville to Gainesville and Sherman and Austin. We're appreciative of them stepping up and stepping out.

Members, you've heard the staff's explanation, the testimony, and the staff's 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. Congratulations Northeast Texas.

MR. BEHRENS: Agenda item number 8 concerns Pass-Through Tolls and asking for the ability to authorize us to execute agreement with Titus County.

MR. SAENZ: Thank you, Mr. Behrens. Again, Amadeo Saenz.

Item number 8, the minute order before you is for final approval of the department to execute a pass-through toll agreement with Titus County for the construction of improvements on US 271 -- we're calling that the West Loop -- from US 67 to FM 3417, also on FM 1000, part of the East Loop from the new section of US 271 to FM 1735, and also on FM 2348, also part of the East Loop, from US 67 down to State Highway 49.

The department and Titus County have agreed to a reimbursement pass-through toll amount of $168,620,000. The per-vehicle reimbursement will be based on 15 cents per mile. The minimum amount to be reimbursed in any one year is $8,431,000 and the maximum is $16,862,000, making the payout in not less than ten years but not more than 20 years. The commission had approved the initial approval in a minute order on March 30, 2006, and we have been negotiating, working with Titus County. Titus County has gone out there and passed a bond election, that's why we waited, and they were successful and they're ready to get started on the projects.

When we look at the projects themselves, US 271 is on the Texas Trunk System, it is a project that goes through the community of Mount Pleasant. The locals had been working on getting that rerouted around the community for many, many years, they just could not fund it. To that project the county has agreed to fund at least 50 percent of the new right of way -- that was above and beyond. It is a project of statewide significance because in the trunk system there is some regional and there is some tremendous economic opportunity that, by having this route outside of town, they will be able to have.

The other two projects basically will make up what's called an East Loop around Mount Pleasant, 271 makes the West Loop, the other two projects make up the East Loop, so in essence, we now have a loop for the community. The other two projects are more regional in nature, even though they do form a loop. The county has agreed to fund all the requirements which is normally 100 percent of the right of way, and in addition to that they're funding 25 percent of the additional construction.

Staff recommends approval of the minute order.

Looking at the indices, as I mentioned, the 271 project is regional but has got very tremendous statewide potential. It is a long term project solving a long term solution. As far as congestion reduction, right now every vehicle has to go through the community, make several turns, now they will be able to go completely around, so it has a high congestion reduction. Air quality improvement will also be high because you're moving traffic out of the community. It's got significant safety improvements in that you're going from a two-lane/four-lane non-divided to a four-lane divided facility. And of course providing economic opportunity in that you have now opened up a whole new area for the community to start moving and promoting people to move into that area. The asset value or the revenue-to-cost ratio is 25 percent.

MR. WILLIAMSON: That's a little bit higher than normal.

MR. SAENZ: That's higher than normal. This facility is a facility that had a 25 percent asset value, so it is one of the projects that was needed, unfortunately we could have it funded. And part of the problem is that this project was more out in the rural area, it was part of the trunk system but it was already what I would call a poor boy four-lane, it was a four-lane undivided so it didn't qualify for the Phase 1. This will allow the project to move forward.

The other two facilities are the FM roads that will make the eastern portion, they're more regional and local in nature, that's why the locals are providing some money. They also will serve as long term and mid term solutions. Congestion relief also will be moderate because they have less traffic. As far as air quality, it's also moderate and low because of the less traffic that you're moving but you do get some benefits.

When I look at the safety, it's the second level of what we call possible and potential safety improvements because you're not doing it as a divided, we're building back just a two-lane facility. And of course, the asset value for these two, because of the lesser traffic, even though the projects cost is considerably low, are somewhere around 10 percent.

MR. WILLIAMSON: That's a little bit more of a stretch.

MR. SAENZ: Right.

MR. WILLIAMSON: We have one witness, members. Commissioner Mike Fields.

MR. FIELDS: We appreciate you staying so long and we're sorry you had to stay so long, but we have business we have to attend to.

MR. FIELDS: That's okay. Chairman Williamson, members of the Transportation Commission, and Director Behrens, good afternoon. My name is Mike Fields and I'm commissioner of Titus County. I just have a few things I want to say to you.

