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Texas Department of Transportation Commission Workshop

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

Wednesday, December 16, 2009


COMMISSION MEMBERS:

Deirdre Delisi, Chair
Ted Houghton, Jr.
Ned S. Holmes
William Meadows

STAFF:

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

PROCEEDINGS

MS. DELISI: Good afternoon. It is 1:37 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 3:21 p.m. on December 8, 2009.

Before we begin, please take a moment to place your cell phones and other communication devices in the silent mode.

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 the posted agenda items but will not have an open comment period. To comment on an agenda item, please complete a yellow speaker’s card and identify the item on which you’d like to speak. You can find those cards at the registration table in the lobby.

I’d also like to call your attention to the cards placed in the chairs and available at the registration table. These cards announce the Fifth Annual Texas Transportation Forum, which takes place January 6 through 8, 2010 here in Austin. If you are involved in transportation, we invite you to come and be a part of the conversation. Please check out the website and consider registering to attend this event.

Before we begin with today’s agenda, are there any comments from my fellow commissioners they’d wish to make? No? Okay.

So with that then, Amadeo, I’m going to turn it over to you.

MR. SAENZ: Thank you, Madame Chair. And just so that everybody knows, at the forum we will be providing updates on the big game for those of us that won’t be at the game.

MR. HOLMES: I’m sorry we’re not all able to go to the game.

MR. SAENZ: Well, it’s not that we’re superstitious, but the last time when we did win the National Championship, we watched it, and we’re going to the same place, watch the same TV, I’m going to sit in the same chair and probably wear the same shirt -- just in case.

(General laughter.)

MR. SAENZ: The first item on today’s agenda is an update from Grant Thornton, who is giving us an update on the organizational and management review. Ed will introduce our speakers.

MR. SERNA: Good afternoon, Madame Chair and commissioners, MR. Saenz. For the record, my name is Ed Serna and I’m the assistant executive director for Support Operations here at TxDOT.

Before I introduce Anna Danegger, who is the director for Grant Thornton, who has been kind of leading the effort, I would like to kind of go over some information that we put together as a result of the last workshop that we had, last month’s workshop. At last month’s workshop, you asked the staff to go back and work with Grant Thornton to look at adding a compensation study, as well as a more detailed review of our procurement and contracting practices, and also to plan or scope or add to the contract Grant Thornton interviewing all the members of Senate Transportation and the House Transportation committees, respectively.

We’ve done that work; we’ve met with them; they’ve put together some project schedules; we’ve had some meetings and gone back and forth with regard to the time line; we’ve also met with them with regard to the cost of doing that. We feel very comfortable that we’re ready to proceed and unless we hear any sort of major objections or issues at today’s workshop, we, the staff, are going to take your instructions and proceed with authorizing Grant Thornton to move forward.

Basically, the impact of the change is only a three-month push to get all this other work done, to get included in the report. By three-month push I mean instead of late January, it will be the April time frame that Grant Thornton will actually submit the report to you. In addition, the cost we looked at very carefully, compared it to the overall cost of the contract, the cost is reasonable, both in my estimation as well as a result of the staff’s analysis, the staff’s estimation. Total impact to the contract is just a little bit over $400,000.

There’s a significant amount of effort in the procurement and contract review, it’s a very deep dive into our practices and into an analysis of our practices there, and we feel very comfortable with being able to proceed.

If you have any questions for me, I’d be more than glad to answer them after I’m done. Anna has got just a little bit to update you on what they’ve done to date, but unless I hear otherwise, the staff will move forward as instructed.

MS. DANEGGER: Good afternoon, Chair Delisi, commissioners, and Mr. Saenz. I’m Anna Danegger, representing Grant Thornton today. I wanted to just provide you a very brief progress update on our work.

We continue to make progress toward completing our assessment of the areas that are currently within our scope, which includes: recommendations around TxDOT’s organizational structure and staffing, focusing on the organizational levels of administration, district, division, office and region; making recommendations to further transparency, accountability and communications; and making recommendations to further efficiency, which we’ll be addressing through the diagnostic area of business process or functional review in accounting operations, communications, human resources, information technology as it supports TxDOT, planning, designing and building, recognizing that the design and build reviews are a high - level diagnostic review and we’ll not review the engineering effectiveness practices.

In design, we’re looking at the design process, including coordination between headquarters and the field, design review and use of consultant contracts. In the build area, we’re reviewing the construction management process, including contract management, quality assurance, claims and disputes.

The work that we’ve been doing to accomplish our current goals includes analyzing the surveys that we received from TxDOT employees. We received a greater than 50 percent response rate, with respondents being from all portions of the agency: 21 percent of the respondents were from the divisions, 20 percent from the offices, and 47 percent from the districts.

We’ve also been reviewing interview notes, government-furnished information, and we’ve held a number of follow-up meetings, that is follow-up to our initial interviews, both one on one and with groups of personnel to help us dig more deeply into the areas of process review. Finally, we’ve been benchmarking the work of TxDOT against that of other DOTs.

I’m happy to answer any questions you might have.

MR. SAENZ: Thank you, Anna.

The next item, Mary Meyland will present and lead us in a discussion on the development of the 2011-2015 Strategic Plan. Mary.

MS. MEYLAND: Yes. Good afternoon, Commissioner Delisi, commissioners, it’s my pleasure. Mary Meyland, director of your Strategic Planning and Performance Management Section.

We have been through the months developing the process by which we are going to call our new Strategic Plan, and I believe that most of you have had the opportunity to visit personally with Dr. Lance Newman on a telephone conversation to get us to the next step. Last month we presented the affirmation of the goals that we’ve set forward, and at this point we’re in the process of trying to develop the actual strategies and the objectives that are very important to the organization as we move forward, and we’ll tie our processes that we currently know and currently do to the overall objectives as you have defined them.

I want to take a little time and go through, and I apologize for using a power point presentation but it really helps focus since we do have quite a bit of information collected and to move forward with.

The key outcomes, today I just want to affirm the direction that we’ve been given individually through Dr. Newman and your conversations that you’ve given him on the way that we should continue to process and to implement our Strategic Plan. I will let you know at this point, and then I’ll summarize at the end, that we’re kind of on a collision course with our Grant Thornton study that they’re currently -- and you heard -- in their work program looking at process analysis and process evaluation.

