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Texas Department of Transportation Commission Meeting

Ric Williamson Hearing Room
Dewitt Greer Building
125 East 11th Street
Austin, Texas 78701-2483

Wednesday, August 26, 2009


Deirdre Delisi, Chair
Ted Houghton, Jr.
Ned S. Holmes
Fred Underwood
Bill Meadows


Amadeo Saenz, Executive Director
Steve Simmons, Deputy Executive Director
Bob Jackson, General Counsel
Roger Polson, Executive Assistant to the Deputy Executive Director


MS. DELISI: Good afternoon. It is 1:35 p.m. and I call this meeting of the Texas Transportation Commission to order. 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 1:41 p.m. on August 18, 2009.

Before we begin, please take a moment to put your cell phones and pagers on the silent mode, please.

Today's meeting will involve a series of discussions on various topics currently before the department and the commission. We will accept public comment that is relevant to any of the posted agenda items but we will not have an open comment period. To comment on an agenda item, please fill out a yellow speaker's card and identify the agenda item on which you'd like to speak. You can find these cards at the registration table in the lobby. And as usual, we will limit each speaker to three minutes.

Before we begin, commissioners, do any of you have any comments you'd like to make? No.

Okay, with that, then, Amadeo, I'll turn it over to you.

MR. SAENZ: Thank you, Madame Chair.

Today we will begin our first agenda item with a discussion and an update on our independent management and organization review being done by Grant Thornton. I'll ask Ed to introduce our presenters today.

MR. SERNA: Good afternoon, Madame Chair, commissioners, Mr. Saenz. For the record, my name is Ed Serna, I'm the assistant executive director for support operations.

We're going to provide you with a brief update on the status of our management and organizational review that's being conducted by Grant Thornton, and to do that, I'm going to introduce Susan Pentecost, who is the managing partner for their state and local business.

So with that, Susan.

MS. PENTECOST: Good afternoon, Madame Chair, commissioners, Mr. Saenz. For the record, I'm Susan Pentecost, partner with Grant Thornton.

I just wanted to do a brief update to you today regarding where we are with the management and organizational review. We received final approval of the project plan last week on the 18th, and we have started scheduling and conducting a rather extensive set of interviews, so all of those interviews are meant to be done by the end of September, and so far there haven't been any issues with getting anything scheduled or with the participation.

In addition to that, we're planning the all- employee survey which we're refining right at the moment based on some of the feedback in our early interviews and the way we see those conversations flowing, so we anticipate releasing that to all TxDOT employees about mid-September and having that open for a two-to-three-week period.

We'll also be conducting focus groups around some specific business processes toward the end of September and early October, all of this with the intention of continuing to meet the schedule to deliver organization design recommendations in October and a full set of recommendations by December of this year.

Are there any questions?

MR. MEADOWS: I've kind of wrestled with this because I'm usually someone who would like to see something done sooner than later -- as some of you know -- but there's such an opportunity represented by this particular study, and I think I've certainly appreciated and have enjoyed and been challenged by our discussions, as I know everybody at this table has.

I know what the focus is, but at the same time I know at the back-end of the study there really is a question about what comes out of that really could be described as specific concrete reorganizational sort of options, recommendations.

I mean, do you draw the line at here are our observations; here are the challenges; here are the strengths; here are the weaknesses -- whatever they are, but beyond that, we really have drawn the line to stop at that point versus, as I understand it -- as I understand the scope of it, we really are not asking you to get into any sort of discussion or recommendations with regard to reorganizational options, I would say, not specifics. Is that accurate?

MS. PENTECOST: We're actually required to provide recommendations, so I'm expecting to provide specific recommendations about things that we think should change in the organization structure. Where we stopped is stopping short of actually doing implementation plans for how those might be played out until you all have a chance to look at the recommendations and decide what you might want to do.

MR. HOUGHTON: When you talk about reorganization, at what level does it stop?

MS. PENTECOST: We've been asked to focus on the management levels, so we're looking at headquarters and district leadership, regional leadership or regional management, but we're not trying to talk about how do you reorganize people who are out doing maintenance out in the district somewhere.

MR. HOUGHTON: And reorganization based on what history?

MS. PENTECOST: Well, the recommendations -- and it could be not reorganization, but what we've been asked to do is to go through and look at the way TxDOT is organized, and then based upon a variety of things, so internal input, the functional allocation across the organization, how money is being spent, how processes flow, how effective span of control can be, the kind of feedback we're getting, as well as sort of standard best practices around organization design and we'll also look at what similar kinds of organizations have done, not to say that if another DOT has organized itself a particular way, that necessarily is good for TxDOT, but to look at what models they've tried and what worked and didn't work for them.

MR. HOUGHTON: So you're going to come back to us with other models by other DOTs?

MS. PENTECOST: We're going to be looking at that to come up with our recommendations to all of you about what might be good for TxDOT. So have there been things implemented elsewhere that seem like they may help improve the efficiency and transparency of TxDOT.

MR. HOUGHTON: Are you going to look at pay, from executive director down, how those pay scales work at other DOTs?

MS. PENTECOST: We have a question around that flagged and we're going to try to get as much data as we can about other pay scales because that's certainly something that's come up from a number of people. But I'm not planning to go out and do probably a comprehensive industry pay analysis, we'll get as much information as we can get on that topic to provide recommendations about fairness.

MR. HOUGHTON: I'd rather have a comprehensive.

MS. PENTECOST: You would. Okay.

MR. HOUGHTON: I mean, if we're going to go to this level of -- well, to this type of level, I think we need that kind of comprehensive information. If you're going to come back with I don't know what detail of reorganization based upon what people are saying within the organization or based upon your experience?

MS. PENTECOST: We're working it from both sides, so the feedback from internal people to TxDOT, the observations from the external people about what's working and not working and where people have concerns, as well as sort of a best practices and what other models have been tried with what results, and then our own experience.

MR. HOUGHTON: Back to us based on your experience based on what other models have been tried.

MS. PENTECOST: It will be based on our research into other models that are being tried in other DOTs, so we'll tap into our subject matter experts to get into that area, as well as what's available to us online and from other relationships to find out more about why they took the steps they took and then what they thought about the end result of that. Because certainly different models are being tried and we don't anticipate that they'll simply fit TxDOT but there may be some really good ideas about grouping of functions or various things that made a big difference elsewhere to consider here.

MR. HOUGHTON: I think a comprehensive approach to compensation is an issue, a huge issue.

MS. PENTECOST: Okay, I'll flag that.

MS. DELISI: By comprehensive you mean not only within the public sector but the private sector as well.

MR. HOUGHTON: Absolutely. We're competing against the private sector for the best and brightest. I think our partners across the street at the Capitol need to understand what we are competing for the best and the brightest and what it costs or may cost -- what it could cost to attract those people into this agency. And keep our best and brightest, because as we know, we're seeing a few people retire and they're retiring, for the most part, to go to the private sector -- unlike some that are going elephant hunting somewhere.

(General laughter.)

MS. PENTECOST: Okay, I will follow up on that.

MR. HOUGHTON: That may take more time, I'm not sure, but I don't want to rush to judgment, I want a comprehensive look.

Now, are you going to come back to us with a recommendation, or are you going to come back with findings first?

MS. PENTECOST: Our intention is to discuss with you what we're seeing and the kinds of information that we're getting and what that suggests to us before we come back with a full set of recommendations to you. So we want to take this a step at a time so we have an opportunity to discuss with you what we're seeing and where we think that leads us and to validate that, and then we'll end up finalizing that in recommendations more formally to you.

MS. DELISI: So can you remind me then what the time line looks like? Can you put sort of target dates on how this would play out?

MS. PENTECOST: For the recommendations around the organization structure, those are due to you in final by mid-November, and what that means is starting in mid-October we need to have pulled together content to talk with you about what we're thinking that we see and how we think that would shape into recommendations, but to have discussions before we end up documenting that and delivering it in the deliverable -- which I didn't look at the calendar right before I left but I believe the draft deliverable is due to you in around the third week of October, and then there is time for review and discussion of the deliverable itself before we end up finalizing it.

And similarly, we'll continue during that period working on a broader set of recommendations beyond those that are focused on organization design, and we'll want to do the same thing, talk about the kinds of patterns and what we're hearing, what we're looking at, where that leads us in terms of thought about TxDOT, and then solidify that into recommendations that we deliver to you formally.

And so for the latter product, that one we expected to go to you draft, I believe, December 7, and there's a two-week review period and time over about a three-plus week period to discuss the deliverable itself, but we'd hope to have talked with you all before that about the progress and what we think we're seeing and where we would meet that in terms of recommendations we might make.

So I'm not intending that we would simply show up at the point where we deliver a deliverable and that would be the first time that you see anything about what we're thinking in terms of recommendations.

MR. HOLMES: Susan, I think you're planning to be back in September, as well, for a formal briefing.

MS. PENTECOST: Yes, I believe that's correct that we've been scheduled for each workshop to give an update, and at that point we'd have gotten a lot of content out of the meetings and research that we're doing to be able to go further with the conversation.

MR. HOLMES: Just to follow on to Commissioner Meadows comment, do you feel comfortable that the time frame that is outlined is adequate, is too compressed. Are we pushing this too fast or do you feel comfortable that you'll be able to get it all done in that time frame?

MR. HOUGHTON: This is one of those speak now or forever hold your peace.

MR. HOLMES: I think we can probably keep modifying this along the way, but having said that.

MS. PENTECOST: I won't go so far as to say I feel comfortable. TxDOT, transportation and all of the things we're looking at is a really vast landscape and I don't take it casually that we're trying to do that well, but at the same time, we are trying to move on to get to a point so that we start to draw lines and say we've gotten to this point and here are the recommendations that we can make based on what we've looked at so far.

If there are additional areas that you'd really have to go into in much greater depth to be able to give a better recommendation, or peripheral areas where you say in addition to what you studied there, there's this other thing that we'd really like to see, then we'd have to address that separately.

But I'm trying to find a balance point right now between getting on with what we're trying to do for you pretty efficiently and being thorough enough to be useful and valid when we come back and talk with you.

MS. DELISI: Here's my perspective on this is that if this is our one big shot to do it, I'd rather do it right than quickly, so I'm not so sure if these self-imposed deadlines are the right ones -- which is to say I don't know -- maybe I should ask this question: Is there something in the scope that you think should be added at this point?

MR. HOUGHTON: I hate to override the Chair -- I'm not trying to --

MS. DELISI: Go ahead, I'm used to it.

(General talking and laughter.)

MR. HOUGHTON: I want to go back to Commissioner Holmes's point is that I think he left you an opening -- the way I interpreted this -- to amend the delivery time, and I say either you speak now, and now the Chair has given you that same point, and I do agree with what the Chair has said, let's get this right because the folks across the street, this means a lot to them too. Again, Madame Chair.

MR. SERNA: Very quickly, the deadlines that Grant Thornton are working under were imposed as part of our contractual negotiations with them, so we basically set some deadlines because we were looking for deliverables soon enough to be able to take action. Staff, naturally, on commission's instruction is open to adjusting those, but I just wanted to let you know the end times weren't really something that Grant Thornton came back and said we'll do this by this and this by this, we set some deadlines and then they basically put the structure together to meet those deadlines. So what I'm basically saying is with your instruction we will certainly work with them to adjust as necessary.

MS. DELISI: I think that's what you're hearing. Kind of like what Mr. Houghton was saying, I want it done right so that when we do present this to our partners, the legislature, the public, that there's a confidence that it was done right and not just quick.

MR. UNDERWOOD: Now, to follow up on that, the way I understood, Ed, what you just said also is that if we make some changes in this, kind of like in our contracting deal, is this a change order because we're going to be asking them possibly to do more work for the same contract.

MR. SERNA: Yes, sir, it is, and we can certainly make that change.

MR. UNDERWOOD: Is that basically what you were implying? I felt like I was jumping in front of you on that.

MR. SERNA: No, sir, and I can be more clear. It would require and we will execute a change order based on commission feedback as well as Grant Thornton's saying for us to do this expanded examination, we could get whatever that is done by this time line, we will amend the contract, we can amend the contract. The current contract is a six-month contract with two six-month renewals, so we have time on the contract without a rush, we have 18 months -- I'm not saying we would take 18 months -- so we don't have to renegotiate an end time, it would simply be a matter of the scope as well as the due date for the deliverables. But we can make those changes relatively easy, and when I say relatively, we would sit down with Grant Thornton and negotiate the cost, et cetera.

So it's not a complicated thing so what I probably wasn't clear in expressing is if the commission has a desire to explore, for example, an in-depth examination of compensation or expand -- and I'm just hypothesizing -- expand the scope of the interviews or the extent or the depth of the organizational review, we can certainly accommodate that without a problem within the current contractual structure.

MR. UNDERWOOD: My fear, though, Ed, is that on the onset -- and Susan, you know we've had conversations about this -- that we have a contract, we say here's what we want and then all of a sudden we say we want to add this and this and this, and by the way, we want to hold your feet to the fire for the original price. And I don't feel like that's fair and I feel like Grant Thornton so far has worked with us. Wouldn't you agree to this now, Ned? We've added some things and yet the price has stayed the same.

MR. SERNA: Yes, sir, relatively speaking.

MR. HOUGHTON: I have a big interest in knowing -- I know we compete with the private sector in some ways. Some people choose to come to work here for other reasons, but in today's economic times that balance, private sector and paying compensation, benefits, all of that comes into play on keeping our best and brightest and attracting the best and brightest, and I don't think we're addressing that, I really don't.

I think we're looking at moving the deck chairs -- I hate to say it -- on the Titanic, but we're not talking about a bigger issue that we'll have to go across the street and say here is what we're competing for and whom we're competing with for the best and brightest to take us to the next level.

MR. SERNA: Yes, sir, and I understand. I'm not going to speak for Susan but I believe I have a clear understanding of that particular aspect of what you're looking to have us add.

MR. HOUGHTON: It may take a lot more because you're talking about not just compensation but total compensation, which is your pensions, which is your group insurance, all of the things that are very important to a lot of people.

MR. SERNA: Right. Yes, sir. And then anything else that the commission wants us to pursue or if Grant Thornton comes back and says we need to adjust our time schedule according to this, again, we can do it within the current confines of the contract. We will certainly not hold them -- within reason not hold them to the current price because we're expanding the scope, but at the same time, we can do that within the contractual terms that we have right now. We have enough flexibility, and I think I had mentioned that to the commission when we were first setting this up, that we put enough flexibility into the contract and into the RFO to allow us to expand it or modify it.

I just wanted to make clear to the commission that the dates, the end of October, early November and the December dates were dates that we had put in the contract, we the staff put in the contract based on our understanding of wanting to get something done quickly and have time to implement before the next legislative session.

MR. UNDERWOOD: But you also understand where I'm coming from, Ed, is that I don't want to let $5 stand in the way of doing it because this is our one shot. And we want to make it a clean shot and we want to use a rifle, not a shotgun, and we really want to focus on what we need to do and whatnot.

MR. SERNA: Yes, sir, I understand that.

MR. UNDERWOOD: Thank you.

MR. HOLMES: Just one last point. It seems to me that you have the understanding that the commission wants it done correctly and if it takes another month or two, then so be it. My guess is we don't really know that today but we might well know it in September, and if you had a first deliverable that was sometime in the middle of October, that sounds pretty quick to me from where we're sitting today. But you'll be talking to Commissioner Underwood and me over the next month anyway, so we ought to be able to get a better feel for it and then we can make a clearer decision about timing in September maybe. Does that make sense?

MS. PENTECOST: It does make sense. The other thing that I was going to say as a followup to what you've pointed out and some of the conversations that we've had already about the kinds of questions that have been raised to us is I'd kind of like to take a step back so we've been very much trying to keep our focus on the scope as it was originally defined, pretty close to that, so that we could stay within the bounds of our contract, but I would like to look at some of the additional bits and pieces that we see and how that might fit together in an incremental process, and I'll discuss that further with you all, if that works for you.

MR. UNDERWOOD: Now, that being said, also we don't want to be your retirement project either.

MS. PENTECOST: I really didn't see it as my life's mission, you're safe, but thank you for pointing that out.

(General laughter.)

MR. SIMMONS: Steve Simmons, deputy executive director, I just wanted to point out a couple of things because of some of the comments that were made, that when we developed this contract, first thing we did was pattern it after the Department of Public Safety's contract, and we realized that they were under a very quick time frame to get something done and they're not the same agency that we are, so granted, we understood that. But when we put out the contract for the request for proposals, one of the things we were looking at was a company that could do it in a very quick time frame with it thorough to put the resources into it to get it done.

So we will work with them to establish the right time frame and the right price for everything, but I do want to let you know that we did take that into consideration when we were developing the RFP that they competed on.

MR. UNDERWOOD: And that same thought, Steve, I'm counting on you to make sure we get the most bang for our buck for our dollar.

MR. SIMMONS: I hope you can count on me for that.

MR. UNDERWOOD: I can count on that, I know.

MR. HOUGHTON: I'm repeating myself, Steve, but again, I'm not sure the compensation issue and indexing us to the private sector --

MR. SIMMONS: I agree 100 percent with that avenue and I think that is something that we can work with them to add that.

MR. HOUGHTON: We've got to show the folks across the street what our challenges are from a compensation standpoint and from a third party impartial.

MR. SIMMONS: Yes, sir.

MR. SAENZ: And anything that we are adding to the contract that we want them to look at that was not part of the original scope, we can add it and determine what impact it will have on time and on money and then make amendments to the contract that need to be done.

Thank you, Susan. Thank you, Ed.

Moving on to agenda item number 2, Mary Meyland will come up and lead us in a discussion dealing with our strategic plan. She gave you a presentation last month and this is the continuation of our strategic planning process for the 2011-2015 TxDOT strategic plan.