Together with the State of Texas and this commission, using the pass-through funding, we are building needed highways for today and tomorrow at today's prices. We want to commend the Atlanta District office led by Bob Ratcliff, and the Austin staff directed by Amadeo Saenz, for their diligence as we crafted this plan. We thank you as members of the commission for your vision in creating the pass-through program. We are proud to be a county that is able to step forward early in the program and say yes, together we can get this done.

Thank you.

MR. WILLIAMSON: Wait a minute, Mike. Those are kind words, we want to thank you for saying that. Partnership is what we look for.

Questions for this witness?

MR. HOUGHTON: Congratulations to you too.

MS. ANDRADE: Thank you very much.

MR. HOUGHTON: Thanks for coming.

MR. WILLIAMSON: Thanks for coming all this way and sticking it out.

MR. FIELDS: Thank you.

MR. WILLIAMSON: Amadeo, would we lovingly call this the Former Senator Bill R Freeway?

MR. SAENZ: If you want.

MR. WILLIAMSON: But this is what the senator had talked to us about years earlier.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: I guess we can go tell him that Senator, you only had to wait seven years for us to get to it. And we'll call the exit the New County Judge Sam Russell, Former House Member Sam Russell Exit -- if we approve it.

MR. SAENZ: Staff recommends your approval.

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. Somebody please inform the senator and please inform the county judge, and we're glad this program worked for you. It was designed for exactly this. We're proud to see it. Thanks for staying today.

MR. BEHRENS: Agenda item number 9 is our contracts for the month of November, both Highway Maintenance Contracts and Highway Construction Contracts. Thomas.

MR. BOHUSLAV: Good afternoon, commissioners. My name is Thomas Bohuslav, director of the Construction Division. Item 9(a)(1) is for the consideration of award or rejection of Highway Maintenance and Building Construction Contracts let this month. We recommend award with the exception of one.

It's an Austin District, Travis County, Project Number 4001. It's a total maintenance contract for the toll facilities around the Austin area here and it came in a bit high and we'd like to go back an re-scope the project some, see if we can scrub it down some, and also solicit more bidders -- we only had one bid.

Staff recommends award with the exception noted.

MR. WILLIAMSON: Thomas, how many total maintenance contracts do we have around the state? Do we have many?

MR. BOHUSLAV: We have Waco, we have had two, previously and one in Waco now currently, and then we have some forms of total maintenance. We have one in Houston on 610; we have a striping and marker total maintenance contract in the San Antonio area. Mike, you might know of some others.

MR. BEHRENS: I think the San Antonio one extends into the Yoakum District on Interstate 10.

MR. BOHUSLAV: I think that's all.

MR. WILLIAMSON: We almost always follow your recommendations and I'm not inclined to not follow it, I just think if we're going to get more and more into the world of transferring risk to the private sector, whether it's on our construction or our financing or our maintenance, we're probably going to have to encourage more private sector contracts and not less. To get people past the learning curve where they can figure out what we want and where we can figure out how the private sector is going to respond.

MR. SAENZ: Just for the record, Amadeo Saenz. Really when we looked at this contract and we evaluated it, this is the contract that we were going to put in place to manage our Central Texas Turnpike project, and we only received one bid. When we looked at the standards that we were using, we feel that we can go back and review those and make some changes to those to be able to hopefully get a better price, and also try to go out there and get some competition.

MR. WILLIAMSON: I don't want to mislead you, I'm not disagreeing with your recommendation at all, because as you know, I personally don't like one bid contracts anyway, I just think that if we're going to go down the path of asking the private sector to take -- we're going to get Rod into the highway maintenance business here before this house moving deal is over with, and we want him to be competitive.

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.

MR. BOHUSLAV: Item 9(a)(2) is for consideration of award or rejection of Highway and Transportation Enhancement Building Construction Contracts let in November. We recommend award of all projects. We note that we have 4.3 bidders per project this month. Any questions?

MR. WILLIAMSON: The price of oil went down, therefore, the price of asphalt went down?

MR. BOHUSLAV: It has come down some, not quite at the same rate.

MR. WILLIAMSON: And the Chinese are through rebuilding China so the price of steel is coming down?

MR. BOHUSLAV: Slightly.

MR. BEHRENS: Stabilized.

MR. BOHUSLAV: Better word, yes.