And as we start to push the strategic objectives through the goals, then our members, our management and their management, are going to look at how their current processes align with our goals. So there will be quite a bit of question out there amongst the troops whether or not they should still be looking at the way we’ve been doing business in order to identify our goals or should we wait for the results of the Grant Thornton study. So I just want to let you know there is a collision course.

We were very successful, or not as successful as Grant Thornton, but we’ve got about a 20 percent response rate from internal as well as external respondents to the goals that we sent out. We just had a form that we allowed people to give us comments back in general about the six areas that you have identified as being the focus areas for our goals. Generally, everybody agreed, 67 percent, that we were focusing in the right direction and on the right goals, particularly those number 3, 4 and 6, which are our safety, congestion and maintenance goals, which are very typical of what this department has been responsible for and had generally the authority for for many years.

General lack of understanding on the two new ones, quite frankly because, remember, they were just looking at the goal language and they didn’t have the benefit of the objective definitions or the strategies which you have now seen and I’m going to refer back to you in this presentation.

As we move forward, we used a workgroup of our subject matter experts throughout the department, and they worked to try to present our goals in a very punchy, concise manner so that people could understand them with the least amount of misunderstanding and keep them high level. We are focusing on three main, remember, agency level objectives, knowing that underneath the agency level there will be many, many other objectives and strategies that will complement those agency-level.

Our next focus beyond this -- probably the next month and the month after -- will be on performance measures, which I’m going to introduce to you today as some possible ones, and targets which we understand you may have some interest in helping us with and we would encourage that.

Just to reiterate, we went across the board as far as getting subject matter experts from all our divisions and all of our process areas so that they could support us in trying to identify our objectives and our particular strategies.

Just to reiterate where we’ve been, we have six goal statements that you are familiar with: one about organizational structure and response; one about facilitating finance issues and making sure that we were being unbiased in the direction that we were giving or at least promoting; and three was to look at the transportation system and make sure that we’re maintaining it.-- and these are in no specific order, they are just the way they fell out; congestion relief strategies versus reducing congestion, kind of taking a different approach at it and suggesting that we were going to develop plans for relief and not necessarily for reduction; and then enhancing connectivity, which is kind of a new one, it hasn’t been set out as a goal before and that is the inter-connectivity of our system as it supports the development of all of our activity areas; and the last one obviously is safety and that’s always been a prominent concern.

We’ve decided, with the help of Cambridge Systematics, to develop a flow chart perspective of these goals to make it a little bit more bite-sized as people try to drive down and attach themselves to this new over-arching responsibility that we’re trying to define. So the first one -- I just wanted to hit upon the high-level things. The red is obviously the statement of the goal, the blue is the statement of the objectives as have been identified through the workgroup efforts, and the green are the different strategies or the action areas that the department can do or basically manage in order to accomplish the blue level.

So you see basically four, trying to keep them simple, concise, but yet comprehensive: we’re looking at communication transparency; we’re looking at implementing our performance management program so that we can be transparent in all that we do; obviously developing and nurturing our partnerships was very strongly heard and we’re trying to emphasize here and that’s all about collaboration with our stakeholders; and then we need a place-holder there for our workforce in making sure that we’re enhancing our workforce so that we can meet the needs of a changing organization.

I just wanted to put up for consideration -- and I believe you have a copy of this presentation in your workbook to refer to later as we look at the blue areas, which are the objectives we have to start defining a performance measure that we would use at the agency level, and this will be very important for you to consider as you start setting the tone for the targets that you would like for this agency to shoot for and how you would like for us to perform in the future, or in other words, what does success look like for this agency in these different objective areas.

So we just throw up some of those that are being used across the country right now; these are not a comprehensive list by any means, and we intend on bringing that comprehensive list for your consideration and maybe prioritization next month and in February. But just to let you know, we’ve already finished the program management side, I developed those and we sent them to you last month where we talked about the on-time/on-budget on the design side and the construction side.

We’re in the process of developing these others, so we’ll just move through these as a matter of information.

This is our second goal and it was a very important one for you and that was how we facilitate the discussion of our funding options as we move forward with our partners in developing project priorities, and we kind of put them into three different areas. These things we are already starting to develop a systematic approach to, and one is to explore all the options available to us. The second one is to continually document the needs and revenue sides of our operation. We’ve done that this year through the 2030 Committee efforts, as well as funding the future that was developed through TMPO activities. We’d like to see that captured and updated so we always have that reference.

And then the last part, which is most important, is communicate the results of, what are the options, what are our revenues and what our needs are. Again, trying to think ahead, we’ve got to be able to say how well we’re performing in these areas and so we’ve identified some general performance measures to be considered in communicating the resolve on this one goal.

Our third is the maintenance of the system, which typically tends to be our priority in a lot of areas and defined that in three specific objective areas: the existing infrastructure as we see it in the pavement and the bridges, and obviously we want to capitalize on our best practices and make sure that we’re doing what we should across the department and particularly as we standardize our processes; the second one is to respond to emergencies and make sure that we are doing our best practices and again standardization on our emergency processes; and the last one is one that Amadeo made very clear in these last three or four objectives and goals that he wanted to make sure that we were performing and we were measuring our performance so that we could always improve, so we’ve highlighted that here.

Moving forward, again you get a little symbolic measure -- and hopefully you’re able to see this in your presentation; if not, I’ll make sure that your aides get them so you can see where we’re going with publications and basically performance measures that would be system-level, high-level, and produced publicly for maintenance. Amadeo did make one comment on the very one where we’re talking about a rating of good or better on our pavement, we want to make sure that we compare that to the investment that we’ve made on an annual basis.

We now have, from the efforts of David Casteel and the district engineers and the Maintenance Division, a new collaborative tool that puts together a four-year maintenance plan and tells you or predicts where we think the pavement condition scores will be. So it will be very interesting to be able to track our actual expenditures to what we propose that we would expend and also the goals of the pavement scores as we thought they would be and what they actually are. So that’s the first one and that will be something that no one else, as we know of, is doing on the national level.

