TEXAS TRANSPORTATION COMMISSION STAFF BRIEFING

Dewitt Greer Building
125 East 11th Street
Austin, Texas

7:30 a.m. Thursday, November 16, 2000 Briefing

COMMISSION MEMBERS:

ROBERT L. NICHOLS
DAVID M. LANEY

DEPARTMENT STAFF:

CHARLES W. HEALD, Executive Director
MIKE BEHRENS, Asst. Executive Director, Engineering
HELEN HAVELKA, Executive Assistant, Engineering Operations

P R O C E E D I N G S

MR. NICHOLS: I'm showing 7:32, November 16. I call the briefing of the Texas Transportation Commission to order. Agenda was filed with the Office of the Secretary of State, 8:52 a.m. on November 8. Staff presentation.

MR. BEHRENS: I think I'll introduce it. Mike Behrens, Engineering Operations.

Today, commissioners, we have with us Zane Webb, director of the Maintenance Division, and Joe Graff, engineer of Maintenance for Zane. They're going to talk about the Texas Maintenance Assessment Program.

What this stemmed from, of course, yearly we do pavement evaluations on all the pavements in Texas, a sampling of that, and of course when we do that, a lot of different eyes look at those evaluations from the various districts; some we contract out. Some of the things we saw, I guess just maybe because there's different eyes looking at it, we thought that maybe we needed to sort of qualify some of that information.

So initially, Zane and Joe Graff and Ken Seiler from the FHWA, they looked at -- drove every mile of interstate in Texas, one direction, and gave us an assessment of that, and they will talk some about that. After we saw that, they decided to go out and look at all the rest of the roadways, the US, the state and the FM system, and sample that system. And I think we've got some good information, and it gives us a good indication on what the overall condition of our highways are. That would be pavements, our traffic signs and operational things, and then the roadside and everything that the public sees when they drive down the roadway.

MR. LANEY: You said that was a sampling?

MR. BEHRENS: Yes.

MR. LANEY: I think they ought to drive all of the miles of the whole thing.

(General laughter.)

MR. BEHRENS: We will take that into consideration. And with that, I'll turn it over to Zane and Joe. And let me say that Joe probably did all of the work, he came up with the system to rate and things like that, and he's really done a good job on it.

MR. WEBB: I'm going to turn it over to Joe in just a minute. I'm Zane Webb with the Maintenance Division. Joe, as Mike said, primarily built this program, wrote it. The impetus for doing the program was actually the total maintenance contract; that's what actually pushed us into this, because we needed a way to evaluate what condition overall the roadways were in before, during the total maintenance contracts that we were doing. So this kind of pushed us into doing something that we'd wanted to do for a long time and we had to put the resources at that time into doing it.

The program itself is relatively simple, easy to do. Joe, like I said, wrote it and we got a programmer on board that kind of helped out after we got moving on this. That having been said, I'm going to turn it over to Joe and let him give you a little bit of the technical portion of it and how it's done to assure you that what we're doing is statistically dependable.

I guess the important part of this is that we're using this program now and Finance is using this program and the results from it for our GASB-34 data.

MR. NICHOLS: Did you say Gatsby?

MR. WEBB: GASB.

MR. GRAFF: Governmental Accounting Standards Board.

MR. NICHOLS: Okay.

MR. WEBB: As a result, the information could be scrutinized pretty closely, not only by us but people outside the agency.

That having been said, I'm going to turn it over to Joe.

MR. GRAFF: Thank you, Zane. I am Joe Graff, director of the Maintenance Section of the Maintenance Division, and this particular process is something that I've seen the need for for the 14 years I've been in the position, so I'm just really appreciative of the support that Mr. Webb and the administration, commission has given maintenance to get this thing going.

On page 1 -- I know this is a pretty massive document -- but page 1 is kind of just the briefing and I'll go through that. Zane has gone through most of the background.

The TxMAP process -- we call it TxMAP which is Texas Maintenance Assessment Program, and actually Texas is about the third or fourth state in the union to develop a process like this. Florida was the first, probably about ten years ago; Washington state has what they call the MAP; they call it the the Maintenance Accountability Process. And then a number of other states are developing similar processes. There's been some national research: NCHRP 14-12 is a research project where the National Cooperative Highway Research Program researched this. And I kind of stole a lot of the ideas and stuff from that research project and from Florida and from Washington state.