MR. WILLIAMSON: And the Republic of Mexico is getting permission to send more and more cement our way?

MR. BOHUSLAV: It will be coming more so in the future, yes.

MR. WILLIAMSON: I'd say that's bad for those industries and good for the taxpayers of this state. Do I have a motion?

MR. HOUGHTON: So moved.

MS. ANDRADE: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

MR. WILLIAMSON: Motion carries. Thank you.

MR. BEHRENS: Agenda item number 10 is the Routine Minute Orders, they're all listed for you. They've all been duly posted as required. I don't think any of them individually impacts any commissioner. So I recommend approval of the Routine Minute Orders.

MR. WILLIAMSON: Your staff and you have had the opportunity to look through this extensive list of miscellaneous items?

MR. BEHRENS: Yes, sir.

MR. WILLIAMSON: Do you have any questions or comments about these things?

MR. HOUGHTON: None. Move to approve.

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. Now, which did we skip, Mike?

MR. BEHRENS: We'll go back to agenda item number 5(b)(3) under Rules for Final Adoption and this will be rules concerning Chapter 18, Motor Carrier.

MR. WILLIAMSON: I need to ask Mr. Jackson a couple of questions.

It is probable, Mr. Jackson, that I'm going to lose my quorum during the consideration of this minute order. I assume that the commission will not be able to take action on the minute order if that happens.

MR. JACKSON: Yes, sir.

MR. WILLIAMSON: Is there anything in our rules or in the law that is tantamount to automatic adjournment when the quorum is broken?

MR. JACKSON: No.

MR. WILLIAMSON: So will we also formally adjourn or are adjourned by the fact that there's not a quorum?

MR. JACKSON: When you lose your quorum, you can continue the meeting as long as you don't take any action.

MR. WILLIAMSON: So we can get our testimony on the record and give consideration to it and so on.

MR. JACKSON: Yes.

MR. WILLIAMSON: Okay. Thank you very much.

MR. BEHRENS: Carol.

MS. DAVIS: Good afternoon. For the record, I'm Carol Davis, director of TxDOT's Motor Carrier Division.

The agenda item before you is the final adoption of proposed amendments concerning insurance requirements for household goods carriers operating vehicles weighing 26,000 pounds or less. These amendments are necessary to implement provisions of House Bill 2702 passed during the 79th Legislative Session and effective September 1, 2005.

House Bill 2702 amended the Transportation Code to require all household goods movers to register as motor carriers regardless of the weight of the vehicles they operated. It also deleted alternative registration and insurance options for those household goods carriers formerly known as Type B carriers.

The amendments were first proposed at the November 2005 commission meeting and were deferred during the February 2006 commission meeting, and were finally removed from the rules package adopted during the April 2006 commission meeting to allow TxDOT time to further study the issue of minimum vehicle liability insurance requirements.

These amendments before you establish a minimum liability insurance limit requirement of $300,000 combined single limits for household goods carriers operating vehicles weighing 26,000 pounds or less in intrastate operations. This amount was selected based on our research which is detailed in the preamble before you.

The Motor Carrier Division received 53 comments during the public comment period. Fifty of those were written comments and three during the public hearing. The majority of the comments pertained to compliance with Government Code 2006, proper publication of rules, and the minimum liability insurance limits. We have evaluated these comments and the responses to those comments are included in the preamble. We are not recommending any changes to the proposed rules as a result of those comments.

And we're recommending adoption of the rules as proposed and I'd be happy to answer any questions.

MR. WILLIAMSON: We have witnesses. I do want to ask one question. I know at our last meeting Mr. Johnson took the time and trouble to drive all the way over to Denton which was 31 miles, about, from his house -- a lot cheaper on him up there than it was coming down here -- and he had some extensive statements into the record indicating that he felt like certain actions had not been taken or had been taken erroneously or should have been taken.

Did we ever respond to him or did you just respond to me at my request? I know you responded to me.

MS. DAVIS: We prepared a letter for your signature to Mr. Johnson. I am not sure where that is.

MR. WILLIAMSON: And do we remember if I ever sent that letter? I may not have sent it, I may have decided, after looking at it, that it wasn't appropriate.