Coming towards the end of the goals, we have the relief strategy issue, again, reiterating the fact that it’s congestion relief and not just reducing congestion, which has been a focus in the past. I think there’s a recognition, particularly as our funding is concerned, as you move forward past 2012 that we’re not going to be able to do much to actually reduce congestion but we can work together with our partners to manage congestion a little bit more pro-actively and produce relief strategies like bottleneck resolutions and things of that sort.

So this is designed to kind of orchestrate or structure that so we look at partner plans, that first one under Implement Multimodal Solutions, that we’re actually working together to develop congestion management plans with our MPO partners, which is kind of different for the organization.

Moving forward, again, we’ve always relied on the Statewide Congestion Index, and really that’s still going to be a prominent measure that’s going to be used across the nation, more than likely, and that we can all rely on as being a consistent measure for congestion and how well that we are performing. We obviously need a focus on the top 100 congested sections so we have captured that in another performance measure, and then Amadeo wanted to make sure that we were being pro-active in our performance evaluation on how well we’re doing or how not well we’re doing as far as our success level.

Connectivity, this was one that was not well understood as far as our general public, and more importantly, our internal customers, but as we try to connect the dots, so to speak, we’ve given it some definition by saying we’re really providing connectivity to what and that is to our major industries, our new industries, connectivity from our system to those major activity and cultural centers, and that we are measuring our performance as to how well we are providing those connections. And obviously, it comes to a measure of how many projects we’ve actually got completed with our business partners and how many lane miles we’ve added to our system in order to produce those connections, the linkages.

And then last, but not the least, is the safety issue. You see a few more objectives in that area because we have a little broader scope. One is not only for the fatalities and serious injuries and the users of the system, as we normally categorize them, our drivers and passengers, but also our own employees as we work and we are exposed to the sensitive issues out on the roadway. So you have emergency safety issues, you have general fatality and system concerns as it relates to operations, and then you have our work zone safety issues.

And then finally, a lot of these are already created, we’re already out there reporting these in the LAR process, but we’re going to try to iterate them up a little bit so they will be more meaningful to our processes and to our management philosophy, but you see at least four there that we know that we can capture and create pretty regularly.

Now, this is the most important part and the last part of my presentation, and that is the strategic time line. I mentioned earlier that we were coming into a point of collision with our Grant Thornton study. As they mentioned, with the additional work items that they’ve been asked to accomplish, there’s going to be a little bit more lag time built into their schedule. We were hoping as of January to have a better sense of the recommendations and how they may relate to the goals as we have sculpted them to date and their objectives, but now that looks like it’s going to be further into March or maybe April.

So we don’t want to proceed. I do not believe, and this was the comments I believe we received from Commissioner Delisi through Lance Newman, that we do not want to assert our position in a strategic level without the benefit of their recommendations so we do not want to push forward in January with our draft plans based on these strategic areas that we identify, so we’ve pushed that back in our time frame, more into March and April, for the public revealing of this draft plan, and that we will come back to you in January and focus more on performance results and get your feeling on prioritizing the goals as they have been drafted and to tell us how you would best want the success of the department to be measured through performance measures.

A last issue, I believe James is going to talk a little bit later this afternoon on the LAR process and it’s very important, we believe, that we move forward together with the Strategic Plan and the LAR process so that we may be able to capture the importance of these performance measures as they move into the budget strategies and the budget costing for the next fiscal year, because as you remember, this Strategic Plan time line starts next fiscal year and goes into 2015, so it would be nice if they can go together. And we’re going to need the complement of the organization buy-in and start process mapping to these goal areas so that we can define these performance measures within the next five to six months so that we can start reporting actively September 1 for the next fiscal year.

So if there are any questions, I’ll be glad to entertain them now. I know that was a lot of information.

MR. SAENZ: Good job, Mary. I guess my only comment on the congestion relief, on the one that focuses on the congested system elements and the top 100 corridors, some of those mitigation plans for those top 100 corridors are not actually work on the corridor but on alternate routes. As an example, 35, we can’t do much to 35 here in Austin, but we can do something to 183, we can do something to 130, so you need to take that into account because you won’t be spending money on 35.

MS. MEYLAND: We’d have to capture that and get credit for that relief effort that we would, and that’s how important the plans are going to plan, but a very good comment. Thank you. I appreciate your guiding process in this, thank you.

MR. SAENZ: Agenda item number 3, Mr. Bass will lead us in a discussion dealing with the goals and objectives and getting some feedback from the commission on the setting up of the State Infrastructure Bank that is part of the Prop 12 Bond Program. James.

MR. BASS: Thank you, Mr. Saenz. For the record, I’m James Bass, chief financial officer at TxDOT.

As you just heard, I wanted to lead you in a discussion today and get your direction as we begin development of the Legislative Appropriations Request for 2012 and 2013. One of the -- that’s the next one.

MR. SAENZ: You’re doing 3, you’re going to do Prop 12 first. Right?

MR. BASS: Oh, sorry, you’re right, I’m wrong.

MR. SAENZ: You can do the other one first, we’re flexible.

MR. BASS: It kind of tied more with the Strategic Plan. We’ll do Prop 12. I’m sorry, I was following the discussion. I’m here today to talk about Prop 12 and the State Infrastructure Loan Bank and get your direction on how we should move forward in establishing rules for that program. Sorry, I flipped them.

First, just as some background, the Proposition 12 funding was approved in 2007 when voters approved the issuance of $5 billion in general obligation bonds, and this is key to our discussions, in the constitutional language it says: to provide funding for highway improvement projects. Then the last legislature in the first called session appropriated $1 billion to capitalize the State Infrastructure Bank in Fiscal Year 2011 for the purpose of making loans to public entities -- again, that’s taken straight from the statutory language, and we believe that it can only be used to fund construction loans for that.

Just as a reminder, the commission has established a rules advisory committee made up of the seven entities. You see before you we’ve gotten individuals designated from six out of the seven and hope to begin having meetings with the advisory committee in the early part of next year, hopefully in January.

Background, the existing SIB that’s been operating since 1997 was capitalized with both state and federal dollars and that came with some requirements with it, and the general purpose of that has been to provide access to transportation funding to entities that might not have access to that, and in some cases, it’s been at a lower cost than they could otherwise acquire that funding and it operates simply as a revolving loan fund program, and although the existing SIB has not been leveraged to date, the authority to do so does indeed exist.