The evaluation -- if you'll look on page 2 is just a copy of one of the actual forms that we used to do the assessment -- we look at 21 different elements in three different components.

The pavement component: we look at rutting, cracking, failures, ride, edge drop-offs, and then shoulders. Traffic operations: we look at raised pavement markers; we split signs into large signs and small signs, because the big green signs are different than the small signs; striping, which includes the pavement graphics like stop bars and those kind of things; attenuators and delineators.

Roadside: we look at mowing and herbiciding; litter, sweeping; trees and brush, channels and ditches; encroachments which includes things like signs or big brick culvert head walls or crosses or those type of things; and then guardrails and mailboxes.

And then we give it an overall what we call a public rating, how we think the public would rate it if they were to rate it.

MR. LANEY: On a scale of what: up to five?

MR. GRAFF: Yes, the ratings are one to five with five being -- on the very bottom you'll see Ratings are based on the following: excellent, new or like new is a five, like a brand new pavement is a five, no rutting, no cracking, no failures gets a five; good is a four, no work needed; three is kind of a borderline condition -- and this performance standard that you see here in the middle that describes, for instance, rutting, no ruts greater than a half-inch, that's the performance standard that's in the total maintenance contract, so that's just a barely borderline condition -- if it's worse than that, it certainly fails; and if it's worse than that, it gets a two; and if it's totally failed it gets a one.

The zeros means that there's not one of those out there to rate, so if you'll notice on this particular form, attenuators got a zero. That doesn't mean they were bad; that just means there weren't any attenuators out there to rate. So in our system, basically it just throws the zeros out and doesn't include them in the calculations.

On the next page it kind of explains the calculations; it goes through a sample calculation. Each element is given a multiplier because we realize that some elements are more important than others. We try to utilize our four maintenance priorities to establish these multipliers. The first priority is safety -- that's always the number one priority; the second priority is protect the investment; user comfort is third, and aesthetics last.

So you can see, for instance, failures -- if there's a failure out there it's certainly a safety issue; it's certainly a protect-the-investment issue; it's a user-comfort issue if they hit the failure, and it doesn't look too good either, at least to us highway engineers. So it got a multiplier of nine. If you'll go down to, for instance litter, it's primarily an aesthetic thing so it gets a multiplier of 2-1/2.

The sample score, you see if we give it a five, it's 100, five out of five. We multiply the element score, the 100 percent times the multiplier, combine those over on the far right to get a 30.8 points out of a possible 37-1/2 or an 82.13 on the pavement component. You see the same thing on traffic; combine those into a 68 percent on traffic, and then 83 percent on roadside. And then we combine the three of them based upon we felt like pavement, we gave it 37-1/2 percent of the total score; traffic ops got a 25 percent, and roadside 37-1/2 percent to get an overall 78.9 on this particular section.

MR. NICHOLS: So the roadside got the same weighting as the pavement itself?

MR. GRAFF: Yes, and we basically did that based on how much money we spend with routine maintenance. All of these things, we could easily go in and change those multipliers, change these priorities to adjust the scores, but when you look at our overall expenditure on routine maintenance, we spend about the same on the roadside as we do on the pavement. That's pretty incredible, but we spend a lot of money on roadsides.

On the next page it just shows the overall assessment for non-interstate, so you can see our overall score on the far right is 81.36.

As Zane said, the Government Accounting Standards Board Requirement 34, GASB-34, is going to require that we, in our financial statements, put in our condition assessment scores, and they're trying to get us to predict what our scores are going to be in the future. James wants to talk about that, but GASB-34 is, I guess, a big change to how governmental agencies develop their financial statements.

On the next page you see it broken out by district. Non-interstate Odessa scored a 93.6 overall, and you see we kind of anticipated that the west Texas districts would score pretty well; they're built on good materials, they've got little traffic, and they've got the best of all conditions as far as rainfall, freeze-thaw, et cetera. So Odessa, El Paso, Childress, Brownwood turned out on the high side; San Antonio, Austin, Yoakum, Dallas were the worst four, but you don't see that much difference, really, across the state; between say the 5th district and the 20th district, there's not but about six points difference. That's by highway type, FM, state and US, by district.