Witnesses are Mr. Johnson, former chief of staff to John Sharp, John Esparza -- I'm sorry, that's wrong -- and Richard Latter. Rod, I'm going to give you your choice, who do you want to go? You don't get to choose about John but between you and Richard.

MR. ROD JOHNSON: I think we'll let Richard go and let you wrap and then we'll let John finish. Richard, state your name.

MR. LATTER: My name is Richard Latter and I'm with Student Movers in Houston.

I'm a small business and I use independent contractors. I will and they will, the small business moving companies, will go out of business with these new laws or these new rules. I can't go over everything in three minutes but the new procedures, the new laws that were designed to put the small moving companies out of business and we need to have a solution to this problem.

The solution is to make the rules to comply with the Texas law Chapter 2006 that requires the impact of the new rules on the small business to be minimized by providing an alternative registration and reporting for small business.

And I thank you very much and if there's any questions.

MR. WILLIAMSON: Well, first of all, we appreciate your patience in waiting on us. I will tell you my viewpoint of this, and it's only been fashioned through my dialogue with Mr. Johnson. If my viewpoint needs to be corrected with your observations, I would invite you to observe.

At one time either the legislature or the commission -- I guess the legislature recognized two different classes of trucks, and almost two years ago decided to do away with those classes of trucks and require the same insurance of everyone. I can't comment on the other arguments Mr. Johnson makes about special treatment of small businesses because that would be the subject of litigation, I'm sure, but it looks to this commission like it's a pretty simple matter. At one time there was a Class A and a Class B, the legislature wiped that out, there's only one class, and that class is you all the way up to Mayflower, and you're required to have the same insurance.

It's our job to adopt rules that implement that law, whether we like the law or not, and it's possible we don't like the law. That's sort of how we see it. Do you see it any differently?

MR. LATTER: I think it's going to hurt the public also very much. You know, a lot of times people call us because the big van lines are so busy, they have a week, two weeks behind, can't even book with them. This insurance that did go through -- and I understand about the laws, that's the rules -- but the problem is that most of us movers work on the weekends, the big van lines work every day because they're running the route list going up and down, dropping off. This insurance rate to go up to $300,000, 80 percent of my guys just work on the weekends, just on the weekends, and that's to provide for their families, or they work for me and two or three other moving companies. There is no way possible that they can stay alive or we can stay alive with this rate up to $300,000.

I guess you guys already said that's the price, you've already made that determination. I wasn't aware of the actual price, that it went up that high. I'm just looking for anything that we can do to help us out because I really believe it's going to open up a can of worms, there's going to be a lot more bandit movers. The guy with the one truck will be able to fly under the radar. And I don't know if you remember ten years ago how much problems there were with people holding furniture hostage, I don't know if you guys ever heard about all that. But there's a lot of legitimate moving companies and we want to stay legitimate, we just want to be able to make a living right now. We're not going to be able to, it will be that simple.

MR. WILLIAMSON: Questions, Hope?

MS. ANDRADE: No.

MR. WILLIAMSON: I really do appreciate you sticking around to express your opinion.

MR. LATTER: Thank you very much.

MR. WILLIAMSON: Mr. Johnson.

MR. ROD JOHNSON: Mr. Behrens, Chairman Williams, Commissioner Andrade, my name is Rod Johnson. I own a local moving company called The Apartment Movers and we use independent contractors to move people from one apartment to another, and predominantly locally.

One of the questions I get asked the most often is what is this law about, what are these rules about, where did it come from, where is it going. Same kind of question I'm sure you ask yourselves, because it is confusing. Is it consumer protection? The answer is no because the same rules that apply to big movers and small movers applied then and they'll apply now. Is it about insurance? It really isn't because today, as an example, I have higher limits on all of my equipment and broader coverage than is required in these new rules.

What's it really about then? It's about competition, and I don't think anyone got too creative to figure that out. Why? What's happening here? This law was designed to make it prohibitively expensive or functionally impossible to use independent contractors in local moving, like some of what you just heard.

The first answer I get back from people is: Isn't that illegal? And I'm not an attorney, but I say, yes, depends on how you do it to them. The first thing you do is you make all the money that you pay to your independent contractors subject to workers' compensation. That's a wow in a state that doesn't require mandatory workers' compensation. Now you've got this little tiny group in this one industry and it's mandatory on all the money you pay them. That's a start.