MS. MEYLAND: Good afternoon, commissioners, Executive Director Saenz. It is certainly our pleasure to be back here once again to discuss our strategic plan and the direction that we want to go. With some encouragement that we received from many of you, we have decided to turn this into a real workshop topic.

We will begin this session with about a 40-50 minute overview of strategic visioning and planning and present to you -- in your booklet we've provided a little worksheet to kind of help guide you through the different issues that we need to address at this time.

It was requested, through some of the individual conversations with the commissioners that we maybe consider a facilitator in this regard, and so we have thus employed two individuals who are very prominent in the field of future studies, planning and performance management. It is our hope that through this introduction session this afternoon that we will help guide you in the process and prepare you for next month's special workshop -- which will be conducted prior to the afternoon session -- to complete the results and the work on the strategic planning vision mission and goal session.

We're going to go ahead and begin and we have a little bit of a PowerPoint to kind of keep us on track with our time here. I'm going to go ahead and introduce Dr. Peter Bishop. Dr. Bishop is an assistant associate professor of strategic foresight at the University of Houston. We have worked with Professor Bishop on many things concerning future studies and we're proud to bring him back today. His specialty is in techniques for long-term forecasting and planning. He also facilitates groups developing scenarios, visions and strategic plans.

So we're going to bring Dr. Bishop forward to kind of give you an overview of the importance of championing a vision and what it means for this organization as we move forward and taking a terminology that Commissioner Houghton just gave us, moving to the future and what it's going to take. Dr. Bishop.

DR. BISHOP: Thank you, Mary. Madame Chair, commissioners, Director Saenz, it's a pleasure to see you all and a real honor to be able to kick off this workshop about strategic planning. My job actually is fairly simple and it's a particular one that a college professor is very adept at because we're going to talk some philosophy, so if you're ready for that, it's only 20 minutes so it shouldn't hurt too badly.

My task here is to propose some ideas about strategic planning merely as a discussion item so that you can comment and bring your experience and planning and what you want to see from this process and the outcomes as it goes forward. So I don't have 20 minutes of presentation. I have a few ideas that I'd like to stimulate discussion, and obviously this group is very adept at that so I'd be happy to share that.

I'm basically going to start off with what I consider to be strategic planning, what the elements of a plan are in very clear, I hope, and concise form, and then some principles about success factors, the pitfalls involved and some of the tradeoffs and constraints that you're going to be looking at as you go forward in the plan. So I'm ready to be interrupted or a break for good discussion, so anything like that would certainly be valuable.

MR. HOUGHTON: This is not a lecture course?

DR. BISHOP: Absolutely. This is me stimulating your discussion; that's what this is about.

So strategic, strategic has lots of different words. Basically it's a long term -- this is a five-year plan but I don't think it has to end there. It should really be something that's extremely important and noteworthy, and I make a big distinction between your strategic plan and the operational plan and the operations that the department is engaged in.

It has a tremendous mission and an everyday responsibility for the citizens of Texas and the strategic plan will have an impact on that operation but I think the strategic plan is not the operational plan, and therefore, it should be something that is quite distinct and identifiable that this is something that we are going to be accomplishing.

It is rather controversial that I might say but strategic planning is not planning. You can plan to build a bridge or a road or you can plan a political campaign, but these usually involve something new and something that no one has ever done before, and in that sense, you are setting a direction but you're not necessarily planning because the time horizon, frankly, is way too long to be clear about what things will be, what the budget will be and what all the factors involved will be. So it is a long-term plan but it is not as detailed as the operational plan would be.

The elements of the plan are the purposes of strategic planning, and let me just identify the key words involved in here. It's really more of a direction and a destination than it is a step-by-step plan. It is to achieve specific accomplishments and create change. You're really doing something, you're really trying to accomplish it. It sets priorities; it organizes and aligns the work across the various units of the department.

And most importantly, I think it's really what you as a commission, the senior staff and the other people in the department want to leave at the end of this time, that you can point to a specific accomplishment and say this is what we did, we didn't just kind of keep the doors open and keep the money flowing but we really did make a significant and measurable difference -- legacy, if you will. So this is a chance for you and the rest of the department to say what do we want this next period to be known for and what do we want to leave behind for our descendants coming on.

So that's basically what I see as the purpose of a strategic plan, and obviously, as I said before, open for discussion and any kind of debate and questions that you might have in terms of the purpose.

The elements of a strategic plan, there's three that I put on this page and the key elements on the next. Basically the mission is what you are tasked to do by the legislature, the governor and the citizens of the State of Texas, and that's obviously to manage and maintain the transportation system here in the state. The values that the department has I think are obviously solid and important, and the vision is there and you have all of that in the previous plans. These elements don't change very often, you may want to adjust them to your own liking at this point, but I don't see that there is a tremendous need for a lot of discussion in terms of those elements.

The other elements in the plan, though, are those that really do establish this as a distinct document compared to the previous, and the goals are probably the most important. Now, you have goals in the current plan that are quite general, goals like efficiency and safety and mobility, and those I would put more in terms of your perennial mission. The goals are really accomplishing something not necessarily new but something that has not been done before, even better. So if there's a safety goal, it has to do with traffic accidents and fatalities, if it's a mobility goal, it has to do with congestion and speed of transport and things like that.

These goals are things that you want to accomplish in the world, they're not internal to the department, you can't buy your way to the goal, you really have to work it and work it with the world, and these goals should be ambitious and yet opportunistic. People do set targets, if you wish, and that's certainly all right, but targets should have some basis in fact, there should be some substantiation for a target, not just picking numbers out of the air.

The goals are what you want to achieve in the strategic plan, and the strategies then are the how and those are the internal. Those are the things you have control over: how you use your time, your money and your effort going forward. They obviously need to be feasible but they require new capabilities which require new training, new means of support of how they are to be achieved.

The last part of the plan -- which is really not part of the strategic plan -- is the implementation of the strategies. These are in short-term projects, year-long projects or so, initiatives to create something new, and that's where real planning comes into effect.

You have objectives. Teams are associated. People are held accountable for that, budgets and time schedules, very much similar to the management plan that you've just discussed is that type of a project, something that will implement the strategy, the projects that roll out year after year as the strategy goes out over the five-year period.

Let me pause here just for a moment and see if there's anything in either the purposes or the elements that you would like to comment on, add to, subtract from or question in terms of how you see this plan rolling out over the next few months.

MR. HOUGHTON: [Inaudible.]

DR. BISHOP: The goals are an element. I'm not talking about the goals, I'm just talking about the goals in general. Dr. Neumann will come up and talk to you about the process of achieving the goals and arriving at the goals, and that's really the most important thing, obviously, from your point of view: what do you want this plan to do over the next five years. Okay, sir?

Three kind of principles then in terms of the key success factors, what is it that you want to make a successful plan. Well, this plan can't be too long, it can't be too complicated because everybody really has to know what it's about, and I mean everyone in the department. Clearly, the senior staff will be working against this plan but they, indeed, and their departments and their units need to make this a living document. Everybody needs to be involved in planning, so every unit and even every individual ought to have some aspect of the strategic plan on their desk and that they're working for.

In terms of your role and the role of the senior staff, obviously your keeping this plan alive is the most important thing, plans die not because nobody agrees with them but they're just not used -- it's like a muscle, it has to be continually brought out and exercised -- so words and deeds and linking your decisions with the plan: we said we're going to do this, and therefore, this is the decisions we've made to do that. Whether people agree with you or not, of course, that's the nature of decision-making but linking those to the plan is extremely important.

I even go so far as to say that every unit, and indeed, every person ought to have at least one strategic goal that they're working for. You should be able to go to a work group who is fixing the roads or a maintaining or a planning unit and say five years from now or next year how are you going to be better than you are today, and that should be a job performance expectation.

In addition to doing your job -- which is, of course, what you're paid for -- we also expect you to be moving and creating change in the future. That means everybody is in the pool together, nobody is waiting for somebody else to take the risk of novelty and change and doing the planning. So creating that as a norm within the department would be extremely, extremely important.

MR. HOUGHTON: Who are the stakeholders?

DR. BISHOP: Who are the stakeholders? Stakeholders, in my terminology, are those who are benefitted by the plan but are not directly served by it, so in this world the legislature would be the stakeholders. Obviously the citizens of Texas who use the transportation system and the businesses of Texas are your "customers." They are the people you directly serve. Stakeholders are others who are interested in and indeed impacted by how well the department does that job but they are not directly served by it. Some people use stakeholders to also include customers, I draw that distinction, that's just purely distinction in terms of terminology

Okay, so how can plans get into trouble then? They take too long. Sometimes multiyear process for strategic planning is way, way too long. Too big and too complicated. There's no way of making a perfect plan. Something that's good that establishes the direction that everybody understands and commits to is the purpose. It could be relatively short, quite a bit shorter than most plans that I see.

It could be too general -- I think, as I mentioned already, the goals that you have right now in terms of safety, mobility, efficiency, all are wonderful things but they don't really provide a specific concrete set of priorities and a way to align the effort -- but at the same time, it can't be trivial and can't be too specific. It can't be too hard, to be ridiculously impossible and pie in the sky, but at the same time it ought not to be too easy because then people don't get motivated to really put out the effort.

We have all been part of strategic planning processes that were not worth the time put in. You're facing, as everybody does when they start a planning process, a rather cynical public. I've been here, done that, this is going to be another one of those ritual exercises, et cetera. And obviously, it has to start here that this is going to be a real thing and is going to make a real difference.

And that's where you're going to tie the achievement of strategic goals to some kind of performance appraisal and performance plan that we're expecting departments and divisions and even individuals to be working against some kind of strategic goal for themselves, and that makes it a real thing, a living thing, puts people's skin in the game as opposed to making it more or less a document that people refer to but are not the basis of decision-making.

Finally, then, what are your tradeoffs. Obviously, there's politics involved, both external and internal politics, there are constraints that you're under from the Governor's Office and from the legislature and from the citizens, and you obviously have to spend a lot of time on that. A lot of times people will use planning as a tactic within the internal political game -- it is here, believe it or not, you know it, we know it -- and so it's important to know that groups sometimes will jockey around for position rather than working for the overall enterprise. There's no way of eliminating that, but of course, setting the right tone and saying we are going to do this for the good of the enterprise is where it starts.

Getting an agreement on the specifics -- the more specific you are, as you know, the more difficult it may be to reach that consensus, so there's a tradeoff involved: how specific do you want to be versus how general in order to achieve the consensus. Believe it or not, some people don't really want the kind of accountability and transparency that we all speak about because they feel like they're a little bit better off if it's kind of fuzzy and there's some wiggle room in there.

And if you are very specific, of course, there's always the possibility that you or the public or the governor or the legislature will find out that you didn't achieve exactly everything that you said you would, and there is that downside as well. So there has to be a tradeoff in terms of how specific, concrete, and ambitious you want to make the plan against the political considerations of doing that one way or the other.

Those are basically some ideas that we teach in our courses at the University of Houston on strategic planning. This is a chance to establish some principles, and Dr. Neumann will come up next and talk about a process that I think follows these principles.

I'd be happy to answer any questions that you might have right now. I think, again, this is kind of your window of opportunity. If these go out of here, then the staff is going to take these as principles that you agree with -- and I certainly hope you do -- and if you do, that's terrific. I can't believe that I hit without any comment or addition or question about that. Anybody want to jump in and have a discussion about this?

MR. MEADOWS: [Inaudible.]

DR. BISHOP: That's what I heard, Commissioner, I heard you're the guilty party here. Right?

MR. MEADOWS: Somebody told you that?

(General laughter.)

MR. HOUGHTON: Well, without being too offensive, I think we missed.

DR. BISHOP: Missed? Tell me in what way.

MR. HOUGHTON: Our real partners -- when I asked you who are the stakeholders -- under transportation law are the MPOs.


MR. HOUGHTON: And this looks like one size fits all. I'll take, for instance, El Paso is a border town that sits on the Rio Grande, international implications, State of New Mexico. Houston, big port, biggest community in the State of Texas. They have different goals.

DR. BISHOP: They will, yes.

MR. HOUGHTON: The different goals and these need to come from this way up, so if I'm taking this out and I'm going to tell Mary: Mary, I want you to go visit with all these MPOs and apply this. What you have as goal one, added capacity may not be added capacity, added capacity in relative terms could be rail -- I mean, that's generic. Or manage travel demand, in El Paso we don't have any toll roads, we have toll bridges.

So my point is that we seem to think that all good ideas emanate from right here and we're not out in the communities, because Dallas-Fort Worth is a lot different from San Antonio and what they do in those communities.

DR. BISHOP: Right. Absolutely.

MR. HOUGHTON: So I think when you get the buy-in, you get the buy-in at the community level, at the MPO level, and those ought to bubble up to us, and the goals are going to be completely different in each and every MPO district. There could be some crossover, obviously there will be.

Now, Mary, I think I was told -- you told me today, Mary, that you did a survey on what the number one priority in the State of Texas is with the public?

MS. MEYLAND: The public.

MR. HOUGHTON: And it's -- I'm going to set you up.

MS. MEYLAND: You did set me up. We have completed the polling that we talked about last month and the number one issue that they were concerned with was preservation.

MR. HOUGHTON: Preservation of the system.

MS. MEYLAND: And they're willing to spend most of their money in preservation versus congestion mitigation which was interesting.

MR. HOUGHTON: Which is a surprise.

MS. MEYLAND: And that covers metropolitan, rural and urban folks.

DR. BISHOP: So let me clarify what this portion of the discussion is about versus what you're talking about. You're talking about the specific plan as it is today and as it may turn out to be in the future. My role was only to talk about goals in general, not the specific goals that the plan has in it or could have in it.

MR. HOUGHTON: Well, I'm looking at the process of getting to those goals.

DR. BISHOP: Right, and we're going to have a discussion about specific process in a moment. In general, I think goals should be concrete and specific. Now, you raise an excellent point, though -- and that's another point that I should put in here -- is that there does need to be a balance between the goals that you have as the stewards of the department, as the leaders in the department, and the goals that MPOs and districts and all of that have.

So in that sense, I don't think you can simply turn the goals over to them; by the same token, you certainly don't want to dictate goals and not leave any flexibility for all the huge variation in this tremendously large state. So there does need to be a balance. What I'm saying is that the commission itself, maybe it's preservation, maybe that becomes a goal that we are going to emphasize, suitably understood and implemented in all the different units, in all the different states.

So I don't think you can go completely to the side of complete decentralization, but of course, nobody would argue that all the whole plan is set in this room, by any means. So there is a balance there one way or the other.

MR. HOUGHTON: I made my point.

DR. BISHOP: Yes. Appreciate it, sir. Thank you.

Any other points before I yield the floor here?

(No response.)

DR. BISHOP: Well, I appreciate your time, it's been a real honor talking to you, and I'm available, obviously, for any further discussion that you choose. Thank you.

MS. MEYLAND: We appreciate Dr. Bishop being here and giving us that insight from his philosophy side. And I do want to kind of answer your question a little bit more specifically. As part of the process -- which we're going to bring Dr. Neumann up here to talk a little bit more about how do we get into the goals and how we formulate the goals -- part of the process -- if you can zoom on that a little bit, and I do have these as handouts; we talked about this a little bit generally last month.

But this month that little blue box right there is where we intend on going out with our strategic planning work groups, and each one of those work groups will be in a regional office and we've invited a member of TEMPO that represents the region to participate in those meetings. And those will be conducted in September and we're asking them to give us input to their regional issues as in regards to goals and focus areas and concerns.

So hopefully, as a part of getting all of the concerns and putting them into a goal package that will be an area where we can incorporate the TEMPO concerns and the MPOs and the regional issues as they come down. Just to refresh your memories there, I wanted to point that out.

At this point we're going to move forward into the agenda on the workshop a little bit and bring Dr. Neumann up. Dr. Neumann has 30 years of experience with transportation policy planing, programming and finance. He is the president of Cambridge Systematics. He works with agencies developing practical approaches to measure and improve performance and increase accountability. Sound familiar? Dr. Neumann is the chair of the TRB Performance Measurement Committee which is going to be valuable to us as we move forward in this process, he can kind of keep us tethered and a little bit anchored as we move forward and making sure that we're lining up our goals to those that may be wanting to be accomplished at the national level as well.

So at this time, Dr. Neumann.

DR. NEUMANN: Thank you, Mary. Madame Chair, commissioners, and Mr. Saenz, it's a pleasure to be here.

Professor Bishop talked about him coming from an academic point of view and giving you some philosophy, I live in the world where we take that philosophy and try to implement it in operating agencies, and that process gets messy often in that translation. And there are a lot of detailed issues that have to be addressed, have to be tailored to the particular agency we're dealing with and the particular context in which you operate.

The comment about MPOs as one of your key stakeholders and key partners, as we think about appropriate strategic goals for TxDOT, is a perfect example of the kind of issues that we're going to have to get into if we're going to develop an effective strategic plan that you support and that you own and yet that works for a very diverse and complex agency and a very diverse and complex set of stakeholders, partners, whatever terminology we want to use.

And I realize time is short today. What I want to do is give you just a few reactions to what I've seen to date in terms of the exercise that the staff has started in strategic planning, give you my sense of that work and the direction it's going in very briefly.

I think we're going to have some time in September to have a block of time where there's more time to engage in a discussion and really facilitate a discussion with you where the key objective will be to make sure we understand what your concerns are, make sure we understand what you want to see in this strategic plan, make sure that we know what we have to do to make this strategic planning process result in a plan that's effective for the agency, that you own, and that receives support outside the agency as well. So no small order and I'll look forward to that discussion in September.