The next page shows it by component, and if you look at it by component, generally you see traffic operations scores low, and Wes, we've seen signing pretty low across the state, and I think your direction to improve signing in three years, bring them all up to standard was right on target. I mean, this shows that's one of the weakest things that we've got is our signing. We anticipate the next time that we go out and do the non-interstate that we hope to see an improvement across the state on the traffic operations scores.

MR. LANEY: How often will you do this?

MR. GRAFF: We did interstate from July to October of last year; we just completed interstate yesterday, the second go-round, and then we did non-interstate from January through July of this year. We've discussed that, Mike and Zane and I a lot. It takes a substantial amount of resources to do one of these assessments.

We're doing about a 10 percent sampling of the interstate, which is one every ten miles, a totally random-number-generated section. We don't know what's going to be out there when we get there; in the office we input the beginning and ending reference markers, mileposts, and then the system spits out a randomly selected one-mile section every ten miles of interstate, and we do one every 20 miles on the non-interstate.

A lot of our roads may not be 20 miles long; say a little farm-to-market road may be a mile or two long. We input it in the system; if the random number generates a section on that highway, we look at it. So if it's less than 20 miles long, it may or may not get an inspection on it, but a lot of time it will; sometimes it won't.

MR. BASS: The GASB-34 statement -- sorry to interject -- the GASB-34 statement requires that this system assessment be performed once every three years, at least once every three years.

MR. GRAFF: We actually, I think, did the assessment very inexpensively for the size of our state. We kept track of our time, our travel expenses; we used state cars; we did the total assessment last year, interstate and non-interstate for about $165,000. That's pretty cheap. I took a lot of resources out of my office that when the legislature is in session I'm not going to be able to do.

We've talked about doing it every other year, we've talked about contracting it; we feel like that that would cost us a substantial amount more than $165,000. We're going ahead and we completed interstate again, I said, yesterday; we'll know the results of that in a week or two compared to last year. We've gone ahead and started the non-interstate for the second go-round.

One of the things that we talked about and I think is a good idea is to get the districts to assist us in this. We ask for one person, a volunteer, to go with us to another district, not their district but to another district. I think a maintenance engineer, assistant maintenance engineer, an area engineer, maintenance superintendent, someone like that would give us the additional resources that we need to complete this assessment. And then I think they would gain a lot out of it. They would see how things are being done in another district and possibly be able to take something back with them.

The benefits, I think there's tremendous benefits to it. First, it provides documentation to the district on where they're weak and what they need to put additional emphasis on. I know John Kelly in San Antonio took our evaluations -- when we did interstate the first time, he went out and he actually did the same assessment and the same miles that we looked at. He called Zane up and he said, You're exactly right, I saw the same thing you saw.

And the traffic engineer, Pat Irwin in San Antonio, said, We were shocked at how bad our large signs were. Why didn't our maintenance supervisors tell us that they were that bad? And I think the district people, they travel those roads every day, and they just don't see things, so it's kind of like when you drive to work every day, you don't see the signs and things that are out there.

I think that's one of the big benefits is it really gives a report card to the districts and helps them know how they're doing compared to their surrounding districts and the rest of the state, and it helps them know what's weak, where they need to put additional priorities.

It certainly provides the administration information on which districts are doing a good job, which ones are not. If it's resource problems, I think we'll be able to utilize this system to help us allocate resources. If we allocate resources to the districts that are low, and they're still low the next go-round, I think that might tell us something about the management. So I think it's a great tool for the administration as far as reporting on who's doing a good job and who's not.

And I think overall, as we monitor this over the years, one of the benefits I see from a maintenance management aspect is we'll be able to document whether our condition is improving or deteriorating, and so it will certainly help us support additional requests to the legislature. We can prove that with this much funding our conditions are deteriorating.

Again, the costs were about $165,000, again, very inexpensive.

MR. NICHOLS: Now, we're still required to do our pavement management, the PMIS? We still will be doing that?

MR. GRAFF: Right.

MR. NICHOLS: That's statutorily required, so this will be in addition to that.