So if we move on to the Prop 12, some of the things to discuss today are some administrative considerations and then also policy considerations that we would appreciate the commission’s input on. On the administrative considerations, our plan at this point, unless directed otherwise, is to establish a separate account for the Proposition 12 SIB, potentially to have a separate set of rules for that program, and also just to add transparency to clearly show how that $1 billion of Proposition 12 funds was utilized. And again, it will provide transparency and there very well may be differing goals and objectives from the existing SIB program that’s been operated.

The administrative considerations as we establish the rules, to see if the commission had a preference or just to leave it open in order for applicants to seek assistance, is there a preference for a program call or a competitive call for the $1 billion, or just to leave it an open application process that any time a project gets to that point, they can submit an application.

And so on that point, I think what staff would do, working with the rule advisory committee, we would generally try and keep it flexible, that the commission could do either a program call or an open window process, but we would appreciate your comments or concerns with that approach as we move forward.

We imagine for this Prop 12, depending upon some of your answers and directions, there will likely be enhanced application requirements from what we currently have for the existing SIB. If the commission does want to leverage the loans made out of the Prop 12 SIB, then we’re going to need additional information on the credit quality of the project and/or the entity that’s seeking to borrow, and some of that would be additional credit and financial documents from what we currently receive.

Don’t know if the commission has a consideration on the department or the SIB assessing a fee for the consideration or review of an application for Prop 12 assistance. It will be really a more stringent, labor-intensive review from what we’ve done from the initial one, the existing SIB, and so there will be additional staff resources dedicated to that, and so I didn’t know if there was an interest on behalf of the commission to assess a fee.

And that’s done with TIFIA, which is a program that’s offered by the US DOT, in order to submit an application, there’s a fee that goes along that to help defray or offset some of those costs. Is there any interest in doing that or not?

MR. HOLMES: Can you put a little color on that, what would a fee be and how much?

MR. HOUGHTON: What does TIFIA do?

MR. BASS: TIFIA establishes a flat fee -- and I apologize, off the top of my head I don’t know what it is -- but one of the things we would likely do that is not necessarily done on the existing SIB -- or has been done but the costs have not been covered -- if it were a toll road or some road that has a dedicated revenue stream along with it, especially if the commission later on wants to leverage that loan, we’re going to have additional diligence and review of that revenue stream and reviewing it, and it may be that we hire an outside consultant to assist us in that review of the traffic and revenue study or maybe if it’s from property tax from that revenue analysis.

Is that something that we just want the department, through our normal budget operations, to carry that cost as providing that service to potential applicants, or is that something we want to either share with or pass on to the applicants?

MR. HOUGHTON: Well, my initial thought is we pass it on if there’s going to be that kind of review, that level of review. Not only if, number one, we do charge a fee, if we go to the level of complexity that you’re talking about, then obviously a different fee.

MR. BASS: And I imagine what we would do is establish a standard fee -- and I don’t know if that’s $5,000 or $10,000, I apologize, I’ll get you what the current TIFIA charge is -- and it may not cover 100 percent of the costs in all cases but it would, at least, help to offset those costs.

MR. MEADOWS: Just a couple of observations. It’s more about just the proper order of business, I guess, one of the key elements here was that we were going to create a rules advisory committee which is going to be made up of people who, more than likely, would have a vested interest in the outcome simply because they would be participants -- in other words, you’re talking about our customer group. A number of these questions I would be reluctant to opine on until such time as I had the benefit of that input.

You’re posing some questions to us today that I think we have some of the information, and certainly we have opinions on some of the questions that you’re asking, and as I review the material, certainly questions do come up, but I would really rather have the benefit of that input before making any sort of decision as regards to -- my inclination, of course, is to agree with Commissioner Houghton, as I always do -- but the fact is that we’d like to recover those expenses, they’re extraordinary expenses over and above normal operations. But on the other hand, let’s get that input first, I think that would be important to do.

MR. BASS: I appreciate that concern. I guess our concern from the staff level was you’re dealing with the applicants, and so I’m making an assumption here they’re preference will be no charge, and if the commission had a position --

MR. MEADOWS: I understand that. James, I just said I acknowledge the fact that -- I believe I said they may well have a vested interest in whatever the outcome is, but I can appreciate and understand that going forward.

I will tell you the other thing that concerns me, just reading this -- because this is a concern -- and that is, you know, there is, believe it or not, a legislative session that’s going to be beginning in just over a year, and albeit, I understand that this was a result of actions taken in the special session, but I think there’s an expectation that we’re going to put this money to work in the state on projects and I think that we really do need to expedite the process and we need to really get serious about utilizing this facility and this tool that the legislature gave us.

MR. BASS: In some of the internal discussions before bringing this discussion item, there was a concern that if we get too detailed in the discussion today, it may preempt the advisory committee process, and that’s not our intent. The other concern was that if -- using this fee as an example -- if the commission had said no, we’re not interested in doing a fee at all, we want to just cover the cost, then we didn’t want to necessarily spend a day and a half with the advisory committee discussing how we might establish that.

And so there’s a delicate balance here of trying to get some over-arching goals and direction from the commission without preempting, as you said, the benefit of getting input from the advisory committee. So some of this is: Is this something we should discuss or is this something that might be completely taken off the table at this point.

MS. DELISI: Can I ask a question? The advisory committee, is that done, do we have the people?

MR. BASS: Six out of the seven, those seven entities have been adopted.

MS. DELISI: Could we add to it if we thought that there’s other folks that need to be at the table?

MR. BASS: I think you certainly could, I think not today at this item, I think we would need to bring a minute order at a future meeting to add to the committee because the committee was established through a minute order, and I got some head-nods, but that’s certainly what we could do. Six out of those seven entities have identified the individual that they have chosen to serve on the committee, we’re waiting to hear from the last one on that.

MS. DELISI: Do you know who, like, the Municipal League or the Association of Counties person is?

MR. BASS: I believe it’s the Municipal League, which is the seventh entity that we’re waiting to get that individual identified.

MS. DELISI: For example, do we know where the Texas Association of Counties representative is coming from?