I'm hoping, depending on your schedules, that we might have an opportunity, that I might have an opportunity to discuss some of the issues and things we may want to do at that meeting one on one with you between now and September, and obviously I'll work with staff here and see if we can make that happen.

In terms of just a general reaction to what the department is doing and the process that has started, I think they're taking the right steps; they're defining the right activities. Clearly, the step that we're taking today in terms of making sure we engage you in a very real way in this process is critically important, from my point of view. But as I look at what they've done and what they've laid out and the chart that Mary just put up, it strikes me as those are the right elements, those are the right things to focus on, the challenge will be in the details of what each of those boxes mean and what we actually produce as a plan.

Just as further quick background, at the national level -- and Mary may not be aware but I've been Sunsetted as the chairman of the TRB Performance Measurement Committee. It was a great experience. I'm certainly still involved in the activities of that organization -- but the other recent activities that I've been involved with at the national level is working with both AASHTO, the Federal Highway Administration, and through briefings of House and Senate staff, engaged in a discussion at that level about the next federal reauthorization, and particularly the aspect of that federal reauthorization that is very likely to focus on performance measures and performance management and national goals that we all are going to have to deal with.

My comment there is just meant to suggest that certainly the direction that I sense you and TxDOT are going in with respect to really looking, as part of the strategic planning effort, at accountability, at performance management and integrating that into this plan and the department's operations in a more robust way than has been done to date, I think puts you in a very good place with respect to what I suspect is going to be a very, very different federal reauthorization act.

Can't predict Congress, can't predict timing, but I think the chances that that bill will have a very, very strong performance management element is very likely, and I think, again, the process that you're engaged in, the direction you're going in, while not motivated by that or responding to that, I think will put you in good stead with that respect.

In terms of the strategic plan itself, I would just quickly reiterate a few of Peter's points and emphasize them, because as we bring this kind of work to practice, from my point of view, the most important thing that we want to have in the strategic plan is a very clear statement of focus and priorities for Texas Department of Transportation, and those focus and priorities may be framed around some of the partnerships and other actors that you have to work with to get your job done, so that's fair game.

When we think about what is that focus and what are your priorities for the department, it's not just top down; it's not just working alone, but it's working in concert with a whole set of other partners, and we have to figure out what are those priorities and what kind of direction do we want to give.

This plan will be meaningless, in my opinion, if you don't own it and you don't support it and you don't believe it, as well as, obviously, the executive management of the department. And it will also be meaningless if it doesn't actually influence actions and priorities in the budget.

So those are the tests. And so we want to work with you, and certainly I've been brought into this to really help make sure we understand what your concerns are, make sure we reflect those concerns in this plan, make sure that the product of this effort is something you can use, the department can use, and that can actually drive some decisions.

And Peter mentioned this, a plan that doesn't do that is a lot of words. If it's not connected to action, it really doesn't make sense. And I see this when I work with other agencies -- this being a strategic planning exercise -- as a great opportunity for a conversation between the commission and executive staff and others around what should the department's priorities and focus be, and of course, I'm well aware of lots of discussion about that focus and priorities coming out of the Sunset process and some of the direction that you've gotten from the legislature and others.

Let me stop there. Does that make sense to you guys; does that sound like we're moving in the right direction, that's what we're hoping to do?

I'll keep going and the slides may catch up; the slides aren't that critical.

Staff just asked me to sort of -- and I think you've gotten a work packet with the existing mission statement, vision statement, some proposed values and the existing goal statements that exist for the department right now -- and the mission statement is now up -- and just make some comments on it. I think Peter already made a comment about the mission statement -- which I agree with. The current mission statement, from my point of view as an outsider, does get at your core mission. It's concise; it's clear; it's focused. It's a reasonable mission statement. No need to change it.

As part of the strategic planning exercise, though, we want to put it in front of you and just see if there are some other themes that given today and given some of the events that have happened recently, we want to reflect in a revised mission statement. It's not a big deal but it may be important in terms of signaling that we're hearing some things.

And the staff offered an alternative mission statement -- which I think you've gotten in your packet -- and from my point of view when I look at that alternative, what are the themes that they're suggesting we may want to think about, partnerships and working cooperatively, environmental stewardship and accountability and transparency in terms of how TxDOT focuses on achieving its mission.

All I'm suggesting is those may be some candidate themes that we want to think about, decide whether we want to revise the mission statement to reflect those. I don't think we want to revise the statement every year or every two years, but we're at a point in time, given events, that it might be worth doing that. Just offering it as a suggestion. In September we'll want to come back and try to finalize a mission statement that you're all comfortable with.

So again, this is a perfectly good one; we can stay with it. There may be some themes we want to add. And certainly if there are any quick comments -- and again, I realize the schedule today is tight, but if there are any quick comments or reactions to that right now, we're happy to hear them.

And not hearing any immediately, similarly, vision statement, where are we going, sense of direction moving into the future. Again, from my point of view, a perfectly reasonable vision statement, nothing jumps out at me that just doesn't sort of resonate, it's pretty clear, it's a pretty effective statement. Staff again, though, has offered some additional language that they thought we may want to think about as we think about the next edition of a strategic plan, and again, those themes relate to environmental stewardship, innovation and creativity in how the department goes about its work, partnerships with stakeholders and partners broadly defined, and again, become a more performance-driving organization.

So again, easy enough to imagine some variations on this statement that may reflect some of those themes if we think those are priorities that we want to emphasize and note. I certainly would not want to see the vision statement become a whole lot longer than this statement, so the staff's suggestions are quite a long list of suggestions but I think the intent there is just to offer some ideas and we would all want any revised vision statement to be pretty short and sweet.

Peter also mentioned the notion of values and, of course, we all understand that TxDOT for a long time has operated supporting these kinds of values that are shown on this list. They evidently have not ever been an explicit part of the strategic plan -- in other words, a value statement, a list of specific values that guide how TxDOT does its work, hasn't been a part of the plan in the past.

I think it's actually a good thing to add those statements, and again, it's a very useful tool for staff internally to recognize that this is what the leadership of the organization says. This is the kind of organization we are; this is how we're conducting our business; this is the kind of relationships that we want with our partners and others.

So again, something to think about, it can be in there; it doesn't have to be in there. The staff is offering some language. It looks reasonable, but again, we want to open this up to your ideas, your discussion in terms of whether it's in there or not, whether these capture all of the key values that you think TxDOT ought to be articulating.

And then finally -- and this is probably from my point of view, and I think Peter mentioned it as well -- when I think about getting together in September and having some time to have a more expansive discussion and more interaction with you on the key elements of the strategic plan, mission, vision, values, goals, it's the goals where I think it's going to be most helpful to really get into a discussion.

Now, again, you'll dictate how much time we spend on these different elements, but my suggestion is that this is a very, very key element because from my point of view, the goals are the way we take very broad and very general mission, vision, value statements closer to action and setting priorities and a sense of direction.

So we want to have a conversation with you about goals, not only the topic areas but realistically how can these goals be set, to what extent can TxDOT for part of the system have some goals that they drive, to what extent does TxDOT's goals in some of these areas have to reflect partners and other constraints. Those are the things that we need to discuss and get comfortable with before we can then move forward and articulate a set of goals that are going to work for you and for the organization.

So again, the current set of goal areas -- I would call them -- reducing congestion, enhancing safety, expanding economic opportunity, improving air quality, preserving the value of transportation assets -- keeping your assets in a state of good repair, as I understand that -- again, very logical set of goals. The staff has offered four goals as an alternative expression of maybe the goals of the department. I don't think there's any strong pride of authorship -- I should be careful when I say this to the staff -- on those four alternatives, but again, I think we're just trying to stimulate some discussion and thinking.

My only guidance in this area is, I think, there's no magic number but at this level for this plan, five goals or six goals or four goals is tractable and workable, 10 or 15 or 20 starts to get complicated and I would encourage us to really think at a high level what are the really most important things for the department to focus on, what are those most important actions that we think we want to drive in the department. Keeping that list as short and focused as possible to aid that is important.

Now, certainly I think the intent is -- and of course, the department has already done a lot of performance measurement reporting. I know that the legislative budget process requires certain performance reporting. I know that the Sunset bill, though it didn't pass, suggested other performance measures that the legislature might be interested in, so certainly the intent is with each of these goal areas and others -- whatever the goal areas are that come out of our process -- to really think about how are we going to measure progress and success for meeting these goals.

And again, I think there's a fairly long list of candidate measures that the department is already either dealing with or has put in front of you or certainly has prepared. Part of this process wants to at least begin a discussion about whatever goal there is we come up with, what is going to be the most effective way to capture, at the highest level, our achievement of these goals as a department moving forward.

Those are kind of quick summary reactions to what's happened to date, some reactions to just where you stand now with respect to some of the key elements of a strategic plan, as Peter has described it, a little bit of a sense of some of the next activities to give you an opportunity, to get more engaged in this discussion and really give you an opportunity to really drive the plan and drive the content and make sure that you're comfortable with it.

So let me stop there. I'd be happy to respond to any questions or take any comments, and I look forward to seeing you again in September if there aren't any.

MS. MEYLAND: Well, thank you. In summary, we've had two presentations, one to give us an overview of the direction of strategic planning and where it should go with this organization, and Dr. Neumann is preparing us for the September return so we can spend more time delving into the finite direction statements that we really need to adjust and prepare.

And also by that time we will have had information accumulated and summarized concerning the public polling that we just finished and basically the impact of those public statements and the concerns that they bring forward from the 1,200-ought poll returns that we have. In addition, we will have completed all the focus groups that we have been conducting in eight communities. So we'll have all that information also to bring forward to you.

We will also at least have conducted three or four of our stakeholder groups which will help us bring forward an internal perspective as well which might help you in your goal-setting and your goal alignments in the future.

So at this point we're just hoping that we can get some interest from you and encourage you to come back or visit with Dr. Neumann in the interim over this next month so that we can come back in September and do some formalization of these goal statements. And that's all we had for our presentation.

MR. MEADOWS: I'm sorry, I was practicing listening -- I don't do that a lot.

(General laughter.)

MR. MEADOWS: I apologize. I just wanted to say I think we had the order right. I think that this was a good presentation today, I think we all know where it is that we stand, we have a good overview of the sort of key elements of the plan at really a 50,000-foot level, and then some direction about where it is that we go. There's never going to be a perfect way to do it but I think that this process will yield the plan that we're trying to accomplish. So thank you very much for redoing this.

MS. MEYLAND: Thank you very much, Commissioner.

MR. SAENZ: Moving on, agenda item number 3. Phil, where are you? There you are. Make sure you're not carrying your rifle that we gave you last night.

(General laughter.)

MR. SAENZ: Phil is going to lead us in a discussion. Of course, we do have a requirement on the federal side to have a long-range plan and we also have a requirement on the state side to have a statewide transportation plan. It follows pretty much after the strategic plan, this is more of an operation of what we want to accomplish in transportation. So Phil is going to lead us as we move forward to updating the statewide transportation plan.

MR. RUSSELL: Thanks, Amadeo. Good afternoon, commissioners and Mr. Saenz and Roger. Again for the record, I'm Phil Russell, assistant executive director.

Actually, I think Mary's presentation is going to be a pretty good segue into what I'm going to spend a couple of minutes with you discussing today the Texas Transportation Plan. Many of the output that I think we'll get out of Mary's analysis in December or January, whatever the goal is, will be critical for us in putting together the transportation plan, and that will be a lot of the target goals and the standards that we'll be looking at on the plan.

As Amadeo mentioned, the reason we have a Texas Transportation Plan, it is required under both federal and state law, and you really look at the two pieces of legislation, they're very compatible; they both talk about creating a plan that looks at highways, turnpikes and aviation, mass transit, railroads, water traffic, that sort of thing.

Federal law specifically talks about the three Cs, continuing, cooperative and comprehensive planning processes that take into consideration project strategies and services that will address economic vitality, safety, security, accessibility, the environment, preservation. It also requires that we have a minimum 20-year forecast period as we develop the plan.

Also, of course, there are several pieces of legislation -- and Coby may actually get into some of this under his presentation -- but Chairman Oberstar, as well as other members on both the House and the Senate side are looking at some transportation authorization acts that could affect our transportation plan and how it's put together. But again, I think the commonality, at least the commonality that I see on these various proposed pieces of legislation, they talk about performance standards and performance targets and the management of those performance targets; it talks about reduction in fuel consumption, reduction in greenhouse gas emissions, encouraging livable communities. And so I think we should probably keep all of those in mind as we move forward on our transportation plan.

Just as there are some proposed pieces of legislation on the federal side, as you all know, there was various attempts in our last legislative session to get into a lot of these areas, specifically on House Bill 300, the Sunset bill, talked about a statewide plan that would cover a period of 25 years or more, again it talked about goals and performance targets, it talked about priority corridors and projects, a participatory plan and looking at elements to relieve congestion and it required an update every five years.

So where does that leave us in moving forward? Again, I think the hopeful outcome out of Mary's effort on the strategic plan will provide the basis of a lot of those performance standards and goals that we'll need on the Texas Transportation Plan. We do have a current transportation plan. I think it was out of the '90s, and over the last five or six years we've probably had three or four -- two or three different attempts at revising the plan.

And of course, at the time we always had these watershed legislative sessions that a lot of things were in the works and we felt like no, let's hold on to the plan update because we'll have some legislation that really may change the game plan here.

And I think we're at the point that we simply can't wait any longer, we need to update the plan, we know that there will be changes both on the federal and the state side but we have to be cognizant of some of those proposed changes and I just think we need to move forward with our proposed plan.

Again, just a couple of other things to kind of keep in mind or to think about, the transportation plan that we have now -- and in my experience that we've dealt with before -- is really a 30,000-foot plan. It's pretty generic, and again, it incorporates all of those elements that both the state and the federal statute requires. Candidly, in my viewpoint, it's probably a bit too ethereal for me; it's hard for me to really focus in and say, Oh, okay, I get it; this is what we're supposed to be doing. So I think it may be appropriate to start drilling down and trying to provide a bit more specificity on our plan.

And Commissioner Meadows, you and I have talked quite a bit about the 35 corridor, the 69 corridor, and it may be appropriate, as we start building the transportation plan, that we start looking not just at that 30,000 feet but start looking at corridors or projects and start looking at our mission statement of what do we need to do, again, on the 35 corridor. And if Mary's strategic plan comes out that we need to have goals that we will reduce congestion by 3-1/2 percent or we will decrease the freight travel time between Laredo and Dallas, maybe those are things that can be incorporated into our plan, again, on 35 itself or any other major project that is of that importance.

I think there also should probably be some discussion on where we stand from a funding standpoint. We've got a couple of great tools that I think the guys behind me and you all have created. The 2030 Commission report I think would be a valuable element to include in this plan, as well as the TRENDS model that's been discussed so often, and I think that kind of sets the landscape of our goals and needs but it also shows kind of where we are as we start developing the transportation plan.

John Barton, I think, is going to tag on and talk a little bit on the TRENDS model and some of the elements that he's working with.

John, are you here? Would you like me to try to attempt to answer any questions you might have now before John comes up, or would you like to hear his presentation?

MR. MEADOWS: I just have a question, one about irony, I guess, and that is is there any irony in the fact that the presenter of the long-range plan today is going to retire in two days?

MR. RUSSELL: It does seem like an odd thing, doesn't it.

(General laughter.)

MR. RUSSELL: But I'll be watching; it's a very transparent world and I'll be watching on the website. But other than that, a very astute remark.

Any other questions?

(No response.)

MR. RUSSELL: Mr. Barton.

MR. BARTON: Thank you. For the record, my name is John Barton, I'm the assistant executive director for Engineering Operations for the department. And Commissioner Meadows, I think the information I'm about to share with you will explain why the person that was presenting the long-range plan has decided that he doesn't necessarily want to be here as we move forward with that. And I will say I'm impressed with his use of the word ethereal -- I can't even pronounce it, much less spell it, nor know what it means, but that's okay.

(General laughter.)

MR. BARTON: As Mr. Russell was sharing with you, part of the transportation planning process is dependent upon an accurate forecast of available revenues into the future so that metropolitan planning organizations, toll authorities, the department and our state's leadership and the legislature and at city and county levels can have a good understanding of what to expect in terms of financial resources and to develop all those federally required transportation plans based on that forecast.

So I wanted to share with you some information that we've recently collected through the process of polling our metropolitan planning organization partners and district engineers in asking them what they believe are reasonable assumptions we can make in using our TRENDS model -- that has been presented to you before -- that tool that was put together by a group of metropolitan planning organizations, the Texas Transportation Institute, the Center for Transportation Research and district staff, and use those assumptions in the model to help forecast what future revenues might be available over the next 25 years for us to use in our planning processes.

One question we asked them, because it's understandable that population growth is tied almost directly with the amount of vehicle miles that will be traveled on the system and the relationship or correlation between those growth trends is well documented in this part of the TRENDS model.

So we asked them which forecast of population growth should we use in this model to develop our forecast: should it be the half a percent population growth increase that's developed by the State Data Center; the 2000-2004 population trend increase that's created by the State Data Center; the 2000-2007 trend; or the 1 percent increase in population?

And as you can tell from these survey results, the majority of people felt like we should be using the 2000-2007 scenario, and it's kind of toward the high end of the population growth spectrum but certainly not the highest of the ones that are available from the State Data Center.