Let's finish them off. Let's take the moving company, let's take me, I've got this big umbrella that covers everybody that I touch or even think about and all these movers underneath me and they have insurance, and now we're going to put another insurance policy on them, so that every time I contract with somebody, I'm going to have to put this guy's VIN number and all this on the policy and make sure he's covered. Issue him a CAB card, he goes out, works, end of the day he comes back, take him off, CAB card goes away. So every day it's back and forth.

Doesn't sound like much initially but now we've doubled, tripled, or possibly with the overhead, quadrupled the cost of using independent contractors. Now, where is that headed? Well, that's headed back to the days when there's nothing but employees, nothing but unions, nothing but monopolies, and we've evolved from that. Ladies and gentlemen, we're headed back there in a hand basket.

So how do you do something like this? It boggles the mind. The first time I heard about it, some senators called me up and said, We've got some bills we'd like you to read. So I went down to Austin, here I am. You read some of them, some of them are kind of interesting, some didn't sound very interesting, and then there was this House Bill 341. Now, that today is the same language that's tacked on the back of 2702.

I decided I'd go to every single senator's office because I had to know where did this come from, where was it going, who was behind it, it didn't make any sense. And as I'd gotten about halfway through the senators' offices, I realized that it didn't have any support, in fact, it had wide opposition, lots of opposition. It had been placed on the local and consent calendar and enough of these senators were about to take it off. Why? Get it debated before the Senate? No, they were going to kill it because there wasn't enough time to debate it and they knew that. It's a practical, functional matter. They wanted to kill it.

I continued to go to the senators' offices, one after another one, and I finally wound up in Senator Armbrister's office with a gentleman by the name of Nick James, and Nick James told me what it was really all about. I'm going to delete all the expletives. This is part of a conversation.

"Rod Johnson: Hi, my name is Rod Johnson. I'd like five minutes of your time to talk about HB 341.

Nick James: What do you want?

Rod Johnson: I own a small local moving company and this bill is going to hurt a lot of small and minority-owned businesses. A lot of the senators agree and are going to take it off the local and consent calendar so it can be debated on the Senate floor.

Nick James: That would kill it because there's no time left.

Rod Johnson: Yes, we all know that. But I told the senators I'd come down here and ask before this happens to see if there's some study or a pile of bodies or a lawsuit somewhere we aren't aware of. Where did all this come from?

Nick James: Look, Rod, TMTA is a big supporter of ours and we try to get their laws passed, that's all there is to it.

Rod Johnson: Okay. I just wanted to make sure you didn't have any skin in this game or anything because I'm sure there are more than enough senators I've talked to that think this is a really bad law.

Nick James: Look, it scared the (expletive deleted) out of us when they first brought it to us and we didn't want anything to do with it. Then they brought it back and showed us how they were going to do it to you guys and we decided to go along with it.

Rod Johnson: Okay. Well, I'm sure the other senators will take it off the calendar. I just wanted to make sure that you didn't have any skin in the game, any uncovered losses, a death, a pile of bodies someplace.

Nick James: Look, Rod, it's like this, we're going to (expletive deleted) you guys with this law or (expletive deleted) you guys with another law."

Pardon me for pointing at you. Every time I read that, it infuriates me. I don't know what you would feel like if you were on the other side of that. It's horrible.

I was still in disbelief and then the law got passed. We got these calls from the senators -- their secretaries, actually -- the last day of the session and they said, We killed it, Rod, it's gone, it's dead, don't have to worry about it. The next morning I got the other calls: Rod, they tacked it on the back of 2702. He did just what he said he was going to do, he created another law, slapped it on the back, (expletive deleted) us.

Then I got this message from the executive director of Southwest Movers Association, the bulletin, his comments on it. I'm going to just read portions of this, I've already given this to you as part of earlier records.

"I wish I could say 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. Terry found out firsthand, as all elected officials do, that the grease that really turns the political wheels is money. Fortunately, with very targeted and well thought out contributions, we were able to prevail in our legislative bid to pass the household goods legislation."

Money, criminal intent. These are interesting components in a dangerous cocktail. The only thing you're left missing is damage. I've come to you repeatedly, every chance I had, every chance you'd listen to me, to try to avoid that damage because that is the last dangerous component of this cocktail, very dangerous.