MR. BASS: I’m not sure which county. I know we have that name and that individual, I don’t know from which county, if it’s an urban or rural county at this point.

MR. HOUGHTON: Can we get the names of the people?

MR. BASS: Sure.

MR. HOUGHTON: I think one of the -- to add on to the Chair’s discussion item -- is one of the groups we haven’t identified is the international bridge operators.

MS. DELISI: There’s a lack of border representation for sure on this.

MR. HOUGHTON: There’s obviously a demand for international bridges in light of trade issues.

Let me ask you another question, James. In the existing SIB, what is it capitalized to?

MR. BASS: Right now the cash balance, given pending loans --

MR. HOUGHTON: The initial capitalization.

MR. BASS: The initial capitalization was, I think, close to the order of $200 million over a period of years of both state and federal dollars.

MR. HOUGHTON: Okay, and today, with interest payments back.

MR. BASS: The total amount that’s been provided is over $350 million, and I can get the precise dollars for you, and that’s assisted projects.

MR. HOUGHTON: What is available, what’s the capacity today?

MR. BASS: Over the next six months it’s little to nothing, it’s all been spoken for.

MR. HOUGHTON: What’s the biggest loan we have in there?

MR. BASS: It’s in the neighborhood of $140- to $145 million.

MR. HOUGHTON: To whom?

MR. BASS: To NTTA. It was a transfer of an existing prior loan that had been made out of the State Highway Fund, but that’s the largest existing loan.

MR. HOLMES: James, before you go too much farther, on the advisory committee, clearly it’s important not to preempt, but it is an advisory committee.

MR. BASS: Yes.

MR. HOLMES: And we want and need their input, but the ultimate rules are going to be written not by the advisory committee, we’re going to take their advice. As Bill pointed out, they may have a vested interest in the outcome, well, most certainly they would, but they also have some prior experience, particularly the Water Development Board.

MR. BASS: Right.

MR. HOLMES: And so it seems to me that we take their counsel and then we need to make sure that we mold it and fit it within the context that we need to operate.

MR. BASS: And what we were hoping to do today is set out, if you will, kind of guideposts from the commission, that as we begin discussions with the advisory committee, if they’re going off in a direction that doesn’t seem to meet an overall policy objective of the commission, that we could redirect that discussion and say: Well, we think we’ve heard from the commission that they want the program to be able to do A, B and C. And so we need to then put in the details under A, B and C to make sure the program leads us there.

And so the difficult thing in the discussion is, I believe, and just getting those guideposts without getting into the nitty-gritty of how we get there, but keeping it at a higher level and then allowing the advisory committee to come in and advise us how to get there. But you’re correct, it will ultimately be the commission proposing rules to seek public input and then adopting those rules.

MR. HOLMES: If one of the goals is to generate credits that are then marketable so that we can then let that money back out again, then these are going to have to be relatively commercial terms. Otherwise, it will be a one-time deal, we’ll have a bunch of 20-year loans and we’re out of business and the rest of the state is waiting.

MR. BASS: Some of the later slides -- but the biggest question, in my mind, is, does the commission want to have the ability to leverage this loan portfolio through debt issuance. If so, we then need common marketable provisions in those loan agreements. If we don’t have those, then that opportunity will have been lost. But putting those in doesn’t mean that the commission necessarily will but it will make sure that that flexibility exists if the commission wants to today or in the future.

MR. HOUGHTON: Well, if that is the case, if we go that direction, then maybe your advisory committee has the wrong members on it, because you’re talking about, Commissioner Holmes, marketable securities, when some of these projects today are not marketable. So if they’re going to come in here and say we’d like a sub-prime loan or sub-market loan, and we want to go market that, I mean, how much flexibility then do you have.

So my opinion on the advisory committee is the fox is in charge of the hen house, so you may want to look at folks in the market that are going to market these loans and say here are the parameters that have to be met to make these loans marketable or the floor to make the marketable.

MR. BASS: That was one of the thoughts behind the Water Development Board being a member of the advisory committee rather than a member from the private sector, and obviously that’s a decision for the commission to make as to who they want.

MR. HOUGHTON: Well, the Water Development Board is out-voted by a huge number here because you’ve got toll road authorities --

MR. BASS: But again -- and some of this is what we’re trying to avoid by setting these guideposts, hopefully, today, but it very well may be the advisory committee said X, but commission/staff’s recommendation is Y, and here’s the reason why staff’s recommendation is different than the advisory committee, but providing you with both of those schools of thought and then let the commission decide which way they want to go out. What we would prefer is on day one, hopefully, everybody knowing where we’re trying to get to and then choosing the best path.

MR. HOUGHTON: Give me an idea of what TIFIA, the terms of a TIFIA loan look like, our current TIFIA loan.

MR. BASS: TIFIA loan -- and it’s somewhat different -- but TIFIA, 1.1 times coverage is generally the minimum amount required, and generally speaking -- well, I think always it’s subordinated debt. One of the reasons I’d say it’s different is because TIFIA generally is a one-time cash loan deal; whereas, what we would be looking at, potentially, is a loan portfolio of a number of loans and then leveraging that through issuance. TIFIA, to date -- and I’m not even sure they have the ability -- to leverage their loans -- they can sell individual loans but I’m not sure that they can’t package them together as a portfolio.

MR. HOUGHTON: I’m just looking at marketable.

MR. BASS: Well, there’s toll rate covenants and a lot of the interest and concerns that TIFIA has is covered by the senior debt provisions, and as they’re subordinate, it goes under.

MR. HOLMES: The existing SIB, though, was set up with an entirely different goal than being marketable, creating marketable securities.

MR. BASS: Correct.

MR. HOLMES: And so we’ve really got a mind set change in the kind of instruments that are going to be required by this new $1 billion SIB.

MR. BASS: Right, and I’ll use the term toll rate covenant, but it’s really a rate covenant because although a lot of the discussion and a lot of the thought is that it’s probably going to be larger toll roads that will be the ones seeking assistance -- I don’t disagree with that -- but the program itself is broader. And in a later slide, one of the questions is from a credit perspective: you want diversity in your loan portfolio, you don’t necessarily want all one asset class.