We then asked them in terms of fuel efficiency -- and as Mr. Russell pointed out, that will be a key factor in future available revenues -- what should we look for: should we look for a large penetration into the market of highly-fuel-efficient vehicles, meaning we'll have a very high miles-per-gallon efficiency rate; should we anticipate that the price of oil is going to stay where it is and Texans are going to continue to drive 15-miles-per-gallon pickups and that we have a very low penetration of new high-fuel-efficiency vehicles and therefore would have a very low-miles-per-gallon usage rate, or should we use the average that Cambridge Systematics and Texas Transportation Institute came up with which predicts a future average fuel fleet efficiency of about 34 miles per gallon -- and today, as you know, we're at about 18-19 miles per gallon.

And from the survey results, the majority of those responding from the MPOs and district engineers felt like that average-miles-per-gallon forecast tool would be appropriate.

We then asked what would be an appropriate level of maintenance to believe is the appropriate level to plan for and recommend that the commission plan for: should we maintain our roads at improved condition from today and invest as much funding as necessary to maintain our roads at 90 percent good or better, or should we just maintain the current level of spending we have on maintenance which is at the low end, meaning that our roads would decline in conditions below 80 percent good or better, or should we be somewhere in the middle based on the scenarios laid out by the 2030 Committee?

And as you can see, there was a little bit of spread in the results here but the majority of people felt like we should maintain our roads at 87 percent good or better or better than that, and so I think that the forecast tool recommendation would be to fund maintenance at a level so that we can sustain 87 percent of our roads and bridges in good or better condition.

We then asked them what do you believe is the likelihood and should be used in our forecasting processes that the state fuel tax would be increased by our state legislature. And as you can see, the majority, or almost 60 percent of those responding said they didn't think that that was a reasonable assumption to make, the rest said that either 5 or 10 cents per gallon was a reasonable assumption. So staff would suggest that we recommend that we don't anticipate an increase in the state fuel taxes for this forecasting process at this point in time.

We asked the same question about an increase in the registration fees for vehicle registrations, and a little different here, probably because we've seen some communities where this has been done and we've had legislation passed a couple of sessions ago that allowed some communities to increase registration fees to support transportation projects, and so the majority of the responders said that it's likely and a reasonable assumption to forecast that there would be a $10 per vehicle increase in registration fees available for transportation funding, and so we would recommend that as well.

We asked the same question about increasing the federal fuel tax, and again, the majority of responders the most common response was zero. There's a little spread towards the 5 cents per gallon and 10 cents per gallon increase. I don't think that I can stand here in front of you today and recommend that we would anticipate a federal fuel tax increase, and using the data that's there, I think I could support that, but that one, it's possible that somebody could conclude that maybe using a 5 cents per gallon fuel tax increase at the federal level would be a reasonable assumption.

We then asked do you think the legislature or is it likely and reasonable to assume they will index the fuel tax, and the majority of those responding said no. And then we asked if you felt like that in Texas we'll start slapping GPS units on everyone's vehicles and charging you for the vehicle miles you travel based on that, and as you can see, the clear answer to that was no. So we asked, finally, how do you feel about and should we reasonably expect that we're going to reduce diversions, and the majority of them said they didn't think that as well.

So we took what we believe are what the results of that survey were: that registration fees, we could anticipate registration fees increasing $10 per vehicle and that was really about all, and in doing so, what would be the available revenues versus the projected expenditures, and this is what the result of that is.

But I guess what I wanted to share with you today was this information to kind of say that our planning partners have worked with us, and based on all those questions we asked and the feelings that we have out there, we believe that the reasonable assumptions to apply toward the use of the TRENDS model in developing a financial forecast for the next 25 years is: that the vehicle registration fees would be raised by $10 per vehicle, and that the commission should endorse funding maintenance at a level that would maintain our system at 87 percent good or better roadways.

And those are the only two assumptions that we would put into the model. Everything else would remain as it currently is today in terms of revenues and expenditures. And that's what we would use in developing these financial forecasts for the future which is critically important for the development of the Texas Transportation Plan, each metropolitan planning organization's long range metropolitan transportation plan. And I've discussed this with a lot of individuals, including a few of you individually, and this is a stark reality. But what it will mean is that we'll be planning for a declining revenue stream into the future --

MR. HOUGHTON: Like when, next year?

MR. BARTON: Yes, sir -- and absent any revenue enhancements that come forth from the legislature or Congress into the future, our transportation plans will have to be adjusted to accommodate for that, meaning that any additional revenues that are necessary to provide those projects in those communities that have to develop those long-range plans would have to be based upon locally funded options.

MS. DELISI: Refresh my memory, in the cases where the legislature has increased the vehicle registration fee in the last couple of sessions, none of that revenue increase accrued to this agency. Correct? It all went to the locals?

MR. BARTON: It was all dedicated to the local counties so it was at the county commissioners courts.

MS. DELISI: So it's also another reasonable assumption that if the legislature were to take that option, it would all accrue to the locals and we may not see any revenue increase from that.

MR. BARTON: That may be a logical assumption, yes. And it could be a local option that those communities would choose to put into their planning process.

MR. UNDERWOOD: Quick question, John. Now, if I understood your figures right, the projection was 34 miles to the gallon and right now about 18 and 19?

MR. BARTON: Yes, sir, about 18 to 19 miles per gallon -- I think it's actually 18.9 miles per gallon.

MR. UNDERWOOD: Have we done any type of study, because to get the 34 miles per gallon, what are they going to do? I don't think you're going to get that much more fuel efficiency, you're going to actually get lighter vehicles which means less wear and tear on our roads. Right?

MR. BARTON: I think that it's based on a couple of things: evolving technology in the weight of the vehicle and evolving technology in the horsepower available through the size of the engine. And Ron Hagquist, with Mary's group in our Strategic Planning and Performance Measurement Office, has done a lot of this research and been responsible for gathering it. I don't know if he's with us but he could explain to you exactly how that model was based.

MR. UNDERWOOD: I'm just saying I would like to know if we're taking into consideration because I know these vehicles, they're making them lighter and lighter, that's how they, quote, get the better fuel mileage.

MR. BARTON: And I think that's particularly true on passenger vehicles. As we all know, the majority of our pavement damage occurs because of freight movement on our truck system, and the fuel efficiency of trucks will continue to increase but their load carrying capacity will not because of the improvements in technology of the engines.

MR. UNDERWOOD: Exactly. We're not going to turn around and say we want you to be more fuel efficient and you can only carry 60,000 pounds instead of 80-.

MR. BARTON: Well, we'd just like for them to carry 80,000 to be honest with you.

MR. UNDERWOOD: I understand that too, and also to stay on the pavement and not drive on the shoulder.

MR. BARTON: Yes, sir.

MR. UNDERWOOD: I understand. Thank you, John.

MR. HOLMES: John, in this last slide it says revenue versus projected expenditures. Is that titled correctly? Are we projecting expenditures that run a couple of billion a year more than our revenues, or is that just what we need?

MR. BARTON: No, sir. What this is intended to show is that if we follow the recommendation of this group that we should fund maintenance at a level that maintains our pavements at 87 percent good or better and we keep everything else in terms of funding where it is today, we would project those types of expenditures but with the assumptions on revenue enhancements and fuel efficiency improvements, our projected revenues are going to be much lower than those. So we would obviously have to adjust our expenditures downward.

MR. HOLMES: Right. And one other chart that would be interesting would be if you took your revenue projection and then you allocated that across the various categories of expenditures, what would that do to the paving scores over that time period?

MR. BARTON: If the decision was to put less money into maintenance while sustaining the funding levels that we've predicted in mobility, then our pavement scores would decline sharply, and I'm going to talk about that a little bit about that in one of our upcoming presentations this afternoon.

MR. HOLMES: Is it a reasonable expectation that we would not even be able to maintain an 80 percent good or better?

MR. BARTON: Yes, sir.

MR. HOLMES: Eliminating mobility.

MR. BARTON: If we eliminate mobility, it's reasonable to forecast that our pavement condition scores would continue to decline with the currently available revenues. They would trend down toward 80 and probably drop below 80 at some point in the not too distant future.

MR. HOLMES: Taking mobility to zero.

MR. BARTON: Taking mobility to zero, yes, sir.

MR. HOUGHTON: Are these the same forecasters that forecast the stock market?

MR. BARTON: No, sir, they're not.

MR. HOUGHTON: How accurate have they been in the past on their numbers?

MR. BARTON: On the projection of future available revenues?

MR. HOUGHTON: No. On growth, on miles per gallon. A lot of it is theory.

MR. BARTON: Yes. I think that this prediction of future miles per gallon is something that's new so I'm not sure that we've had a lot of previous forecasts for that.

MR. HOUGHTON: How often does the fleet turn over in the State of Texas.

MR. BARTON: I believe that on the passenger vehicle side -- and you asked that question two meetings ago -- I think it's somewhere in the eight- to ten-year time period.

MR. HOUGHTON: So Ford Motor Company is developing a vehicle that will do 150 miles a gallon, that's the future.

MR. BARTON: Yes, sir.

MR. HOUGHTON: So at ten years let's say we're at 50 miles, we'd turn over the fleet today, let's say we're at 35-36 miles per gallon, gas tax is going to become irrelevant -- it really is. It's not going to be there, it's just not going to cover anything.

MR. BARTON: We talked about that before, that the per-gallon of fuel consumed tax is a declining value in terms of a revenue source because of the fact that fuel efficiency will improve, and perhaps even more dramatically than this is suggesting.

MR. HOUGHTON: And we know that vehicle miles traveled, people are afraid of it because they don't know it.

MR. BARTON: That's correct.

MR. HOUGHTON: People were afraid of the interstate highway system 50 years ago, they were opposed to it, but now it's one of the things you can't live without.

MR. BARTON: Yes, sir.

MR. HOUGHTON: It seems to me that we need to be proactive and not worry about -- some people still believe the "Road Fairy" is still alive.

MR. BARTON: I think you've made it very clear that you assassinated the "Road Fairy" in South Texas.

MR. HOUGHTON: Well, obviously not by the polling data that we have, that they believe that money is just going to fall from the sky somehow, someway, and everything is no, no, no. Maybe that comes from the elected officials; everything is no, no, no. But at some point in time we're going to have to wrestle with this and just say let's go look at vehicle miles traveled.

It's going to be the thing of the future. Everyone knows it -- well, not everyone knows it; they don't know it -- that it's going to have to be looked at, that with a declining what you've got left, that's what you have left, and we ought to, as a department, start moving in that direction to educate research what that means and educate the public on what that would mean to them because I think they're afraid of that future because they don't know.

MR. BARTON: And I believe that you're correct and we do have staff that are prepared and have done some preliminary work in that regard, and we can continue to move forward with that at your direction. I believe that this type of conversation will bring about what Commissioner Meadows said a couple of meetings ago, and I heard it and it was one of the most profound statements that we've had said here recently --

MR. HOUGHTON: What was it that you said?

MR. BARTON: I'll share it with you.

MR. HOUGHTON: Please, we're all ready.

MR. MEADOWS: I'd better write it down.

(General laughter.)

MR. BARTON: It's something that Ben Wear and others might want to write down, but what he said was: It's going to take removing projects from an MPO's transportation improvement plan before these communities and transportation partners wake up to the reality of our funding situation.

MR. HOUGHTON: We're not going to be removing them, they are, they will.

MR. BARTON: Well, they'll have to based on these predictions.

MR. HOUGHTON: When they see the revenue source, they have to remove them.

MR. BARTON: And so as they go through the development of their metropolitan transportation plans over the next eight months, and in communities all across this state, they remove projects from their current transportation improvement plan -- that's the four-year plan they thought they would be building projects on -- I think the message will be loud and clear finally.

MR. HOUGHTON: Well, I don't think we can wait for that but I do believe we need to get into the research of vehicle miles traveled. I mean, when you see what's left in your hand of cards, there isn't. I mean, if the legislature is not going to do what they should be doing, need to be doing, the federal government is not going to do it, then what do you have left?

MR. BARTON: Well, we certainly take that direction and work on that.

MR. SAENZ: We were at a Senate hearing last week?

MR. BARTON: Yes, sir.

MR. SAENZ: And one of the questions that came up from the Senate hearing had to do with if we were going to be doing anything on a vehicle miles traveled study. And of course, this last session there was a bill introduced that moved through either the House or the Senate -- did not get through -- to actually have a pilot project for a vehicle miles traveled study.

MR. HOUGHTON: Well, why do we have to wait for the legislature to have a pilot program when we can institute our own pilot program?

MR. SAENZ: Based on what I heard last week at the hearing, I've asked staff to look at what can we do through our research program something on vehicle miles traveled. Other states are already doing it. Can we piggyback on what they've done so we can get some information to put some information out to the public about how it works? What are the issues we would have to address with it? How we could address -- say, for example, Mr. Meadows doesn't want us to know when he's out fishing in Port Aransas.

MR. HOUGHTON: Well, that's all the time, so there shouldn't be any problem.

(General laughter.)

MR. SAENZ: Okay. So how do we address that, and we're going to try to see if we can do some research. TTI has also been very involved and had submitted for some federal grants, and we're looking at some work for us also, so we will move forward with trying to see if we can do something to get information out that we can put out to the public in a VMT study.

MR. HOUGHTON: The next step?

MR. SAENZ: That will be the next step just to get that done. The item here dealing with the Texas Transportation Plan -- the statewide plan is really more of a policy statement. There are some policies that need to happen, as for example, we heard from our partners in the commission that we want to fund maintenance at this level, or we want to do this much in mobility; we want to use the parameters that we're going to use to project revenue for the next 20 years.

We need to give that information to the MPOs so they can develop their 20-year plans, and that's going to result in them identifying we only have this much money but we have these many projects, and which projects move forward, which projects stay behind is what's going to start leading to the reality that you're talking about.

We need to move forward with giving them a revenue forecast so that they can develop the plans that they're required to do instead of them going out there and making their own assumptions and developing their own plan and we don't know whether they're using a .5 population increase curve or a .7 or a 1.0, whether they're including 20 cents gas tax or not.

I think one of the things that came out of Sunset, that came out of a past state auditor's report was that every MPO had their own standards and what we're trying to do now is through the statewide planning process -- and also included in 300 -- is that we would come up with this revenue generation curve for them so that then they plan on something and they're all on the same scale.

MR. UNDERWOOD: I want to go back to the VMT comments that Ted made. In doing this study, Ted, I'm not averse to that, I just want to make sure that it doesn't come out of here that we're about to implement something like that or that we are driving this train that way.

MR. HOUGHTON: I would love to drive the train.

MR. UNDERWOOD: I don't want to drive the train, I'm going to tell you right now, I'm going to tell you no, because this needs to be something that was either given a direction by the legislature or we're just going out and doing a study to give to the legislature to use however they want to, not something that we're about to implement as to vehicle miles.

MR. HOUGHTON: You can't implement it, you have to research it.

MR. UNDERWOOD: I know that, but we're going to be portrayed that way, I guarantee it.

MR. HOUGHTON: Well, I think that's your opinion, but the point is you have to start at some point in time to move down that road -- no pun intended -- but you've got to start somewhere and I think starting to research the possibilities of what it does bring you. And are there -- Coby or anybody know, or Amadeo know -- research grants at DOT that allow us to move in this direction?

MR. SAENZ: Yes, sir. TTI had applied for and submitted, was competing for some grants, I don't believe they were successful, but there is some research through our SPR money that comes from the feds where we do things like that.

MS. DELISI: Wasn't the NET RMA also competing for some money?

MR. SAENZ: That was the same one.

MR. HOUGHTON: And they didn't get it.

MR. SAENZ: They didn't get it. We had a research project that we were doing with TTI using the NET RMA projects as kind of a basis. They then submitted for a federal grant, and I think, unfortunately, they were not successful. But we do have research money where we could go out there and do some research on vehicle miles traveled, not to implement it but to be able to provide to the legislature and try to answer some of the questions that would come before them should they want to consider it in the sessions to come.

MR. UNDERWOOD: Amadeo, I understand that; Ted, I understand that. My point is that we're doing a study and we want to make sure that that's understood that there's no direction or ulterior motive as to be able to implement this tomorrow or something else. Because I guarantee you, some people are going to read into this, and I don't want that to happen to us.

MS. DELISI: I think one of the best uses of our time between now and the beginning of the next legislative session -- which I can't believe we're already talking about that -- is we've identified the problem, that's what the 2030 Commission did -- we need to do a better job of articulating what they identified -- we've identified the problem and here are the menu of solutions, and they all have to be fleshed out. You can talk about the gas tax increase pros and cons, you can talk about a vehicle miles traveled pros and cons, reauthorization, CDAs, whatever the gamut of ideas out there, somebody -- and I think that is our responsibility -- is to put them on the table for legislative decision-making.

MR. UNDERWOOD: Exactly. But that's my point is that we are offering these, we are not proposing these.

MS. DELISI: I think we have to provide good information. I think it is incumbent on us to provide information to the legislature that the gas tax is not going to cut it for long-term transportation planning. This may be a solution, it may be a good solution or may not be a good solution but it is a solution; not dissimilar to the CDA program, it is a solution.

MR. UNDERWOOD: It's an option that the legislature has.

MS. DELISI: Absolutely.

MR. UNDERWOOD: By my point is that I just don't want it coming at them here like we're about to implement something. Too many times that we say we're going to do a study and they think that we're about to implement it, we have no ability to do it anyway. We're just trying to offer solutions to a major problem, and you're right, Chair, that we've got to make sure that they understand this is a problem, it's not pie in the sky.

MR. HOLMES: What would be required to do a study of VMT that we could put into a form to present to the legislature before the next session?

MR. BARTON: I think we have the tools available or we have the research program, as Amadeo said, we do have the state planning research money that comes to us from our federal program, and we certainly have the universities and other research group capacity to do that. So I believe we've got direction from the commission you'd like for us to start that research, get it in place, have a deadline of having it ready before we enter into the next legislative session with an outcome of the research and information that decisions can be based upon. And I believe that Mary Meyland is probably very eager to get started on that.