MR. WILLIAMSON: What do you mean by that?

MR. ROD JOHNSON: I mean when you have money, you have intentional damage and then the intentional damage and the actual damage, you've got a dangerous cocktail.

MR. WILLIAMSON: What does that mean? Are you threatening me?

MR. ROD JOHNSON: No, Ric, I'm not threatening you. I've got places I don't want any of us to go, I want us to solve this. What does it mean? Twice, unfortunately, in my brief professional career I've been forced to file federal racketeer influenced corrupt organization charges. I hate it, it's disgusting. The good news is that none of those charges have ever been thrown out of court, and yes, I have put people behind bars. I don't ever want to go there again. I have one person that has 47 years left to repay me for the damages they've done. I've done it when I was repeatedly threatened, when there was damages and when I thought the law would stand behind me, and they did.

I don't want to go back there. I said this before, we're all intelligent, we can solve this. We have a solution, those comments were the solution that's in front of you, and I know there may be differences of opinion on that, I'm willing to explore that and to expand on it.

The Texas DOT opposes implementing Chapter 2006, and that's what we're really talking about here -- or at least what I'm talking about -- and they have a very interesting track record on that. Chapter 2006 is the law that says you try to mitigate the impact of new rules before you implement them and you're supposed to do a study to see if there's going to be impact, and if there is, then you try to mitigate it. Alternative registration, that type thing, things that are already in the rules.

The first time these rules were published, proposed rules were published, they were supposed to do the study before they did it. That's the law, that's part of the law, Chapter 2006 you must do the study before you do it. Did they do it? No.

MR. WILLIAMSON: Have they done it now?

MR. ROD JOHNSON: Yes, they've done a study.

MR. WILLIAMSON: Then what's the rest of your testimony?

MR. ROD JOHNSON: The second time that they published the rules, they didn't do it again.

MR. WILLIAMSON: What's the rest of your testimony?

MR. ROD JOHNSON: And the third time they did the study but they didn't follow any of the rules, and the fourth time they left out everything regarding independent contractors, there's no study of that at all, and that's what the target really is here is to try to make it financially unfeasible to use independent contractors in the state of Texas. It's a movement back towards monopolies, back towards unions, and we've evolved past that, we broke that bond, or thought we did, but it doesn't look like it.

I think you've got a clear choice in front of you, and maybe you don't have a choice today, I'm not sure about the quorum issue, Mr. Chairman. But you have one of stated intentional harm, no documented public need or benefit on one hand. On the other hand you've got a solution that's come to you from the industry that you regulate, the majority of it, the overwhelming majority of it. It's clear, it's straightforward, it's the law, as I see it, it's beneficial to small businesses and to the public.

MR. WILLIAMSON: Thank you.

MR. ROD JOHNSON: Thank you.

MR. WILLIAMSON: Mr. Esparza.

MR. ESPARZA: Mr. Chairman, thank you. Commissioner Andrade, Mr. Behrens. I'm John Esparza, the new executive director of the Southwest Movers Association, and on behalf of our membership which includes more than 325 moving businesses in the state -- and I might point out that those are more than 90 percent small businesses in the state -- I'd have to respectfully disagree with my colleagues this afternoon, and reiterate our approval and support for final passage approval of the changes to the Transportation Code.

I wanted to be brief and say thank you for all your work. I know it's been an issue that's been on the table for a year, as was mentioned earlier by Ms. Davis, since November of last year. Thank you for all your attention to this matter, and I again reiterate our support for this passage. Thank you.

MR. WILLIAMSON: Questions?

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Thank you, Mr. Esparza.

MR. WILLIAMSON: There being an absence of quorum, the commission is not able to act on this matter at this time.

Mike, is there further business?

MR. BEHRENS: No further business.

MR. WILLIAMSON: Do we have any reason, Mr. Jackson, to go into executive session?

MR. JACKSON: No, we don't.

MR. WILLIAMSON: Do I have the most privileged motion? Do I have anybody left? Let's go ahead, what the heck. You move, I'll second.

MS. ANDRADE: I move.

MR. WILLIAMSON: I second the motion to adjourn at 2:30 p.m. One way or the other, we're adjourned.

(Whereupon, at 2:30 p.m., the meeting was concluded.)