And so I’ll skip through some of these other slides just to show -- and this is on the leveraging issue. This slide is called Proposition 12 SIB Capitalization. This is just a cash flow model -- and this is the way, absent the state general revenue up on the top left of how the existing one works -- but in its simplest form, Proposition 12, there will be bond investors who purchase the Proposition 12 bonds, provide a billion dollars for deposit into the Prop 12 SIB.

That billion dollars is then used to make loans to cities, counties and other regional transportation entities; they make repayments over time, and then that money, those repayments get recycled into a second generation of loans to other projects throughout the state. All the while, in the upper left corner there, you have the State General Revenue paying back the debt service to the investors on this $1 billion of GO bonds.

Compare that to a leverage process where you’re going to have step one -- and I apologize, I’m going to go back here -- so one of the questions is how fast does it recycle in this first model. Well, if you’re subordinate, it’s generally going to be longer than if you’re senior; if it’s all toll roads, there’s generally a ramp-up period in it and so it’s going to be longer before you receive sufficient money to really go out and make a second generation loan, if you will.

Well, one of the ways you can accelerate that recycling, if you will, is through the leveraging process, and I think I’ve gotten pretty clear direction on this, but the first step here -- and it says 2010, just to avoid any confusion, that’s calendar 2010 and we’re well aware the billion dollars is not available till fiscal 2011 -- but that first one billion goes out and makes loans, we’re receiving principal and interest repayments. Through the leveraging process you could then issue debt backed by those loan repayments to then fund something less than a billion dollars in a second generation of loans in the near term, and you could do that a number of times or generations.

I know there was concern expressed during the special session in one of the hearings about mortgage securities being leveraged 32, 33 times and was that what the commission had in mind. I said, No, it certainly wasn’t what the commission had in mind 30-plus times leverage, but I think the commission would have an interest in accelerating this recycling of the original loans to go out and help additional projects. And so I think I’ve gotten direction that the commission -- and correct me if I’ve misread -- does want to keep open the possibility of leveraging the loan portfolio of Proposition 12 loans.

MR. HOUGHTON: Hence, the advisory committee members’ expertise in that kind of portfolio.

MR. BASS: We’ll have the Water Development Board. Now, what may be of interest, the Water Development Board, generally speaking -- and Commissioner Meadows, you know more than I -- generally takes a senior position and is 1.2 times coverage, and if you look at it, take a step back, they’re generally dealing with monopolies, water and wastewater, there’s not a whole lot of choice or other alternatives. If you’re dealing with toll roads, you’re not dealing with monopolies, you’re dealing with discretionary choices, and so, generally speaking, one would say then you’d want stronger provisions than somebody who is dealing with a monopoly.

MR. HOUGHTON: How many loans in your existing SIB could you market to the private sector?

MR. BASS: Right now, based upon credit quality or on security provisions? On security provisions, I’d probably say none.

MR. HOUGHTON: And I think that is the perception out there in the toll road business or agency business, I think the perception is that these are below-market loans, favorable terms, that’s my impression.

MS. DELISI: Is there any problem with adding on more financial expertise to the rules advisory committee?

MR. HOUGHTON: I think they have to have that kind of expertise there to let these folks know if we do this, this is what it’s going to look like. Does it become to these folks --

MR. BASS: I don’t know, and my question would be --

MR. HOUGHTON: -- James, in this business is this going to be, well, this isn’t anything better than what we have today in the private sector market?

MR. BASS: The concern would be how do we select the private entities to participate for the financial expert.

MR. HOUGHTON: Well, how about our own people that advise us? We’ve got the expertise.

MR. BASS: That could be it, and then the question -- I don’t know if it’s a policy or a legal question -- would that then -- I may be jumping too far ahead, but one of the ones would be an investment banker that might advise, well, if they advise would they then be allowed to be the senior manager on the debt issuance of a billion dollars that would be the capitalization for the SIB.

MR. HOUGHTON: He could answer that question.

MR. JACKSON: That’s our concern. We’d have to look at that, so that’s why we didn’t go that direction originally.

MR. HOUGHTON: They’d have to make that choice themselves if they would like to advise us and they do not participate in that offer.

MR. JACKSON: We’re reluctant to set up a situation that could have a bad result, and that’s why we put on the Water Development Board to where we didn’t have to worry about any future conflict. So we can look at that and try to arrange it.

MR. HOUGHTON: But I think one of our advisors is in the private marketplace that understands that, that says if you do this, this is what these credits are going to look like what they expect in the private sector to finance these projects. And then it becomes does NTTA say, well, this is no better deal what we can do ourselves.

MR. BASS: And I apologize, but a question which may address the concern, we have a general financial advisor right now under contract, and under that contract they’re precluded from serving on a team for us. If a firm that we already had as financial advisor under us, would they need to be specifically named as a rules advisory committee or could they still attend the meeting on the department’s and the commission’s behalf and help with the discussion?

MR. HOLMES: I think they’d want them to have some color of authority so that when they speak, they have the ability to be heard.

MR. BASS: Right, and so I don’t know if that’s as advisor to the department and attending the meetings with us, or if it’s a full-fledged member of the advisory committee, but that might be a way our general advisor -- and we have a couple of firms, RBC Capital Markets and IMG is another firm that I think within their -- we’d have to look at their scope of work. I know for RBC it would certainly fit with them, and IMG and potentially maybe another firm.

MR. HOUGHTON: Well, I hope you understand the drift of the conversation.

MR. BASS: Yes. I think you want some additional financial expertise and we’ll look at and discuss the best way to do that, and if it is a full-fledged member of the advisory committee, it would be another minute order for us to come back to the commission to add them and/or other members. It sounds like you want to add other entities.

MR. HOUGHTON: The international bridge community needs to be represented.

MR. MEADOWS: Just a comment. I think you’re exactly right, I think you’ve got to get the right players and input from the right folks, but I don’t want to lose sight of what at least I think this particular vehicle is about, and it’s not necessarily about achieving maximum leverage, it’s not. What James said a moment ago is really right, it is about having diversity in the portfolio. The fact is that this is a vehicle that could be used as the A but for@ piece in making some projects work, which may mean that we may, as a matter of policy, make a decision that is not necessarily a decision to make a loan that has the potential to yield greater leverage, more leverage, it may mean that a project gets built.

MR. HOUGHTON: I agree with you, Bill.