MR. UNDERWOOD: And make sure that we offer this to the public as well as the legislature so everybody knows that the information that we're gathering is for them.

MR. BARTON: Yes, sir.

MR. UNDERWOOD: We're not promoting any one particular idea, it's just here's all these options, take it or leave it.

MR. BARTON: Correct. And we don't have to recreate the wheel, studies have been done in Oregon already and a couple of other states. In fact, there's a study underway -- I think Arkansas, perhaps, is sponsoring it -- but they've solicited participation by people in the Dallas-Fort Worth community to be, I guess, study personnel, they're driving and basing their mileage, if they would have been charged on a VMT, what it would have been. So we can probably tag onto some things that have already been done and get a quick response on a good study here in Texas.

MR. HOLMES: John, have we looked at this closely enough to know basically what it might cost to do a study that would be meaningful -- time and money?

MR. BARTON: Time and money. David, do you have any information? I'm going to ask Mr. Casteel -- he's been involved in some of that -- if he can answer it.

MR. CASTEEL: For the record, my name is David Casteel and I work for Mr. Saenz in District Operations.

We have done a pilot study already with the Texas Transportation Institute; I believe we gave you some preliminary results on that back in December. We have an ongoing project with TTI and CTR to evaluate revenue enhancements in the TRENDS model forecast. I think what you're asking for would be an enhancement to that existing project to work with the MPOs on an even more in-depth process. So I would estimate, standing up here having been asked the question 30 seconds ago, that it would probably take us about six to eight months to get what you want, and the cost for that would probably be in the neighborhood of $100- to $150,000 for the research, and that would get us the value and more in-depth analysis of the implementation strategies.

To get to the point where we would know exactly what it would cost for implementation of a VMT process would probably take us a full year and probably another $300- to $400,000, and that's a top-of-the-head guess.

MR. HOUGHTON: Well, the question -- you bring up a good question when you talk about the menu of options -- and this is where it has to be, I think, maybe a bit higher level -- is that you involve the auto manufacturers as to their vision to what they see, not the academician group that says we think it's going to be here. But then you put in the gas tax versus this, I mean, all available revenue across the bar, and see what you've got and where this is going to take you into the future.

MR. SIMMONS: Commissioner, Steve Simmons, deputy executive director, for the record.

During the session there was a national conference held on this particular issue here in Austin that I was able to participate in, and I think what I gleaned from that is whether it's a technology matter, what system finally is decided upon, whether a state level, national level, or whatever, that's not the problem. It's the policies that go with that. The technology is there today, whether to do a high tech or low tech VMT-type process. Low tech is as easy as we touch a car every year with a vehicle inspection, we know what the mileage is each year, how much they've driven. High tech is all the way up to the OnStar system that knows exactly where you're at and things of that nature. The technology is there.

It's the policies that's driven of how that money is collected, how it's distributed when it's across state lines and things of that nature that really comes into play in this decision, and that's where the national is really looking at it, and what Texas needs to look at as far as what our needs are, and I think that's what the research really needs to be looked at.

MR. HOUGHTON: Our needs.

MR. UNDERWOOD: Our needs are on a national level. Wait a minute, Steve. Nationally we need to do this, or our needs statewide?

MR. SIMMONS: I think Texas needs to be ready to answer the question of how we fit into the national picture because the national level, whether it's the 1909 Commission that came out with the recommendation that we go to that or the other finance committee that came out, the national is going to do it, but Texas needs to be ready to answer the policy decisions of how those will affect the State of Texas, how the national decisions will affect Texas, and we need to be ready to have our input into it is what I'm saying.

MR. UNDERWOOD: And do you feel like our legislature at this point in time is ready to handle that?


MR. UNDERWOOD: Because we haven't given them enough information is my point.

MR. SIMMONS: And I think this last session there were several opportunities to have the VMT discussion or at least looked at on the state level, none went through, but I think the message was clear we need to be looking at it.

MR. UNDERWOOD: But my point is the quicker that we get involved in this, the better off we're going to be, to be able to flesh out all the problems and have answers to our legislators when it comes time in a year and a half.

MR. SIMMONS: Yes, sir.

MR. UNDERWOOD: Okay, thank you.

MR. CASTEEL: With Steve's direction, we'll go ahead and amend the current research projects we have and get going on this, Mr. Saenz.

MR. SAENZ: Okay. We will move forward and look into a vehicle miles traveled study. We will move forward also and provide to the MPOs, kind of based on the criteria and some of the recommendations, what the parameters on their revenue forecast could be so they can kind of put together their plans. They need to meet some schedules that are federally required to have a long-range plan that's got to be financially constrained, so this way we can provide to them the funding available. So John, just keep working on that.

Okay, moving on to agenda item number 4 -- Coby are you still there?

MR. CHASE: Yes, I am.

MR. SAENZ: You've been very quiet. Coby Chase is going to provide us a federal legislative update today, and you're on, Coby.

MR. CHASE: For the record, my name is Coby Chase. Good afternoon. I'm the director of TxDOT's Government and Public Affairs Division. Today I'd like to speak about the federal legislation and policies are under consideration in Congress that are affecting TxDOT and conclude with a discussion about a study of the agency's federal priorities.

I'm going to start with the federal legislative update and the Highway Trust Fund fix that occurred recently. Texas and other states, of course, remain concerned about the ongoing Highway Trust Fund shortfall. On August 7, 2009, HR 3357 was signed by the president which appropriates $7 billion from the General Fund of the Treasury to the Highway Trust Fund's highway account.

This allows the Highway Trust Fund to remain solvent through at least the end of the current fiscal year -- that would be at the end of September -- but might possibly keep it solvent through the end of this calendar year based on some speculative estimates. Other circumstances such as the rate at which states request reimbursements will determine that final date, but at any rate, this is just a small band-aid on a much larger issue.

As you may remember, in Fall 2008, the Highway Trust Fund was in the same exact situation, resulting in US DOT preparing states for a slowdown in reimbursements. Ultimately, Congress approved an infusion of $8 billion in General Funds. In anticipation of the gap in reimbursements, TxDOT issued short-term debt. Fortunately, we did not have to exercise this option this time around, however, with the very real possibility of future decelerations of reimbursements, the agency may again look to utilize short-term debt options to fill the gap until reimbursements become available. Although this is not an ideal solution, it would assist Texas with staying on track to meet our transportation needs. It's not ideal and it's really not a situation we should have to be in.

For the second year in a row, Congress has been forced to bail out the primary fund that pays for the nation's transportation projects. The Highway Trust Fund is funded almost entirely by motor fuel taxes but as people are driving less often and driving more fuel efficient vehicles, the current motor fuel tax system simply isn't sustainable. The Obama Administration is opposed to raising the gasoline tax in a recession, but a solution is necessary to avoid future bailouts, of course.

In addition to the reoccurring issue with the Highway Trust Fund, TxDOT received notice from the Federal Highway Administration yesterday that it is being hit with a $740 million rescission. This is our share of the $8.7 billion rescission built into SAFETEA-LU, so it doesn't come as a surprise, per se -- there are some land mines in it, though, that I'll talk about in a second -- but there have been multiple efforts to strike the language in Congress in recent months.

Most recently, Senator Kit Bond of Missouri offered an amendment to repeal the rescissions as part of the Highway Trust Fund bailout legislation. Although this amendment did not pass, Senators Cornyn and Hutchison both supported it. Senator Boxer of California, who is chair of the Environment and Public Works Committee, made the commitment to address the issue after the August recess. Yesterday I spoke with Senator Boxer's committee staff at length about this and they report that the senator intends to move an 18-month extension as soon as possible after returning in September. To quote them directly on the subject, "It's safe to say we're going to do our best to get rid of it -- meaning the rescission -- as part of the extension."

Since the inception of SAFETEA-LU, there have been rescissions in every appropriations bill which have caused our unobligated balances to contract. This is an important thing to note: these have occurred in appropriations bills, these were not built into SAFETEA-LU, they became an annual occurrence right after SAFETEA-LU was passed.

Until Fiscal 2008, each state had the discretion to choose which programs to rescind funds from, but in 2007 a provision in the Energy Act -- a separate piece of legislation altogether -- restricted state DOTs from having that discretion any longer. Instead, the funds must be proportionally drawn from preselected programs, plus or minus 10 percent. What that means is that in 2008 we were forced to take actual dollar amounts off our books, not just unobligated balances. This new rescission has a proportionality rule in effect, and therefore, Texas and other states will more than likely be forced to take money from the Equity Bonus Program which is an actual dollar hit to the state.

Let me go off my prepared remarks for just a second. Not that this should be any sort of surprise, but we have two pieces of law that we're trying to put together to interpret, one was what was in SAFETEA-LU, fairly straightforward in how the rescissions should be handled, but it was amended recently or changed recently in the Energy Act and it's caused some interpretation issues.

Going through the very Byzantine materials that were sent out by the Federal Highway Administration with my Sherpa James Bass -- who is here to catch me when I suddenly fall on this issue -- and meeting with senior leadership of the agency today, it is interesting to see how this could possibly play out. This is different than other rescissions. One is in my estimation, U.S. DOT now has to look at not necessarily 50 DOTs but look at it as one giant DOT that's not them, and some of the worst case scenarios were if a state could actually lose money to another state that's already obligated its money, meaning if Texas were behind the ball -- which we're not -- and California has obligated all its money, money from other states would move to California to fill the hole.

There's no provision for getting that money back -- think about that for a second. This might not end up being a huge problem, those numbers are still being run and debated and cussed and discussed, but there's no provision if that should occur that we get the money back. This kind of points to the magnitude of the mess we've just walked into here and it's very different than other rescissions.

The other kind of scary thing in the kind of odd world we've discussed, obligation authority, budget authority, what's real money, what is not real money -- it's all real at the end of the day -- but our most valuable type of money is called equity bonus which James has explained in the past as neither equity or a bonus, but it is money that comes with its own obligation authority: once you get it, you can obligate it and spend it. We might have to cut into that, that's what we call real cash, and what we have to do as a DOT is we have to do what FHWA tells us to do, we don't have any choice.

The problem is going to be, and my advice to the commission would be we make it very clear to our congressional partners this is different, this wasn't exactly anticipated this way, this definitely stops money. And Senator Boxer and others in the Senate want to fix this problem, we need to try to fix this problem, and at a minimum, we shouldn't allow FHWA to take money from us -- if it comes to that; I don't want to hit the hysteria button yet -- if it goes to another state and never comes back.

MS. DELISI: When would they have to take action by to undo this?

MR. CHASE: By the end of September.

MR. HOUGHTON: It's a good possibility that we could lose real dollars to another state.

MR. CHASE: There is a possibility. The order of the magnitude, it could be 10 cents, the magnitude has not been determined yet but there's at least one small thought out there.

MR. HOUGHTON: A heck of a precedent could be set.

MR. CHASE: It would be a horrible precedent, especially if there's no way to recapture it or get it back.

MR. HOUGHTON: Who would determine how that money goes to another state? How does that get determined?

MR. CHASE: James will have to explain it. There's Formula A and then FHWA has to come in and recalculate it again.

MR. HOUGHTON: So politics or a true formula?

MR. CHASE: I don't think those are the exact two choices.

MR. SAENZ: What they've said is if any state doesn't have any apportionment to give up because they fully obligated their program, then whatever states have apportionment will cover that state's. So if Alaska doesn't have any and Alaska was due to rescind $100 million, the other states that have obligation will cover Alaska's $100 million. How they'll take it out from the other states, we don't know yet.

MR. CHASE: And there's no mechanism in law or anywhere that says, Well, Alaska, sorry -- or whatever the state is -- you have to un-obligate projects. And it's not the Federal Highway Administration's fault, it's not, they're playing the hand that they've been dealt.

MR. HOUGHTON: By whom?

MR. CHASE: By Congress, and it's kind of turned into never liked any of the previous rescissions but, boy, they were easy.

MR. HOUGHTON: This one is --

MR. CHASE:  -- a mess, a potential mess. I hope to come back next month and say I was kidding or send James back.

MR. HOUGHTON: Where's Ben Wear, is he in here?

MR. CHASE: Right now you have 50 state DOTs really wondering what's going to happen next.

MR. HOUGHTON: Do our folks out in the hinterlands know what this means?

MR. CHASE: Well, the folks in whatever the opposite of hinterland is just figured it out yesterday -- the Mother Ship, whatever we are here.

MR. SAENZ: We received this yesterday from Federal Highway, and so we have in the past worked with some of our stakeholder friends when we had to do the other rescissions, we're going to bring them back and educate them. We need to prepare a response by September 4 on a preliminary number.

MR. HOUGHTON: Our money could be going to New York City, that kind of stuff?

MR. SIMMONS: Get a rope.

(General laughter.)

MR. SIMMONS: For the record, Steve Simmons again. I just wanted to add two things. There's two things that really complicate this --

MR. HOUGHTON: It's not funny, it's true.

MR. SIMMONS: Yes, my blood pressure went up. Two things have really complicated this and I don't think I heard Coby mention it, but this rescission was built in the original SAFETEA-LU bill, and the rescission was changed in the Energy Bill, and so the two bills are being blended together to come up with the answer to this rescission, so that's one of the complicating factors. The other complicating factor, this is the last year of the bill, the bill ends, and so you don't have that buffer sometimes of the next year fixing some of those drop-dead issues.

MR. HOLMES: But if it were to be extended by 18 months, would that make a difference or not?

MR. CHASE: Were to it be extended by any amount, if they choose to address it in the legislation, they could do that, yes.

MS. DELISI: It's more than just the extension, they'd have to extend it and undo the rescission.

MR. CHASE: Correct, or theoretically they could just undo the rescission.

MR. HOUGHTON: Well, there's a couple of things playing, the Highway Trust Fund they've got funded until the end of September. Right?

MS. DELISI: Right.

MR. HOUGHTON: Now they're going to be short again.

MR. CHASE: It's a different ball game.

MR. HOUGHTON: Well, they've got a lot of different moving pieces.

MR. CHASE: At the end of the day, it knocks projects off our books, whether it's now or a couple of years down the road.


MS. DELISI: Could it mean that current projects under construction would have to stop?

MR. SAENZ: I don't think so. The projects under construction -- we'd have to stop maybe some lettings in the next year or this year, but projects that are under construction, we've probably already obligated -- the money has been obligated for those projects, that money is set aside. Correct, James?

MR. SIMMONS: Come on up, James.

MR. CHASE: Am I doing enough fear monger-ing, James?

MR. BASS: Good afternoon. For the record, I'm James Bass, CFO at TxDOT.

Mr. Saenz, in response to your question, not all of the active projects have been fully obligated with federal dollars because we use a technique that's called advanced construction partial conversion -- and next time you find yourself with 20 minutes on your hand, I'll explain to you what that -- and so we could theoretically run into an issue in future years when we go to convert those projects put real obligation to them. But with reasonable certainty, all active projects we'd be able to continue and complete, what would be at risk is adding additional projects to that so it would more than likely affect letting in our Fiscal 2010. That's not 100 percent, but 95.

MR. HOUGHTON: Yes, next week.

MR. BASS: Correct, yes.

MR. BASS: And our response is September 4.

MR. HOUGHTON: Let's put everything into perspective: next week. Wait a minute, our response is by September 4?

MR. BASS: There's two different things.

MR. HOUGHTON: We don't have a commission meeting.

MR. BASS: There's a preliminary plan on September 4 that we have to submit to FHWA and then that information and the action is finalized September 30.

MR. HOUGHTON: I have no idea.

MR. SAENZ: The way the rescission came and the requirements when you mix both bills is pretty much that we're going to rescind from every category here this amount, a proportionate amount based on FY '09 allocations, and so if you need to rescind $740 million, we'll take $740 million and it's 10 percent from this category, 15 percent from that category, depending on how much was apportioned, so they'll come up with it.

Now, if you have some categories that you have zero money left over, then that's going to be the second phase that they'll look at is where are they going to get that money. In essence, we have to submit by the 4th how much unobligated money we have in each category.

MR. HOUGHTON: Well, the most egregious thing to me the possibility of moving that to another state.

MR. BASS: And if a state were in the option of you need to rescind $100 million and you only have $90 million available, that state has the option -- one of three options -- to de-obligate another $10 million so they can give it back to the feds, and it's an option, and forgive me, I don't see any state doing that, because if they don't do that, the other 49 states are going to have to make up that $10 million for them, and how that $10 million would be distributed amongst the other 49, there's no details, it's just kind of to be figured out later and spread among the other 49.

MR. HOUGHTON: Is secession still a possibility?

(General laughter.)

MR. HOLMES: Do we have any sense of where we are in respect of the rescission amount versus the unobligated amount?

MR. BASS: Yes. We are right now -- of course, as we award projects each month, we're using some of our obligation authority and apportionment along with it -- if you just look broadly, the total of all the different categories, we think by the end of the federal fiscal year we would have about $1.3 billion of apportionment, $740 million of that would have to be sent back.

Where the issue becomes is it's not just $740-, and that's what Mr. Simmons was talking about earlier. Some of the earlier rescissions were hey, TxDOT, you have $1.3 billion, we need $740-, well we got to pick where we chose the $740- to come from from these 15 different categories. Now they've come in and said, No, you have to do it pro rata in each of the 15 categories and you have to give so much from each one.

Well, our total of $1.3- can easily cover the $740-, but each one of those 15 categories is separate and distinct and some of those have a zero apportionment balance, and so they calculate that you have zero remaining but you have to give us $35 million. Well, that doesn't work, so it has to come from another category that we can increase by up to 10 percent of a calculated number they had, and if that doesn't cover the $35 million in my example. FHWA then takes over and they pick from which Texas categories that have remaining dollars that they're going to find that money.