MR. GRAFF: Yes. One thing this gives us and that doesn't -- and like Mike said, we're using -- I used ten people out of my office to do this, and they're not biased. Basically we got together and we tried to calibrate our eyes by going out and doing Bastrop County, and in the future I'm going to try to use about three people to do all the districts; that's about eight districts per person. If they go one week a month, we can do it in eight months. It takes about a week to do a district, and that's a week of long hours. We're there; we work long hours. Usually about 200 miles in a district, and it's a lot of driving. We drove around 40,000 miles doing the assessment of non-interstate.

MR. LANEY: Just out of curiosity, do you make your evaluations in the car at 60 miles an hour or do you stop and get out?

MR. GRAFF: Our process is the passenger is kind of the recorder, the person that looks at the map, kind of directs the route, tells the driver where to turn. Typically we drive speed limit in between sections; the mile leading into the section we usually pick up what we call the ride, feel it, drive it at the speed limit, and then we look at the litter at the same time. So the mile before is where we're looking at the ride and the litter, because we want to look at the litter at highway speed.

We stop at the mile marker at the beginning of the section. We typically look at the pavement, look for rutting, look for cracking; we kind of crawl along on the shoulder looking at signing, striping. And once we get to the end of the section, take off to the next section; we rate it as we go.

As you can tell on page 2, anything we rated a two or a three, we tried to put some notes down. This particular section was I-35 in Bell County, mile 302 performed just a few weeks ago on October 25.

MR. LANEY: This is Kirby's district.

(General laughter.)

MR. GRAFF: This is the total maintenance contract area, so this was not too good of a rating. I obviously pulled one out that wasn't the best; it had moderate rutting throughout, greater than a half-inch, so it got a two.

MR. NICHOLS: Now, some of these calls, I mean, it's not measurable with a tool, it's a subjective evaluation by a trained and experienced person.

MR. GRAFF: Right.

MR. NICHOLS: I know on the PMIS scores there was always this, well, how do we know our judgement factor with this person is the same as the judgement factor of that person. Do you get them together and go over like photos and filmage or something to try to make sure everybody is consistent?

MR. GRAFF: The ten people we had involved in this, we all got together and we did Bastrop County, and then I have kind of a core of two or three people that are the base people for this. We hired one person, Stanley Wade, who was a maintenance supervisor in the Bryan District in Fairfield, as our primary responsible person for TxMAP, and he's done about 70 percent of this himself. He's on the road two to three weeks a month, so most of this was him doing the assessment with someone else doing the recording and assisting him.

It's amazing how good we agree when we go out there. When Zane and Ken Seiler and I did interstate last year, you know, we'd all kind of say "It's a three" together, and somebody might say "Three or a four". But yes, it's subjective, but if there's cracking out there, there's cracking out there. It's pretty easy.

MR. WEBB: Surprisingly enough, when we went to Amarillo, we got Chairman Johnson in the car with us and took him out on I-37 and had him rate the same section that we rated, and he came up with the same score. So it's pretty dependable as far as being able to get other people to come up with the same score.

MR. GRAFF: We did some auditing of this data here. I sent Stanley and one of my engineers out to check on some of the districts, and pretty consistent scoring. I mean, there were some differences, because there was about two months between when the first group went out and the second, but generally they were pretty consistent. So I feel real confident about our ability to rate these equitably across the state.

MR. LANEY: All the ratings for a district will go to the district?

MR. GRAFF: Definitely.

MR. LANEY: And how about the contractor for the total maintenance contract?

MR. GRAFF: I have been not giving him the actual forms, but I've been sending them a report, an Excel spreadsheet of all of the ratings and the overall. The overall -- and I don't have those numbers with me, but the overall condition of those two sections in the total maintenance contract, Waco was about an 83 overall when we took over. We looked at it eight months into the contract; they had deteriorated down to about an 81, primarily in traffic items; they hadn't done any pavement marker replacement. They hadn't re-striped anything; the delineators were pretty bad. And we sent them the assessment, and they got busy on those items.

And when we looked at it last month, 13 months into the contract, they had brought it back up to about an 83. One of the things that's concerning is their pavement is starting to deteriorate, the pavement scores on that contract.