MR. MEADOWS: I don’t want anybody to get the impression that all we’re thinking about is achieving maximum leverage to yield more capital for more roads. That, in and of itself, is a laudable goal, but I’m saying there are going to be some projects that you’re going to look at and go this is -- I’m not going to call it a dog, but the fact is it is not as desirable and it is not as marketable, but I think we need to at least leave the door open for consideration of those sort of projects, and that sort of the input you’re looking for today, I think.

MR. BASS: Right, and if the existing SIB had enough capital in it, that would be a nice bifurcation, separation, if you will, to handle the non-marketable ones perhaps out of that funding source.

MR. MEADOWS: You know, the Water Development Board perspective on all this is that that is a decade-by-decade sort of proposition. The fact is the Water Development Board has delivered $4 billion worth of water and wastewater infrastructure in the State of Texas on -- I can’t even recall what the initial capitalizations were of each of those funds, but it was a few hundred million, but that’s over time, that’s going back to 1957, it’s a very patient fund, but it has achieved tremendous result in the state, and none of it, as I recall, was leveraged.

MR. HOUGHTON: But it has a different discipline.

MR. MEADOWS: There are a lot of differences, absolutely, but you know my point, my point is that we need to make sure the door is open to give us the flexibility to be able to advance our goals, utilizing this particular vehicle.

MR. HOUGHTON: And I’m told that Prop 12 we can only use on concrete and asphalt. Correct?

MR. BASS: On highway improvements, yes, and that’s a constitutional issue, not with the SIB but with the color of the money from Prop 12.

MR. HOUGHTON: But if those assets were inside a port facility, that’s still a highway improvement.

MR. BASS: Yes.

MR. HOUGHTON: I think you need a port representative too because they need infrastructure, they need roads that go in and out of their ports.

MR. BASS: Some additional direction that we’d like to get from you, if the commission is interested in a program call -- and I guess even if not -- but with a program call, you then have a competitive situation, and I think one of the ways the advisory committee could assist in that is perhaps establishing some criteria to score the different proposals on and how they could potentially be weighted. I may be completely off base there, I don’t know if the commission has any interest in doing a program call if it’s just an open application.

MR. HOUGHTON: I personally believe it’s open. I think every project is going to be completely different and will have its own dynamics.

MR. HOLMES: Well, being open doesn’t necessarily preclude a program call. Right?

MR. HOUGHTON: You can call for projects.

MR. HOLMES: You can call for it.

MR. HOUGHTON: And I don’t want to name names, but let’s just say my favorite toll road authority, the CTRMA has a project that’s interest-only for five years and a balloon or some type of term like that, versus the NTTA has market rate, when you talk about program calls and you’re scoring, the obvious is to go with the one that’s a marketable rate instead of the sub-market rate.

MR. BASS: And competitive may have been a poor term on my part, but as you well know -- and it may sound odd to our audience -- the billion dollars is a limited resource, and there are many more needs in the state than a billion dollars, and so by having a due date as opposed to a program call, you then get all the --

MR. HOUGHTON: How many people have beat your door down for a State Infrastructure Bank loan under the Prop 12?

MR. BASS: Anybody and everybody you know.

MR. HOUGHTON: Have they?

MR. BASS: Well, they’re all ready and interested to know when the rules are going to be out there, and our hope is to have the rules and applications in place and be ready to award -- if the commission chooses to, to be ready to award some of those in the September 2010 meeting, if not the August one, because we can’t get access to the money on September 1 but we want to be able to provide that financial assistance, and so that’s the time line we’re on.

So it sounds like an open program call but the commission also has an opportunity to go out and say if you’re interested, we want to see your application by such-and-such date, but not necessarily putting in predetermined or prescribed weighting and scoring.

One of the questions comes on patient lending versus quicker recycling, and I don’t know, again from an over-arching thing, is the commission interested in taking a subordinate position in some projects or is the commission only wanting to be on parity or at a senior level or interested in taking a subordinate position on some projects.

MR. MEADOWS: I think that gets back to -- at least from my perspective, that’s a maximum flexibility, you’ve got to leave that open, we don’t know. I mean, this is a tool that can be used and the circumstances are going to differ.

MR. HOUGHTON: Our internal advisors, when you start adding those type, what falls off the backside. And I’d also like to look at -- and I don’t know where we’re going to get it from -- but James, I have from time to time -- and I know John Barton is within earshot -- that $142 million we presently have now with NTTA, it does not belong in the SIB, it belongs north with our friends.

MR. BASS: Reading in a newspaper article -- therefore it must be accurate -- I saw a report of a discussion, I think it was last week at the RTC and the impression I was left with after reading the article was there was not a lot of interest in the RTC stepping in and kind of buying that loan from us, which is one of the potential ways we saw to recapitalize it -- that might not be the right term, but to bring in more money.

MR. HOUGHTON: My concept -- and this is my personal concept -- we have an existing SIB and I asked you the question early how many of those loans could you market -- probably none -- and I wish we could have some capacity in there to do those types of loans for a long time, and we have the Prop 12 SIB that we would have marketable, so we have the best of both worlds. Some need a lot of help, some need a little help, and with that $142 million over there, it really hamstrings us to do those types of sub-market type loans.

And I think my message to the RTC then -- and excuse, Bill, I’m telegraphing from the dais -- if that’s the attitude, then their capacity has been sucked up as to consideration for their loans. I think you have to open this thing up to say you have $142- here now and you’re sucking up the capacity of an existing SIB. We move that out, we have a great flexibility of using both SIBs to achieve our goals across this state, not just in one region.

MR. BASS: I’ll go through these next ones quickly because I think I’ve gotten some of the direction, especially on the security provisions. I think we want standard marketable security provisions to provide that flexibility. Lien position, leave it open, as whether subordinate or senior. On the interest rate and duration on the loan terms, I think given the history of the existing SIB, some are going to want below market rates. Obviously if we’re leveraging, we’re going in, we need to cover the interest cost on the debt that’s been issued.

This first generation, having it paid for by GR may present an opportunity, but our general thought was look at the cost of borrowing to the state, what the entity could otherwise borrow at, and maybe falling within that range as far as establishing interest rates going forward. I don’t know if the commission has a broader thought on how to establish interest rates as we go into this.