And what we would prefer -- again, we kind of hold equity bonus -- as Coby says, neither equity or bonus; used to be called minimum guarantee, and that's a lot more descriptive of what the dollars are intended for -- we would like to protect that and say we'd rather use other money, other categories to make up our rescission because equity bonus is very flexible, it can be spent on anything and it comes with its own obligation authority, so we want to keep that. Well, at a certain point that decision is beyond us and FHWA is going to step in and make those decisions.

MR. HOUGHTON: They're solely going to make those decisions.

MR. BASS: To clarify, September 4, we have to get some preliminary numbers into FHWA and then final instructions follow that. Correct?

MR. BASS: Correct. And so as far as timing of when would Congress need to act to remove the rescission, that deadline is not September 4, it would be September 30, but we do need to start reporting and kind of submitting preliminary plan information to Federal Highways as early as September 4.

MR. HOLMES: If we end up with a billion three at the end of the federal fiscal year, September 30, unobligated and there's a $740-some-odd million rescission, the delta could be taken by other states that have --

MR. BASS: Right, so what we would end up with is $550-, after we've rescinded and everything, we've got $550-. And we're looking at the math. I believe Mr. Chase, in his example pointed out Alaska or California might be in the situation of they have to do $740- and they only have $640-, somebody has to come up with the other $100 million. Well, so our $550- could be reduced to help fill the hole for California or Alaska.

I think on a quick glance -- and again, as Mr. Chase said, we've had this less than 36 hours so we're still kind of going through -- right now preliminarily it looks like there may be two states that could be in that situation, Alaska and Nevada, that they will not have enough apportionment to send enough back that they're being asked to send back to Washington.

MR. HOUGHTON: So they're at zero.

MR. BASS: Well, what they have available is less than the amount they need to rescind, so at some point they're going to run out and there's still going to be rescission left to get to the national total. I think what Federal Highways is saying: We've been given a national total that we need to get to, we can't get it from this state, we've got to get it from somebody else.

And so one concern, because we like equity bonus -- for the reasons I mentioned -- we would like to, with some flexibility we have now of what categories we obligate projects to here in the next weeks, we'd like to save some of that equity bonus. Well, we have no guarantee if we save the equity bonus so we can use it that it might not be rescinded to help pay another state.

Well, we'd rather use it in Texas than send it back to D.C. so maybe we try and use up, obligate as much of that as we can in the next few weeks which could create some flexibility issues if rather than getting an 18-month extension, we start getting 31-day continuing resolutions where they give us one-twelfth of our money. Our expenditures don't follow an equal amount through the year and so that sometimes causes cash flow issues for us, and as Mr. Chase said, in those circumstance we'd then use the short-term borrowing to try and get us over those issues.

MR. CHASE: Thanks for the save.

MR. HOUGHTON: Have you got any good news, Coby?

MR. CHASE: Yes, I have five more pages of good news, hold on.

I would also like to mention that, as you know, the agency has worked with Senator Watson and a group of MPOs on rescissions -- this one, the specifics of it are kind of confusing and new and odd, and like Mr. Bass said, we've been wrestling with it for a short amount of time -- but they'll be in this loop as well because might as well share the pain, I suppose.

Overlapping the $7 billion in Highway Trust Fund aid debate and rescissions has been the extension of current surface transportation laws, SAFETEA-LU, as we call it, will expire September 30, 2009. To continue investments in the nation's transportation system, Congress must either authorize a new surface transportation program or pass an extension of the current program.

The White House and the Department of Transportation requested an 18-month extension and a larger infusion of General Fund cash to keep the Highway Trust Fund solvent over that period of time. Authorization of surface transportation laws are, in their judgment, too complex and important to rush as the new administration develops its own priorities. One would reasonably expect that the economy will look quite different at that time and funds to address transportation needs for the country could also be more accessible, or they could not be.

The current annual spending level through the transportation program is roughly $50 billion a year which would be extended through March 31, 2011, the ending point of the 18-month extension requested by the White House. The appetite in the Senate for reauthorization appears to be in line with the White House and Senate leaders have indicated they will bring forward legislation for the 18-month extension when they return in September.

On the flip side, Congressman James Oberstar, chairman of the House Transportation Infrastructure Committee has publicly disagreed and intends to have his version of the reauthorization legislation, called the Surface Transportation Authorization Act, out of committee soon after the Congress returns from its recess.

While I feel there are many issues with Chairman Oberstar's bill that I discussed last month, the most glaring issue is how to pay for it. His proposed bill would channel an estimated $450 billion in funds to states over six years to invest in roads, bridges, transit systems and rail, plus another $50- billion specifically --

MR. HOUGHTON: Coby, hold on just a minute. $450- and compare that to what the last reauthorization was.

MR. CHASE: This would be double.

MR. HOUGHTON: How do they intend to pay for it?

MR. CHASE: Well, that they don't know yet.

MR. HOUGHTON: So they're going to submit a bill of $450 billion with no companion revenue source.

MR. CHASE: As you know, they satellite different portions of the bill and then put it back together to get it out of one of the chambers and the revenue portion goes to Ways and Means, and there's no indication out of Ways and Means that they're going to have any sort of their portion of the bill completed in time to get it over to the Senate where the Senate has basically stated we will sit here and wait till we figure out what we want to do. It's a repeat pattern, but you're right, they have not yet decided.

MR. HOUGHTON: Is the Senate akin to a $450 billion bill?

MR. CHASE: The Senate does not have a bill.

MR. HOUGHTON: I mean are they akin to agreeing or informally such to saying that's a pretty good number, or have you heard?

MR. CHASE: I haven't heard any disagreement that it's not a good number, but it's still an open question of how you pay for it.

MR. HOUGHTON: Who cares about revenue, we just print money these days. Right?

MR. CHASE: Sure. Apparently we print it and we send it back.

The total would include an estimated $70 billion each year for highway and mass transit systems, however, current taxes only support approximately half the amount needed to realize the legislation's intended funding levels. There appears to be no appetite in either the House or Senate to raise the motor fuels tax, and it's up to the House Ways and Means Committee, not the T&I committee, to address the funding issue.

Recently Commissioners Houghton and Underwood, along with NTTA Chairman Paul Wageman, met with Congressman Mica of Florida to discuss this matter. Mica is the ranking Republican on the committee, and he said, point blank, that filling the gap was the most pressing issue they have and there's absolutely no consensus around any solution whatsoever.

At this point it would appear neither the White House nor the Senate intend to change their options on the need for an extension. That could open a range of extensions that are either short-term and many -- for example, the former federal transportation program, TEA-21, went through a series of twelve extensions totaling 680 days before SAFETEA-LU was enacted -- long-term, the 18-month proposal, or perhaps something in between.

Now I'd like to briefly discuss the FY 2010 appropriations cycle. On July 23, House Resolution 3288, the FY 2010 Transportation HUD Appropriations Bill, passed the House, the Senate has yet to take up their version but it has passed out of the Appropriations Committee. Good news, there's no rescission in it, they didn't need to do it this time.

The Senate bill would provide $42.5 billion for the Federal Highway Administration compared with $41.1 billion in the House bill, $11.1 billion for the Federal Transit Administration compared with $10.5- in the House bill, and $15.6 billion for the Federal Aviation Administration compared to $16 billion in the House measure. In addition, the two chambers will need to negotiate a compromise on high speed rail when the bill eventually goes to conference. The Senate bill would provide $1.2 billion for high speed rail, in line with President Obama's request; the House provided a larger amount of $4 billion for high speed rail grants.

Just a side note, you'll find in both the House and Senate versions a combined 61 transportation-related earmarks aimed at Texas, costing approximately $312 million.

Now that we're up to speed on what Congress has been and will be working on in the coming months, I want to take a look at what TxDOT's role should be in some of these very important policy decisions and discussions that will soon be occurring -- that are occurring, I should say.

States have relied on the federal government to help develop, expand and improve our transportation system for a long time but really in earnest since the 1950s, however, as a rapidly expanding state, Texas has not received adequate assistance necessary to meet its requirements. I doubt we'll be pulling out of the federal program any time soon, so we're left with the federal tax and spend structure that is ineffective at meeting transportation needs. Federal taxes are forced through a system comprising inflexible and unfocused funding categories, and Texas receives back only a portion of the federal taxes that Texans pay while the revenues we do receive are further diluted through discretionary programs and other means.

While Congress has the chance to implement major policy changes that can benefit the national transportation system and the customers it serves, it's going to require enacting several solutions because to us one thing is evident: no single source will cure the problem.

In July, Senator Carona asked in a letter to Chair Delisi, among other things, what substantive changes the agency would recommend for a new federal authorization bill and other legislative items the agency feels should be discussed at the national level. Our Chair responded to Senator Carona that the commission would begin having that discussion this month -- here we are -- and will look to incorporate public and stakeholder input into addressing his questions.

To do that, I would suggest to the commission that my staff engage stakeholders through a series of meetings with organizations that have clear federal interest, such as metropolitan planning organizations, interest groups, tolling authorities, regional mobility authorities, members of Congress, our committees of jurisdiction in the Texas Legislature and its leadership, the Office of the Governor and the internal TxDOT constituency.

Regarding public input, I would suggest posting a notice in the Texas Register and accepting comments. The Government and Public Affairs federal staff will take all comments, analyze them and create a draft list of priorities that would sit out for a month for further public comment and review. A final list would be presented to the commission at its January 2010 meeting. However, this can be modified in any manner you see fit.

This concludes my remarks today. Any questions or anything you'd like to let me know?

MR. HOUGHTON: A question I have, Coby, who is representing us or our interests at the national level?

MR. CHASE: Well, the Texas Department of Transportation maintains two staff members in the Office of State-Federal Relations, in addition to staff back here, and outside of members of Congress, that's it.

MR. HOUGHTON: Or the more direct question: Do we have a lobby that we've employed to help us protect our interests?

MR. CHASE: No, sir.

MR. HOUGHTON: We do not.

MR. CHASE: No, sir.

MR. HOUGHTON: Do other states?


MR. HOUGHTON: Can you tell me which ones may or may not, or do you know?

MR. CHASE: The last time I looked at other state DOTs -- and mind you, this was two years ago -- 24 or 25 of the 50 DOTs employ contract lobbyists to do their work in D.C., or at least some portion of the work. That's dated, though, that could be larger or smaller at this point.

MR. HOUGHTON: Okay, thanks.

MR. CHASE: Thank you.

MR. SAENZ: Agenda item number 5, James will present a report on our work with the Comptroller on the ERP project.

MR. BASS: Good afternoon again. I'm James Bass, CFO with TxDOT.

As Mr. Saenz said, I'm here to provide you an update on the department's participation with the Comptroller's Office on two projects, one being the ERP, and the other being financial transparency.

The first question is well, what is ERP, and ERPs stands for Enterprise Resource Planning, and in effect, it is a single set of books for Texas state government that would include administration of several processes. By definition, for Texas those processes include general ledger, accounts payable, receivables, budgeting, inventory, payroll, projects, human resources, on and on.

There are a number of different agencies that are involved with ERP. What the legislature did in the Appropriations Act was continue to designate that the Comptroller of Public Accounts will manage the ERP project for the State of Texas, and then, in effect, having a few pilot or starter agencies to participate with the Comptroller's Office, and those agencies are TxDOT, the Department of Information Resources, and then five agencies under the umbrella of the Health and Human Services Commission, and for the time being, since TxDOT was in there, I think we're starting off on the path of having the Department of Motor Vehicles included in that project.

ERP will be managed through different councils and boards that will be populated by membership from the earlier referenced agencies to make decisions on which projects or which modules or processes to move forward on. The time line for the project, the work has been going on and the Comptroller's staff has been working feverishly in getting RFP documents out into the field. I think in the next few days there will be one that will be out on the streets, if you will, and hoping for responses back, I believe, September 14, and then have one-on-one presentations and their hope is to have an implementation vendor on board by the end of October.

One thing to highlight for your attention is even though ERP includes all of those eleven or twelve business processes that I mentioned earlier, receivables, payables, projects, HR, and basically five agencies, if you think of a grid agencies in the columns and processes in the rows and you have a matrix, the legislature provided funding for this project for the next two years. And what basically the documents to the vendors or what the vendors will respond to is out of this matrix this is how many squares I can fill in and complete within the next two years within the dollars that have been allocated for this project.

So there may be a vendor who comes in and says I can check off every box on this matrix and I can do it all in the next 24 months, so give me the money and let's go, there may be no vendors that check off all the boxes, there may be some that say I can do these businesses processes for three out of the five agencies and these for the others. That's going to be one of the major scoring criteria as we move forward.

So once that implementation vendor has been selected and it's been determined which business processes will be implemented for which agencies, the plan is to have at least two of those application processes implemented by January 2011, the beginning of the next legislative session, to show progress and improvement in this area when the legislature reconvenes. And then to have whatever the vendor has bid on and agreed to have completed, to have that completed by August 2011, the end of the current biennium.

And there's a much more detailed time line with more of the individual step by steps, and if you have interest in that we'd be happy to share that with you or your office, just let us know.

Before I move on to the transparency of financial reports, I guess I'll stop to see on the ERP project if anyone has any specific questions on that project, the progress or our participation in it.

The next one is moving on with the status of the transparency of financial reports. The Comptroller's Office has for some time on their website a site titled "Where the Money Goes" where the public and others can watch Texas state expenditures and monitor that by agency and by vendor and by type of projects, and you may have, I think, in your packet a screen shot on there. The department helped in that effort by providing some funding for a programmer to basically help develop the left side of that page, some of the search tools, state agency searches, vendor searches, spending category searches, and so we had the opportunity to work with the Comptroller's Office on that and get that implemented.

The other part is the Comptroller's Office is readying and I think within the next couple of weeks will have live on their website a "Where the TxDOT Money Goes" website, so it will be dedicated to just TxDOT and focused on TxDOT expenditures and it will slice and dice the figures a little differently than with some more detail than the earlier ones did, and really breaking it down by our grant awards and that may be our public transportation grants, the traffic safety grants that we do as the department, the aviation grants.

You'll be able to pull that information up off the Comptroller's website, see the individual grants, who the receiving entity was, what the grant dollar amount was, and how much of that's actually been expended to date.

In addition to that, there will be an area on our budget where you'll be able to look at our appropriations, the general Appropriations Act, and look at our expenditures by TxDOT, by agency and then also look at how much of that came out of the Mobility Fund, how much of that came out of the State Highway Fund, and as we go forward, how much of that came out of Proposition 12.

Lastly, in that area on "Where the TxDOT Money Goes" there will be payment transaction search tools. Again, you'll be able to drill down and look at by purchasing codes if anyone is interested in that, how many pencils or paper did TxDOT spend on these type of commodities.

You'll be able to pull that information up through the website, look at the spending, the types of travel spending that TxDOT has had and then also broader spending category searches focusing on TxDOT, how much has been for infrastructure, how much for professional services, how much for travel, how much for salaries, and you'll be able to drill down and see those different types of expenditures and even drill down once again to the vendor level and see those actual payments.

We've been working with Comptroller staff on that and working on the upload of information, making sure that that's working properly. I think we've signed off on all that on our end, and again, I would expect in the coming next few weeks that that "Where the TxDOT Money Goes" will be live and operational on the Comptroller's website.

Those were the prepared remarks I had on the update. Again, I'd be happy to answer any questions you might have. Thank you.

MR. SIMMONS: Thank you, James.

Our next item is item 6, discussion of options for the establishment of eligibility and prioritization for the Prop 12 Bonds, and John Barton will be leading that discussion.

MR. BARTON: I have a presentation I'd like to pull up at this point in time. Again for the record, my name is John Barton and I'm the assistant executive director for Engineering Operations.

I have the honor today of presenting to the commission some information regarding the Proposition 12 Bond Program, and how we might proceed with the use of these bond proceeds for much needed transportation projects around the State of Texas, and I do look forward to getting some feedback from you and getting direction on how you would like for us to proceed in developing definitive plans for the use of these bond proceeds in the future. James Bass, our department's chief financial officer, is also going to be participating in the conversation with me in a few minutes, so I'll just direct your attention to the presentation and I'll share some information with you.

A brief history, as you know, in November of 2007, voters here in Texas approved a constitutional amendment to allow the commission to issue up to $5 billion worth of bond proceeds that are supported by the general revenues of the state rather than the revenues that come to us through the highway funds, and the legislature has recently enacted the necessary enabling legislation that allows for the issuance of some of these bond proceeds during the first called session of the 81st Legislature, and in doing so, amended the department's appropriation bill pattern to allow us to issue $2 billion of these bonds.

In doing so, they required that $1 billion of the bond proceeds be used to capitalize the State Infrastructure Bank for the purposes of making loans to public entities for the development of highway improvement projects, and also limited the use of the remaining $1 billion of bond proceeds for projects that were non-tolled projects. It's important to note, however, that the $1 billion of bond proceeds designated for non-tolled projects may be used to support $1.85 billion in new construction contract obligations over the next two years. So the math is one plus one equals three, and that's something I know you're aware of and just wanted to point out.

The need for the use of Prop 12 Bond proceeds is clear, the actions by the voters of Texas and then the leadership of the legislature provides to us a clear signal that they support advancing many of our much needed transportation improvement projects across the state, and the need for these additional funds is undeniable. We've talked about a lot of things in the past, today we've even mentioned the 2030 Committee, and as you know, they documented an annual investment need of well over $5 billion for maintenance of our system and $9 billion for mobility.

Our staff has recently met with you and shared that our routine maintenance cost alone is in excess of $1.2 billion on an annual basis, and then we've also had staff prepare a report that we refer to as a Mega Bridge report, and they have identified mega bridge projects across the state -- as we refer to them -- and the report indicated that the top three alone would cost over $1.75 billion to replace those bridges if we were to move forward with them today.