Dallas, the same thing: Dallas was an overall of about an 81, I believe; it dropped down to about a 77 in eight months, but they brought it back up to about an 82 at 13 months, so they've actually improved upon I-20 in Dallas.

MR. NICHOLS: So you haven't had any problem with them disagreeing with how you're scoring it.

MR. GRAFF: We actually got together with VMS, went through this process, explained to them how we were going to do the assessment, and they have a very similar process that they do, and so they pretty much agreed with it.

MR. HEALD: Let me say, you know, we've got GASB to deal with, but I don't think that's where the real value of this program is. The real value is I guess it can be referred to as a peer report, when one district can see how they're doing compared to other districts. And yes, there's some subjectiveness in it; we understand that, but you know, it's the program; it's not the year or the particular inspection or the particular sampling, it's the program.

Given the fact that Gene Adams will be going out talking to the district engineers about this, given the fact that I'll be doing their performance evaluation talking about it, given the fact that we'll make them more aware of how they compare to the other districts and where their shortcomings are, whether it be in any one of these particular elements that Joe is talking about here -- give us some years, I think you'll see some difference.

We've put a lot of emphasis on ride quality. We've put a lot of emphasis on signs. We've put a lot of emphasis basically on all these things here. Overall, I think the maintenance program is alive and healthy. I think a lot of it is due to Zane's leadership and the fact that we've restored the Maintenance Division. We got it back up there where there's some pride in the organization. So I don't want you to think we're complacent, but overall, I'd say the program is healthy, and it will be very important that it be continued on in the same direction that it's going. This is a big element of the success of that program.

MR. LANEY: Is there an overall target score, sort of an optimal score? I know 100 was not the right score, because nobody is ever going to get there, but is it 83 or -4 or -5 percent? Do the districts have a target set of scores they're after?

MR. WEBB: We've not got -- and correct me if I'm wrong -- we don't have a district target score, commissioner; we've got a statewide target that we've shown, and I don't know what that exact number is.

MR. GRAFF: One of the things GASB wants is they want us to set a target and project where we're going to be and how much money it's going to take to get to that target. I think that's their big requirement, is for us to establish a target and how much money is it going to take to get there, and I don't think we've got enough history behind this thing to really know.

MR. LANEY: If you set a statewide target, do the districts use that as their individual district target, because a district isn't going to manage to a statewide score. They're going to manage to their own achievable scores and whatever they think you all expect of them.

MR. GRAFF: Yes, sir. I don't think you could ever expect us to -- we would not expect to put a statewide score down and have all of the districts meet that score. Some of the districts in the rural areas would be able to easily exceed those scores, simply because of the conditions they're under with lower traffic volumes and soil and weather conditions. As you get into deep east Texas with more traffic volumes and poorer soil conditions, it would not be expected that they might ever meet the median score that we put on there.

But overall statewide, we would want to see an increase in each one of those districts, whether their score started out relatively low. You'll never be able to compare Brownwood with Dallas; they've got two different sets of problems, and their scores will always be somewhat different.

MR. LANEY: Just in connection with the overall allocation of resources among districts, who gets more for what, who gets less because they don't need it, and to give guidance to your district engineers, I would suggest you at least consider customized district-by-district targets. You can't always expect an increase. I mean, you start approaching -- I don't know what the number is -- you start approaching 85 percent, for instance, that's not going to improve much over that, and I don't know what we want it to improve much over that.

It's your call, but it sure would help the district engineers for them to know what they're shooting for.

MR. HEALD: I think you've already mentioned this, Zane and you both, but you know, speaking as a district engineer, you think you've got your district in good shape -- let's talk about pavement, you think you've got it in good shape. You can have more than normal freeze-thaw cycles or you can have what we've just gone through, these extreme drought conditions, and we've had a lot of pavement damaged this summer because of just no moisture; we've had a lot of cracking. So you can build a program and you can see some improvements, but you can have some failures too, and a lot of it's something that's outside of your control.

MR. GRAFF: This is an extremely thick document; I just want to explain the rest of it to you. We've kind of gone through the statewide assessment. On page 7 is our overall that shows US, state and FM -- and I didn't bring the reports, we had sent them to you earlier -- but the interstate last year was about an 86; US you can see was an 84.6, state an 82, and FM a 79. So it turned out exactly like we were expecting with the interstates in the best condition, next is US, next is state, and then farm-to-market.