We've also determined that we've got a lot of work remaining on I-35, as we've all talked about before, and those improvement projects between Salado and Hillsboro alone would be about $1.5 billion of needed work. And earlier this year when we asked Texans to help us identify projects for the American Recovery and Reinvestment Act, we came up with over 1,500 projects that were valued at a little over $13 billion that were shovel ready.

So I think it's clear that the challenge is not in determining where the needs exist but determining which projects to fund out of the long, long list of needs that are out there.

Some potential scenarios are obviously available to us and there's an unlimited number of scenarios that we could choose from. As I've described to you before, there are a lot of competing interests that are vying for these limited funds and they involve preserving our existing system, making sure we do things that improve safety, reducing congestion which is a huge issue for all of us, connecting our metropolitan areas around the state together, and honoring previous commitments, and then, of course, taking advantage of opportunities to make our dollars go as far as they can.

So it's important that the commission consider criteria by which to identify, prioritize and ultimately select projects for funding under this program, and so I just want to talk through a few scenarios to kind of get your thought process going on this.

I've talked about the mega projects and we could address several mega projects across the state with these funds. These projects, as I mentioned already, would far exceed our ability to fund them under the normal funding program, and so funding just the three largest bridges alone and some work on I-35 would cost us about $3.2 billion, so a scenario like this would allow the commission to take care of some of these huge project needs and remove that burden from the normal funding program that we have. So it would be a way to use this new source of funds to take care of a big problem if you wanted to consider something like that.

Another alternative or scenario would be to take care of some of the most pressing congestion problems that we have here in our state, and as you know, metropolitan areas have certainly struggled with this issue for quite some time, and the impacts of congestion on the economy and air quality in those areas as well as the rest of the state is well documented.

So under a scenario like this, the department could look at funding many of the problem areas in the State of Texas with much needed mobility dollars and during the development of what we commonly refer to as Scenario C, we anticipate that about $3.2 billion would be available over the next ten years for these type of projects in our metropolitan areas of the state.

And so one scenario would be looking at maybe taking this funding and dividing it up between those eight largest metropolitan regions to address the mobility needs that they have for them, rather than having them wait over the next ten years for funding to become available.

I laid out a different scenario here that would help us tackle the ever-increasing maintenance problem that we have across our system here in Texas, and we've talked a little bit about that this afternoon already. But our cash forecast has been changing over the past few years and the need to balance the priorities of mobility and safety and congestion are something we've struggled with, and in doing so, have had to decrease funding for all of those areas in a way that made sense and was reasonable for the needs of Texas.

Our most recent forecast doesn't allow us to fund any of those priorities at the level we'd like to, but we've had to reduce maintenance funding in order to continue to be able to do other needed improvements on our system for the past several years. And as you've heard, our district engineers have been working with the Center for Transportation Research to look at what that means, and I think you asked that question earlier, Commissioner, about how quickly would we trend down toward an 80 percent or below good or better condition on our roadways, and the district engineers with CTR have indicated that at our current trends on funding for maintenance, we're going to see a rapid decline in our pavement conditions over the next four years.

So a scenario like this would allow us to fund maintenance and safety projects around the state at the discretion of our district engineers and their staffs so that they could take care of their most important projects on the highway systems they're responsible for managing.

And then, of course, any combination of those types of scenarios is possible, and this is one that just depicts how you could possibly address some of the issues, goals and priorities that are out there in a multi-faceted way while still meeting the needs of the system in a lot of areas across the state.

So I just laid out those scenarios to talk about the fact that it's important to think about those things in today's discussion, but just as important as considering possible alternatives, I think it's important for us to prepare for and respond to, in a timely manner and well thought-out manner, the use of these Proposition 12 Bond proceeds.

Over the next few weeks, staff would propose that we would meet with our transportation partners from around the state, kind of mimicking that process that we put together during the American Recovery and Reinvestment Act opportunity earlier this year, to draw them in and seek their input and participation in developing some guiding principles that we could bring forward to the commission next month to help us help you filter and prioritize projects as you go through that project selection process.

I think that the success that we enjoyed with the Recovery Act was unprecedented and very well received and I think we could build upon that in doing something like that for the Proposition 12 Bond proceeds as well. And so I think that it's important that we consider that, wanted to offer that for your consideration today, and to point out that we need to do this quickly because projects do need to get underway and we do need to have projects under construction later this fiscal year and throughout fiscal year 2011.

It's also, I think, regardless of the opportunities there, the scenarios that might be considered, the choice on how to distribute the funds is obviously going to be a difficult one, but regardless of whichever way we choose to go, it's important that we consider a few constants that we have in front of us throughout this process. You as a commission have been very, very clear, as well as the legislature and the public in expressing your desires that the management of these funds be done in a very transparent way and that we ensure accountability for the use of these funds as we move forward.

So I think it's imperative that the department deliver these projects in a way that provides for a lot of things: selection of the projects by the commission in a way that is effective and clearly understandable by those that are looking at it, and that we have performance measures in place to help us effectively manage this program as we move forward.

I think the expectations that I understand from you are: that you want to have a project selection process that's clear and understandable, defendable and that the process that's used delivers projects quickly and in an effective manner for the state; that you want to have a budget for every project, that that budget is transparent to you and the public as we move forward with these projects so the financial plan on how a project is going to be delivered is clearly defined; I think you want to have a schedule so you'll know when the project is supposed to go to contract, how long it's going to last and you can monitor our progress on that; and then I think I've heard you say you want the process to be so transparent that as we go through the process, people can see how the money has flowed from us to the project to getting the construction completed so that there's not any question about taking money from one area of the state and moving it to another area of the state to get projects completed.

So that's some of the information that I think we need to think about and discuss today as we talk about the Proposition 12 Bond Program and how we will implement it here in Texas, and I would like to, at this time, offer Mr. Bass an opportunity to share with you some of the information he needs to about the bond proceeds that will be placed in the State Infrastructure Bank and how we can go about using those funds and what the limitations and expectations on those are. So at this time, I'm going to pause and ask Mr. Bass to share that information with you.

MR. BASS: Thank you. For the third time, I'm James Bass, CFO at TxDOT.

The State Infrastructure Bank, I think most of you are familiar with the plans for that so I'll be brief and primarily just offer you an opportunity to provide input and direction to staff, but as you know, a billion dollars of Proposition 12 was directed towards the State Infrastructure Bank. Our plan, unless directed otherwise, is to move forward and basically to operate two accounts within the State Infrastructure Bank: keep the current State Infrastructure Bank separate and apart, and then capitalize a new account with the billion dollars of Proposition 12.

A couple of reasons for that. One is the transparency Mr. Barton talked about. If we chose to commingle those funds, they would start to lose their identity, and which project got funded by Proposition 12 and which project got funded by repayments from earlier loans under the other one, at some point you'd lose that, so we'd have two different accounts. The other reason is there are very important smaller projects that get assistance from the current SIB, whether it's an $80,000 loan to the City of Socorro, and we would, I think, recommend that those projects not potentially get squeezed out by the bigger, higher profile projects that are likely to receive assistance through the Prop 12 SIB.

The Prop 12 SIB can be loaned to either tolled or non-tolled projects, but as a revolving fund, the main thing is that there is a revenue stream that's dedicated to repay that assistance, whether it be user fees or county taxes or city taxes, some revenue stream needs to be dedicated to repay that. The Proposition 12, because of some of the constitutional limits, really can only be used for direct loans to projects, it cannot be used as backstop or other forms of credit assistance or enhancement, it's really just going to be back to kind of that basic loan agreement.

Some of the issues or I guess one of the issues of operating separate accounts within the SIB and some maybe being higher profile, bigger projects, I think staff believes there's an opportunity or a likelihood, a need to amend some of the existing SIB rules to kind of differentiate between the two accounts. One of those is that the State Infrastructure Bank itself has the ability to issue fund revenue bonds, so we make the loans out to entities and then we can package those loans together and go use that as the credit for bonds in the market.

The City of Socorro is a rather simple -- and I'm not picking on them -- is a rather simple loan agreement. Some of the protections and credit enhancements that one might expect if we were to take those to Wall Street are not in those agreements. I think in the Proposition 12, again, higher profile, larger scale, sophisticated borrowers, we would likely recommend that those provisions be in the loan agreements. That would also help the marketability of those loans if the commission ever chose to issue fund revenue bonds.

And so there's some issues that we're going through the current SIB rule structure and looking at how we would potentially modify those to account for the two accounts.

At this point, before turning it back over to Mr. Barton, I would just open it up to see if any of you have questions about the SIB and/or comments that you'd like to make at this time.

MR. MEADOWS: The only comment I have really is as you begin to contemplate the rule structure, I think formally engaging and involving some potential borrowers, I think that ends up being a very important component of the process by which we define what those rules are going to be and how they do apply, begin to have some people who the rules are going to apply to being engaged and involved in an advisory way.

MR. BASS: And in the legislation for the Revolver, that was a requirement; when that moved over to the SIB, it was not a requirement but there's certainly no prohibition on having an advisory committee, if you will, or a working group to kind of bounce ideas off of.

MR. MEADOWS: I think it would be very helpful because you're just borrowing some of the best from the Revolver and I think it would be appreciated and I think the work product could actually be more user-friendly.

MR. HOLMES: Were there any rules or guidelines written around term and rate for SIB loans?

MR. BASS: No, neither in the pending legislation for the Revolver there as none on that and so it kind of falls into the existing SIB rules right now. The rate is determined by the commission. What we've done as a guideline on the existing one is looked at market rates, we can pull those up when somebody applies and kind of benchmark that, and if they're on the border or there's other considerations, then the commission has looked at providing a below market rate. That's something that the commission could obviously do here, and the commission could say we don't want to compete with the market, they need to go to the market if they can get funding there, so let's just offer market rates for this, that could be done.

The one thing, there may be a limit in the current rules on the SIB that it has to be paid back within 35 years. I think there's an ability for the commission to defer any payments for up to a five-year period, again, thinking that if it were for a toll road or for a project that was backed by a TIF, a tax increment financing zone, there may be a ramp-up period that you want to wait for that money to start coming in, and so you can have up to a five-year deferral and then a 30-year payment so that equals 35.

That kind of came with some of the federal rules when we initially established the existing SIB back in '97. My understanding is in the Prop 12 SIB that if the commission chose to be more flexible or more restrictive on the amount of time that we would consider having a payback, I think that would be open to commission direction through rules.

MR. HOLMES: You know, if there's any notion that we're going to package some of these loans and sell them in the market in order to just increase the velocity of money, then we're going to need to be relatively market-oriented in pricing terms and conditions.

MR. BASS: I would agree, and another question then comes, more than likely on some projects this debt would be subordinate, and so obviously when you have a subordinate pledging in the market, your leverage factor is going to be smaller, and also, the repayment stream from that loan is going to be longer than otherwise, so if you do want to recycle the money faster, it may push the commission towards packaging those together, and therefore, we want to make sure the provisions, the rates, the terms are marketable and we'd have interest in the market if the commission ever chose to go that direction.

MR. HOUGHTON: Well, I want to make sure we don't box ourselves that one size doesn't fit all. I mean, we may do a ten-year with a 35 amo, but for this project we may do the five-year no pay and 35-year, depending upon if we're subordinate or a first lien holder, but at least we have that flexibility with looking at the projects.

MR. BASS: Right, I think it would be interesting, because of the recycling of the money to potentially look at it are there projects out there where perhaps the Prop 12 SIB, rather than just being a subordinate lender, maybe it is the lender for the project. That would potentially help the borrower in getting the project in a better financing package. It would also help the Prop 12 SIB in getting a revenue stream and a repayment coming in sooner than if it were merely on a subordinated basis. And so I would agree, I think our intent would not be to try and box in and limit those type of options.

Thank you.

MR. BARTON: Thank you, James.

I'll just conclude by sharing with you that I think this is a unique and exciting opportunity for transportation here in Texas and a way for us to address many of our state's most pressing highway needs. Any decision that you make, obviously, regarding the use of these funds is going to be a positive and long-lasting improvement for transportation in Texas, and I believe that the commitment of our voters and leadership and the legislature have provided us with a tool that we certainly can take advantage of and use to successfully put forward projects in Texas.

So I would like to get your feedback, comments, I'm here to answer your questions. Mr. Bass is still here, I hope.

MS. DELISI: He left.

MR. BARTON: James, that guy. But I do have Bob Jackson and his staff is available. So we'll be happy to try to answer any questions that you might have at this time and get any direction you'd like for us to take.

MR. MEADOWS: John, I certainly compliment you all on developing what I think will be a very good process. What it really does, in effect, is builds on the success that we enjoyed through the process we established for allocation of the stimulus monies. This is a process that does engage our transportation partners, and the only thing I would add to it is I think it would be advisable for us to solicit in letter form input from the legislature, the same guiding principle sort of comment, outlining the process that we've established. I think that's important for the legislature to know how the dollars that they were engaged and involved in providing us through the voters is actually going to be allocated. It's a good process and they need to know it and we could certainly benefit from having any opinion that any member might have.

MR. BARTON: That's a good idea. I'll be happy to work with Coby Chase and his staff to get a letter for the Chair's consideration to send to the members.

MR. HOLMES: John as a follow-on to Commissioner Meadows, it did seem like the stimulus money allocation was well received in terms of the process by which it was allocated, and I think you said that earlier, that it's been a successful program. Do I recall that you divided the state into regions and there was some allocation across regions?

MR. BARTON: In the stimulus package, yes, sir, it was. One of the guiding principles that we came up with in that process was that there would be geographical representation of projects around the state, and to ensure that we met that need, we kind of divided the state into the four regions that we now have the department's responsibilities divided into and did an analysis to make sure we had equal distribution of projects in those areas, relatively equal.

MR. HOLMES: Right.

MR. HOLMES: I don't think that I saw that in this presentation.

MR. BARTON: No, sir, and I didn't really put forth any guiding principles. I was just trying to lay out what some of the transportation needs were around the state and rather in proposing that now if the commission believes it's a good approach, I would convene that group of transportation partners again and ask them to talk about what the guiding principles for Proposition 12 Bond proceeds should be, knowing that they're a little different than the Recovery Act funds, and so there may be different guiding principles that we believe would be appropriate to bring forward, but I didn't want to speak on their behalf.

I've heard from several of them, they've had a myriad of ideas of how it should work, and so I think it would be a good process to kind of replicate what we did with the Recovery Act and get them all together here in Austin for a day and kind of brainstorm what the issues are in terms of guiding principles, not which projects are we going to look at, but just how are we going to go about deciding from the list that we already have those that are the most important to the state, and so I did not lay out any guiding principles today.

MR. HOLMES: I do think that there are a few distinctions between the stimulus money and Prop 12. Probably the most notable is the fact that voting citizens of Texas approved the Prop 12 on a very direct basis as opposed to it being a representative form of government going through the federal government and being allocated back.

MR. BARTON: Yes, sir.

MR. HOLMES: And so assembling a group in Austin and having them work through those principles, I think, is a great idea.

MR. BARTON: Thank you. We'll work toward that end then.

Are there any other questions or comments, direction that the commission would like to provide on this issue?

(No response.)

MR. BARTON: Well, I think we've got clear support for the approach we're taking and we'll get started on it and come back to you in September with some guiding principles to consider for your use.

MR. SIMMONS: Thank you, John.

MR. BARTON: We can go ahead and move on to item number 7 which is a discussion of Article 2 which is the planning out of House Bill 300.

MR. BARTON: Yes, sir, thank you. And again for the record, my name is John Barton.

I appreciate the opportunity to brief you today on the department's ongoing efforts to implement the plans and measures that are contemplated in Article 2 of House Bill 300 that was discussed and considered in the 81st Legislature this past year, commonly referred to as TxDOT's Sunset bill, so I'm here to talk to you about the planning part of TxDOT's Sunset bill.

Prior to the session, as you know, the Sunset Advisory Committee carefully thought about the department's operations, they interviewed several of you as well as many staff members and others from around the state, and made several recommendations for legislation that would have required the department to redevelop and regularly update our statewide transportation plan to establish a transparent and well thought-out, understandable system of project programming in the State of Texas.

The recommendations of the Sunset Advisory Commission report were ultimately incorporated into Article 2 of our Sunset bill, and although the bill was not enacted, we believe that it does represent a good foundation from which to start a process to move forward with the concepts that were expressed in the conference committee report for House Bill 300, and so we would like to move forward with those things that are appropriate and are possible for us to do within the context of our current rules and regulations and do not require any additional enabling legislation to allow us to do that.

The commission has the authority to adopt rules for the planning process and the development of all modes of transportation in the State of Texas which include the highways of the state as well as all the other modes of transportation. A planning process for long, mid- and short-range plans is an important part of that, and procedures for selecting projects are as well, also establishing funding categories -- one of the things that you do on a consistent and regular basis -- and creating formulas for allocating those funds to the different geographic regions of the state, all are part of a well thought-out transportation planning and project development process.

You decided, as you will recall, to move forward with the adoption of new rules to implement the concepts that were contemplated under House Bill 300, and to assist us in this effort, during your last meeting in July, you appointed a rulemaking advisory committee to advise the department and you on the development of these administrative rules for establishing the transportation planning process here in Texas.

Membership for this rulemaking advisory committee has already been established and I wanted to inform you that I will be meeting with the committee tomorrow afternoon at two o'clock p.m. following your commission meeting, so you'll need to be able to get out of here by two o'clock tomorrow afternoon in order to allow us to have that meeting because it's contemplated to be here in the Ric Williamson Hearing Room of the Greer Building.