The rest of the report is by district. Well, page 8 is a statewide for US by element, the next page is state highways, and the next page is farm-to-market, and then an overall.

On page 12 it starts by district, so you can see page 12 is the US for Abilene; the next page is the state highway for Abilene, the next page is the farm-to-market, and then page 15 is the overall district, Abilene District. And it goes through all the districts like that, those four graphs for each district.

Wes, your comment about cracking, that's why I put this picture on the front page. That's exactly what's been happening because of the drought, severe cracking, two- or three-inch wide cracking. Those cracks go down, four, six, eight, ten feet deep into the subgrade, and a lot of times you see some settlement there because of the shrinkage of the clays. It's very typical of what's happened, and with all the rain that we're getting now, all that water is going right down into those cracks.

MR. NICHOLS: You've been wanting to do this for how many years?

MR. GRAFF: I've been in Austin 14 years, and I proposed what I used to call a component rating system, CRS, probably about 12 years ago, and my division directors never saw that the benefit was going to be worth the cost.

MR. NICHOLS: One of the kind of immediate benefits that I could see, if I was as district engineer flipping through these things, you can certainly find certain elements where you fall way down. And I know I would think human nature would be certain people would look for certain things it their own district. And if somebody from outside the area comes in and looks at it, they'll see something different, and where you rate real low, all of a sudden you go in there and pay attention to something you may not have considered important before.

MR. HEALD: Let me point out that fact. If you'll look at page 25, the Austin District, something Mike and I just discussed this morning, as a matter of fact, with the Austin District, what we call poor-boy four lanes with no shoulders. Look at the edge drop-off and the shoulder rating -- this is on the state highways on page 25 -- I think that's pretty indicative of the problem we're having with our four-lane roads, the no shoulders; there's no shoulder support.

MR. GRAFF: One of the corollary items that's occurred is a number of districts are using our form and they're doing their own assessments. Laredo has done that -- actually Luis and Rosa have gone out and done the assessments themselves. And Pharr has begun evaluating their own, and I know Lufkin started a program a few years ago; Bryan has had a program similar to this going on for a number of years. They're evaluating their area engineers and their maintenance sections on how well they're doing.

MR. NICHOLS: I like that; it looks like a good program. I'll be anxious to see how it works out over a period of time. So you're just going to continue moving on year to year? Okay.

MR. HEALD: Mike, do you have any concluding remarks?

MR. BEHRENS: Yes. I think ultimately, like Joe said, we're doing it again now, and that's probably just to compare data on what happened in a year. What he indicated about light workload with the legislative session, it may be that we do that on the off years in between, so it would be on a two-year basis. And I think we'll make that assessment as we go forward.

James, do you have any comments on GASB and how this ties in?

MR. BASS: James, Bass, director of Finance.

The only thing I would add would be that the comptroller's office is, of course, the responsible agency in the state of Texas to implement GASB-34, and currently they are preparing to meet with legislative staff and talk about the different system assessments or targets -- not only for TxDOT but for other entities -- what those targets should be, and they would like for TxDOT to provide input into that dialogue as to what we think our targets are going to be for system assessment for interstate highways -- it's just going to be interstate and then non-interstate, I believe.

MR. GRAFF: I've been trying to steer our accountants, our financial people toward only reporting two numbers: an interstate number and a non-interstate number. I guess I'm real concerned that the more information we give them -- if we go ahead and give them a score for interstate, US, state and FM, they'll start trying to direct how we spend the money. And I don't think we want to lose the capability of us deciding where we put the money, and I guess that's one of the big concerns I have.

MR. BASS: There's already one statutory requirement on farm-to-market roads that we must spend one-fourth of the amount of gasoline tax collected, less $7.3 million, on the construction and/or maintenance of the farm-to-market roads. That's not well known or well publicized, but there are a few who know that. And there is already one requirement that we have to do that on farm-to-markets, and we would like to avoid having a similar thing done on all the other components of the system.

But the comptroller would like TxDOT to come up with whatever that target is, and whenever we develop a target, that also then requires an estimate of what the required expenditures will be to attain or maintain that level of service on the system. Then when we report the actuals, we'll show what our estimated expenditures were to attain that level, what the level actually was, and what our expenditures were.

The whole point of my comments, I think, is that we certainly want to be involved in setting that target for TxDOT rather than the comptroller and the legislative staff, and I think they are right on the brink of having those meetings, and I'm not sure if setting that assessment level for the system would be done by the commission or the administration or Maintenance Division, or how you would envision that target being set.

MR. LANEY: Well, the commission is certainly not in a position to set it. I mean, you're going to have to come to the commission with a detailed recommendation and probably, my guess is -- Robert may differ -- my guess is we'll defer to you how best to set it, but I like the idea of making sure you don't do it element by element, the US and non-US, or interstate and non-interstate, however you want to do it.

MR. GRAFF: I prepared kind of a draft financial statement, or a page that would go into our financial statement, and this is just very much a draft, and I don't even know if the numbers jibe with what they finally came out with, because I did this a while back. But I've just shown what -- like '98, '99, those are just example numbers; they're not actual numbers, obviously -- but this is something that we might report in a similar format to this: where we were in previous years and where we are in 2000, and then the dollars down below that would be actually spent to get to that condition.

Like James said, they're trying to get us to project forward as to what our targets are and how much money that would take. And I don't feel comfortable enough with our current process until we get some history and we can develop some kind of correlation between funding and outcome, and then things like the droughts or severe freeze-thaw or hurricanes, or no telling what kind of environmental conditions will make a major impact on us.

MR. BASS: I think if we experience those, we would just have to disclose those in the annual financial report, that if there were a hurricane or a severe drought, that it severely impacted the rating one way or the other. And I agree with Joe that there's not a whole lot of history to base our projection off of, but I guess our concern is if we don't do it, our fear is that the comptroller and the legislature will do it themselves and they have even less data available to them than we do.

MR. LANEY: What's the harm in doing it and missing the target? I mean, let's take our best shot at it.

MR. BASS: Right. And Duane Sullivan, who is our GASB-34 expert, could probably give you more detail than I'm about to give you. If we miss our target -- in GASB-34 you have an option of how you want to report your infrastructure: you can either depreciate it or show a system assessment. The system assessment was offered as an alternative after AASHTO commented on the depreciation in saying that depreciation did not make a whole lot of sense for main-lane highways, that they felt there should be another option.

So after those discussions GASB came back and offered the system assessment level. If you miss the system assessment, then you are to revert back to depreciation. Now, of course there's some question as to what it means by missing the assessment. If you miss it one year, there's some question as to whether or not you've truly missed it, and you can change what your target is as long as you disclose that you've changed your target. So in my mind, that's a little soft.

MR. NICHOLS: I can't fathom anybody who understands highways at all agreeing, on a rational basis, a legislator, an elected official, the depreciation methods; it just doesn't make sense. Assessment is the only way; that's why we're working in that direction. And I don't think any prudent person is going to throw that system out because you missed something, particularly if it's an environmental factor like a hurricane or flood or tornado, or something like that.

And so obviously the assessment way to go is certainly much preferred, and you just take your best shot on your estimates, and then you continue to take the information that you learned from the past in projecting the future and factor in a few disasters occasionally and those kind of things; just take your best shot. That's the only way anybody can run a business.

MR. HEALD: James, could you comment on your opinion on whether or not future federal funds might be affected by this?

MR. BASS: At this point I don't think that there's any tie to GASB-34 and the reporting requirements on the receipt of federal funds; I don't think FHWA has come out with any restrictions on that.

MR. NICHOLS: Is that it? Okay.

MR. LANEY: Great job, Zane, really terrific.

MR. NICHOLS: I commend you for it.

Motion to adjourn?

MR. LANEY: So moved.

MR. NICHOLS: Second it. All in favor, say aye.

(A chorus of ayes.)

MR. NICHOLS: It is now 8:18.

(Whereupon, at 8:18, the briefing was concluded.)

C E R T I F I C A T E

MEETING OF: Texas Transportation Commission
LOCATION: Austin, Texas
DATE: November 16, 2000

I do hereby certify that the foregoing pages, numbers 1 through 32, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Penny Bynum before the Texas Department of Transportation.

                       11/20/00
(Transcriber) (Date)

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