I just wanted to briefly review with you Article 2 of House Bill 300. It does address the transportation planning process that we undertake as a department with our transportation planning partners, and the provisions of this particular article are extensive in their scope and looked at a lot of different areas of the transportation planning process, so I'll try to briefly summarize some of the major concepts and components of this article for you today just so you'll be aware of the things that we'll be working on over the next several months as we revise these rules.

House Bill 300 in Article 2 requires the development of a 25-year statewide transportation plan. Mr. Russell briefed you on our efforts that we're currently taking to address this. It does need to address all modes of transportation, so that's rail, highways, ports, waterways, aviation and mass transit, and it needs to contain specific long-term transportation goals, one of which by the rules that were contemplated under Article 2, must be reducing congestion -- it was the only one that was specified in the bill -- and each of the goals must have measurable targets for them in order to monitor the progress on this plan.

The plan would need to identify, as well, priority corridors from across the state, significant projects that we need to work on, and areas of the state that we have concerns about, and it also must contain a public involvement process that's well defined.

The department will be required to update this statewide transportation plan at least once every five years, more often if need be, and we must reference this particular plan in any of the policies that we implement or any of the programs that we initiate so we can draw back on how we are addressing the goals and vision of that plan in the policies and programs that we establish as an agency. As you heard today, under the leadership of Ms. Meyland, the director of our newly created Office of Strategic Policy and Performance Management, we're currently working toward creating this plan and getting it underway in the near future.

The bill also requires the development of a transportation project and performance reporting system. We've talked to you a little bit about the genesis of that in the past several meetings. This system needs to be located on the department's website and available, obviously, to the public. It also needs to contain information regarding all of the department's transportation projects that are part of our ten-year Unified Transportation Program.

This reporting system has to provide information on the status of the projects, the source of funding for them, has to have a map of where the projects are located, the time lines for which the projects are estimated to be completed in, and the progress of the project as it moves forward to completion.

We've already developed this website enhancement, it's referred to as Project Tracker. Many of you have probably visited it or have talked to others who have, and this is a good tool to provide transparency to the public and our transportation planning partners as we develop a process to be more transparent and open about where we are in our projects, and I believe this is the beginning of our efforts to meet the intent of this particular provision of House Bill 300.

An additional requirement of the bill calls for the establishment of a transportation performance report and it's a little different than the reporting system I just mentioned. This report must list all the significant transportation problems in each district of the department and an evaluation of the effectiveness of our investments in those districts to meet or achieve the goals that were established in this Texas Transportation Plan.

It also must include information on the condition of our roads and bridges in those areas, the traffic congestion levels that they experience, and our accident rates, and calls for the department to publish an annual statewide transportation report that reports to the public and to the legislature the progress that we're making toward meeting each of our long-term goals as well as the performance of each of our district engineers and their staffs in accomplishing those things that are laid out for them.

Currently we provide a lot of different reports to a lot of different people that could be, I guess, combined together, if you will, to meet the intent of this particular requirement and it's an initiative that we think we can undertake that will help us improve our overall management of the department's programs.

The bill also calls for the development of a ten-year Unified Transportation Program -- that's something that we already do. It must list the projects and programs we'll be moving forward with over the next ten years, it has to establish a project selection criteria which is currently part of what we do, and define the major phases of a project that are included in those particular reports. It needs to be annually updated, according to the bill, and it also must contain within it a four-year subset of projects that have specific funding allocations for them and a schedule for completing those projects.

Obviously, the development of the UTP is a critical component of any forecast of the department's activities, and therefore, a reliable forecast of the anticipated revenues is important, and we talked about that a little earlier today and I appreciate your support in moving forward with some of those assumptions that will allow us to do that.

To that end, we've had a couple of different work groups created. James Bass and Phil Russell have created a UTP work group to help us modify and improve our Unified Transportation Program, and simultaneously, we've had this TEMPO and TTI and CTR work group developing this TRENDS model to help us do the forecasting, so we're well underway in addressing and complying with these particular requirements of House Bill 300, Article 2.

I just will conclude by telling you that I think we have got a very good process in place, we are continuing to pursue and implement the provisions of this particular bill through this rulemaking process. I anticipate it will take several months and it will need the direct involvement and input of the commission, this rulemaking advisory committee that we've created, as well as the public in order to be successful, and we're excited and confident that we'll be able to bring about a successful rulemaking process that will yield big dividends for our state and improve our planning process and make us more effective in delivering projects for the State of Texas.

So that concludes my presentation. I've attempted to be brief and I'll be happy to try to answer any questions you might have, and again, I have Bob Jackson and his staff here to assist me in trying to answer any questions you might have about this or anything else.

MR. SIMMONS: John, why don't you introduce Montie real quick.

MR. BARTON: Okay. Also with us today is Montie Wade from the Texas Transportation Institute. Montie has been assisting us on the Unified Transportation Program work group to help us develop and implement a new program approach in that area, and he also will be participating in the rulemaking advisory committee, not as a member but there to learn from it, provide resource information to us, and help marry those activities of this UTP work group with the rulemaking process. So Montie, would you just wave your hand so everybody will know who you are? And he used to work for the department in his first career and did a great job for us in leading transportation planning in the east and northeast part of our state.

MR. SIMMONS: Thank you, John.

MR. BARTON: Thank you.

MR. SIMMONS: The next item is item 8, Phil will be talking about where we stand on the CDA program.

MR. RUSSELL: Thank you, Steve. And again for the record, I'm Phil Russell, assistant executive director.

Commissioners, my intent is to move fairly rapidly -- we're at 4:35 this afternoon -- I'm going to try to give you a little bit of an update. I know Commissioner Houghton specifically has been a little bit interested in where we are now with our CDA program, and then I'll follow that up with a quick update on our existing CDAs.

Commissioners, as you know -- or as I think you know, our general CDA authority will lapse next Monday, August 31. There are certain exceptions to that. Specifically, we'll have the ability for several projects to enter into CDAs up to August 31 of 2011 and those exceptions are straightforward design-build projects meaning that the private sector has no economic interest, no equity interest in the project, we could continue to enter into those projects up to August 31 of 2011.

There were also several projects that were very specifically excepted, again so that we'll have the ability to enter into those contracts up to August 31 of 2011. Those projects, of course, are State Highway 99, the Grand Parkway in Houston -- as you know, we're working with Harris County Toll Road Authority on that project. They have, I think, until September 25 to make a decision whether they're going to develop the project or not; if they could move forward with the project, that's outstanding, if they can't, we'll have two months to make a determination whether we will move forward and develop that project. We have our staff moving forward having an RFQ document ready to go should they decide not to move forward on that project.

One of the other projects that was excepted, and again, we'll have till 2011 to enter into a CDA, is the Loop 9 project up in Dallas. That's the old outer loop around Dallas. There's one particular section, the southeast section, that effectively would connect up I-35 to the east towards Rockwall over to I-30. That's a project that should be environmentally clear next year and conceivably that's a project that we could move forward with as a CDA. We'll work closely with NTTA as far as who should develop that project, but we would have the authority and the ability, if that's the local determination, we can develop that project as a CDA, assuming we enter into that contract by August 31 of 2011.

Just a few of the other projects -- well, before I get into those project updates, just a bit more information on the other toll authorities. The RMAs effectively are in the same boat we are, their CDA authority -- unless Bob corrects me -- I think their CDA authority closely parallels ours, their general ability will lapse next Monday, they'll also have a two-year window to enter into some design-build projects and I think perhaps a few other specific CDA projects up through August 31 of 2011.

NTTA and Harris County, however, don't suffer under that same CDA limitation so they will have authority to develop these projects in Dallas and Fort Worth as a CDA, and I think that may be something that's worth considering and we think about that and keep that on the table.

Very quickly let me go through kind of a quick status report on some of the other CDA projects. Specifically, these were all projects that were excepted back in '07, so again, we had the ability to continue to move forward and develop those projects. The three big projects, of course, up in Dallas-Fort Worth, the DFW Connector, the LBJ project and the North Tarrant Express, all three of those projects were in good shape, they were specifically excluded from that '07 legislation. The Connector, of course, we've been working on for some time. All of those projects will require LBB approval and the attorney general's approval.

We've been working, and specifically Bob Jackson and John Wright, out of this office, I think are doing a fantastic job of kind of teeing that effort up with us as we make sure the attorney general is comfortable with those CDAs so that they can be approved. Through their fine work, the North Tarrant Express, the NTE project, was approved by the attorney general in June, I guess -- Bob, June or July? June. But we've got the contract executed now and we should be off to the races. Of course, that was a Cintra project and so we should be moving forward on that project.

We've attempted to prioritize that work effort with the AG of letting them know which of these CDAs we would like them to work on first, and so the North Tarrant Express was the first project. The second project that we've been working on is the LBJ managed lanes project. We've been working continuously with the AG, Bob and his staff worked with the AG, and I think we're making some really good progress. We hope to get that approval very quickly as well.

Assuming that is done, the third major Dallas-Fort Worth project will be the Connector, it's a straightforward design-build project, as you all remember. We have some state gas tax funds, you also approved $250 million of stimulus funding for that project. That would be the third project that we'll seek attorney general approval on and our hope, our expectation is, since it's a straightforward design-build, there's no private sector equity in that project, that that should be a fairly smooth approval for the attorney general.

The fourth CDA project that's lingering out there is the old I-69 project. As you remember, that was a straightforward planning sort of contract, it was a $5 million contract to help us decide how to develop I-69 from the Border all the way up through East Texas. We have achieved LBB approval and then once we complete the AG approval process on the Connector and on the LBJ project, the fourth one that we'll be sitting down with the AG will be the I-69 project, so we're optimistic on that one as well.

The last project that I think is worth discussing is, of course, our State Highway 130, Segments 5 and 6 project from the airport down to Seguin on I-10. It's a project that's been underway now for a year or so. Again, obviously it's a contract, it was excluded from the CDA process back in '07 so we're in good shape there. Cintra is working on that project, they're making great strides. We had an update meeting with them this morning. I think they mentioned that they have access to 95 percent of their right of way parcels, over 300 of those parcels.

And some of you probably remember our updates on the Central Texas project, right of way acquisition obviously is a critical path, until they have access and they have those right of way parcels cleared, they can't get the machinery and they can't really start developing the project. So I think Cintra is making some fantastic progress. By the contract they're supposed to have it open to traffic in late 2012, I bet they beat that -- contractually it's 2012 but I think they're making great progress and they will continue to move forward on that.

Just a couple of the other projects, again worth noting that were originally excluded from that CDA termination was the Trinity Parkway up in Dallas -- that's an NTTA project, and then the second project was State Highway 161, again, our expectation is that NTTA will develop that project. But those are two other projects that we would maintain CDA authority for two more years if whatever happened and the department was asked to move in on those.

Commissioners, that concludes my remarks. This should be my last CDA update. I've given you all several of these on the Central Texas Turnpike project for a number of years. I've talked to Mr. Saenz and I think he has asked us to reinstate the CDA updates now that we will have three major projects going in the Dallas-Fort Worth area plus the construction contract on State Highway 130, and so my expectation is Mark Tomlinson will be providing a more thorough update for you all on a quarterly basis, very similar to what I've done in the past on the Central Texas project.

So commissioners, I know I went through those very rapidly but I'll be happy to address any questions you all might have.

MR. HOLMES: Phil, you mentioned that the CDA authority for NTTA and HCTRA does not lapse?

MR. RUSSELL: No, sir, they have no sunset date on their authority.

MR. HOLMES: But isn't that true of the other toll entities?

MR. RUSSELL: All the county toll authorities, to my knowledge -- and Bob, please correct me if I'm wrong -- to my knowledge, all the Chapter 284 county toll authorities as well as Chapter 366 NTTA toll authorities do not have a sunset on their CDA authorities.

MR. HOLMES: You had mentioned those two, but I was thinking it was all the 284s.

MR. RUSSELL: Yes, sir, it's all of those Chapter 284s, that's Waller County, that's Fort Bend County, all of those county toll authorities in the Houston area, plus Collin County now has a county toll authority. So any of those county toll authorities could continue to do CDAs at their choosing.

MR. HOLMES: And what about a toll authority that was created after 792 was passed?

MR. RUSSELL: I wouldn't think it would have any impact. If it's formed under Chapter 284 or Chapter 366, I think they're in good shape.

MR. HOLMES: Tell me a little bit more about I-69. You said that we will send that to the attorney general, it will be the fourth one sent.

MR. RUSSELL: Yes, sir.

MR. HOLMES: What are we sending, a $5 million contract?

MR. RUSSELL: It will be essentially the planning contract for that CDA. As you all remember, that was a year or something ago you all approved us to move forward with a planning contract only with the idea that if there was any construction that would come from that contract -- we still have construction authority south of Refugio County I-37 -- it would require that we come back to the commission to seek that approval. So all we're sending over there is just the planning portion, right, the master development plan.

MR. HOLMES: And when would that go?



MR. RUSSELL: It would be after the Connector is finalized, after the AG approval on the Connector.

MR. HOLMES: And that's because we don't assume the AG can do two at once?

MR. HOUGHTON: They don't multi-task well over there.

MR. RUSSELL: I think the simple answer is the AG has asked us to prioritize it.

MR. HOLMES: To send one at a time.

MR. RUSSELL: Yes, sir. They're putting all their efforts on that project to try to shepherd that through as quickly as possible.

MR. HOLMES: Were they able to do more than one at a time, would we be in a position to send I-69 over there?

MR. RUSSELL: Yes, sir.

MR. HOLMES: It's ready to go now?

MR. RUSSELL: Yes, sir.

MR. JACKSON: Bob Jackson, general counsel. The attorney general has asked for what they call a full transcript for each contract which means that not only the unexecuted contract but a lot of other documents that go along with it, FHWA approvals, commission approvals, so it's a lot of paper, and I believe we sent the Connector today. It even includes a legal certification from the general counsel, and they have asked for just one contract at a time.

MR. RUSSELL: But, Bob, if we were given the authority to send multiple contracts, knowing that quite a bit is asked of us, we could probably do that. Right?


MR. RUSSELL: The answer is yes, we could send multiple contracts.

MR. HOLMES: Do we have any sense of the time line of when we might send I-69 over?

MR. RUSSELL: I don't. Just as soon as LBJ is approved, we would go to the Connector next, and then I-69. And Commissioner, my hope is, LBJ is very similar to the NTE, and again, I think Bob and his staff are working closely with the AG, we should be hopefully close to getting that approved. The Connector is a straightforward design-build, I would not anticipate any complications on that, it's not private equity. And so with all that said, a month, Bob, would that be possible to get to 69?

MR. JACKSON: That would be TxDOT's hope would be a month. I don't want to in any way say the attorney general has given us any indication of how long it would take or that there's any deadline for them. Another complication, not in ultimately getting legal sufficiency approval but in the paperwork, there's Recovery Act money in the Connector and they've required a lot of documentation for that.

MR. HOLMES: There is some sensitivity in the AG's office that it is Recovery Act money, though.


MR. RUSSELL: Commissioners, the only other comment I guess I would make -- and the reason I think it may be important when we talk about the CDA capabilities of NTTA and Harris County -- as you will remember, during the special session one of our unsuccessful elements of the special session was we attempted to get some continuing CDA authority, primarily for three critical managed lanes projects in the Dallas area. That was unsuccessful, I think there was a general consensus that we could probably wait a couple of years till the 2011 session and move forward.

It's been my understanding since that time that there's been a bit of a change of heart, and particularly on the I-35E project, managed lanes project between Dallas and Denton. And so our staff has been working pretty closely with the Dallas folks up there trying to figure out is there any way that we could move forward on that 35 project, and one of the elements that's still out there is NTTA does have CDA capability. Without us having CDA authority, that clearly has removed one of the critical elements on how I think we could have developed that project. But even without that TxDOT ability, the fact that NTTA still has that CDA capability may present some opportunities out over the next two years.

MS. DELISI: You said there was a change of heart. Who had a change of heart?

MR. RUSSELL: I'm not sure, Chair, I just understand that a lot of folks in the Dallas area now have --

MS. DELISI: Legislators?

MR. RUSSELL: Perhaps. That they've looked at that 35 project and felt like we need to look for a way to move forward.

MS. DELISI: Decided we need to do it.

MR. SIMMONS: Thank you, Phil.

MR. RUSSELL: Thank you, Steve.

MR. SIMMONS: Chair, commissioners, that's the items we have on the workshop agenda. And I apologize, I wasn't here at the beginning of the meeting to know if there was a note, but there will be a little difficulty getting into the building tomorrow because of a film that's going on at Congress and 11th Street which happens to be right in front of our building. 11th Street will be blocked from Brazos to Colorado and Congress from the Capitol, 11th Street down to 10th.

So it will be a little difficult. We've been trying to let everybody know as much as possible. It's been posted on the website at the commission meeting, and I think we've been letting your staff know. But there will be a little disruption in getting here so if you're coming to the meeting tomorrow, I would recommend leaving a little earlier than normal.

MS. DELISI: Thanks, Steve. Is there any other business to come before the commission?

There being none, I will entertain a motion to adjourn.

MR. HOUGHTON: So moved.

MR. HOLMES: Second.

MS. DELISI: All in favor?

(A chorus of ayes.)

MS. DELISI: The motion passes. Please note for the record that it is 4:50 p.m. and this meeting stands adjourned.

(Whereupon, at 4:50 p.m., the meeting was concluded.)


MEETING OF: Texas Transportation Commission

LOCATION: Austin, Texas

DATE: August 26, 2009

I do hereby certify that the foregoing pages, numbers 1 through 157, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Nancy King before the Texas Department of Transportation.





(Transcriber) (Date)

On the Record Reporting

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