MR. HOUGHTON: You have your work cut out for you.

MR. BASS: These are all questions of leveraging the program, I think you’re all familiar with it: the credit-worthiness of the borrower, diversity of borrowers, if it’s all toll roads, it’s going to be a weaker credit than something else and would also probably lead to longer payback provisions.

That’s really the major issues that I wanted to go into and again had a concern, I didn’t want to get into too much detail and preempt the forthcoming work of the advisory committee. We will visit again with that seventh entity that hasn’t named their individual, we’ll look at adding the financial advisor firm to the department, either as a full-fledged member or coming to the meetings on our behalf, but in addition to that, looking at international bridge operations and port authorities to add to the advisory committee, and I guess if you or your offices have any other ideas or feel like there’s an area that’s been missed in the current makeup, just let me know and then we’ll work towards having that at the January commission meeting to add additional members to the advisory committee.

Keep open the option of leveraging, keep open a call or application at any time, and with that option to leverage, we’re going to need to have marketable standard security provisions in the agreements. Thank you.

MR. SAENZ: Do you want you break and I’ll get Mark up or do you want just go right ahead.

MR. BASS: I’ll plow right through; I was ready to go with this one to start with.

MR. SAENZ: Moving on, commission, agenda item number 4, James will present a discussion on the upcoming Legislative Appropriations Request.

MR. BASS: I think this one will go much quicker, but I’ve been wrong before.

Just a broad general time line on the preparation of the appropriations request, we’re in December, and so again meeting with you today to get your broad direction as we begin the development of it. It’s better for us to know on day one if the commission wants to go a different direction or what direction the commission wants to go in than finding out midway through the process.

The other point I want to get your feedback on is generally speaking, the LAR would be due to the Legislative Budget Board in late August, therefore, our current plan would be to deliver a draft Legislative Appropriations Request to the commission in July and then seek your adoption of that appropriations request at your August meeting, and so I wanted to see if that broad time line of getting a draft in July would be sufficient for you to be able to review that and then adopt it in August or if it was something you would want sooner. We’ll hope for sooner, but the plan right now would be July and then give a month to look at it and make changes and adjustments that you might, and that’s throughout the process there will be other opportunities, rather than just today and July, obviously, for the commission to provide input but those are kind of the bookends of the time line. There’s a lot of internal discussion going on with administration, districts, divisions and the regions working through that process, but the key thing, as far as the time line, was to see if a draft in July with adoption in August was acceptable to the commission.

MR. HOLMES: James, my sense of that is there will be a number of workshops between now and then and to the extent that you can kind of brief us as to how it’s coming along, it would be very helpful.

MR. BASS: As we go along, yes, sir.

MR. HOLMES: Seeing it for the first time in July may be a little late.

MR. BASS: May be a little much to take in. And some of the questions here on this next slide are things that we generally would prefer to know on day one, others there will be opportunities throughout the session, but one of the big ones is budget structure, and I have to point out that budget structure is different than strategic structure. And I think in your briefing book you have a copy of our current budget structure which the legislature made some modifications this past session, some of the key ones being that they changed was breaking out construction projects or payments on construction projects between existing projects and new projects, breaking out debt service into a strategy in and of itself and not feeding it into right of way and design and that.

So a broad question, as far as tracking our expenditures, is if the commission had an interest in potentially changing the current budget structure that we have. If so, that would be something, it’s part of the LAR, we actually show five years worth of data, and so if there’s a different structure, that kind of dictates what our building blocks are and we would need to know that or prefer to know that early on in the process.

The other ones, the riders, this would be something that throughout the process we have a number of riders in our structure, we’ll be delivering those to you perhaps at a future workshop to have discussion if there’s areas that you’d like to see changed. Just today I wanted to highlight that that is something we’ll be having further discussions on and just see if there were any that you knew of off the top of your head or that other people had made you aware of that you perhaps wanted us to focus on.

The funding levels, obviously the appropriations request deals with asking for and allocating resources, and much of the project funding decisions and what strategies those go into will be directed by recent decisions you made associated with the UTP, and so we will plug in the scheduled letting dates of those projects, how we expect them to pay out, and those will fill in a lot of the project-related costs.

One of the questions on the approach is a constraint: should we deliver through our forecast and our assumptions what we perceive to be a financially-constrained appropriations request, or do we want to do a needs-based request, or what we did last time was more so, I would call a capacity-constrained, what we felt like we, the engineering community and the construction community could deliver within that time frame. We then also made assumptions, I think, in the LAR that all available State Highway Fund dollars were appropriated, TxDOT, other funding sources were appropriated to us and the gap was requested through General Revenue.

And so as we begin this process, we didn’t know if the commission had thought about that yet or what type of constraint you might want to see in the appropriations request for 2012 and 2013. Any early thoughts you’d care to share?

(No response.)

MR. BASS: That’s a question we’ll deal with. The other question is on Proposition 12 to date the legislature has allocated $3- out of the $5 billion available, I would assume, unless given different direction, that the commission would want us to request the fourth and fifth billion of the Prop 12 Program. One of the questions will be do you want that fourth and fifth billion dollars to be requested to be plugged into our traditional program or do you want some of that to go into the State Infrastructure Bank to be added to the billion dollars that’s already going in there currently. So that will fall into different budget strategies as we request that, so of the $2 billion is it right of way, engineering and design, bid, build, or do you want to request some of that money to be placed into the State Infrastructure Bank in addition to the billion dollars.

MR. HOUGHTON: Remind me, James, when we started this process when we did the Meadows approach to the revolver on the State Infrastructure Bank, it was a revolver, it was a true revolver, and now what we have is just a deposit into the State Infrastructure and here’s what you can do.

MR. BASS: Correct.

MR. HOUGHTON: And it’s about that long. I would think we would go back and say we’d sure like to fix that because here’s what the intent was.

MR. BASS: Some of the issue is getting back to the color of money in that the constitutional language for Proposition 12 says it’s available to provide funding for highway improvement projects, so the revolver was going to be able to address different modes of transportation. But if you plugged Prop 12 into the revolver, it could still only do highways, it didn’t lose its identity by getting put into the revolver. In addition, the revolver could do reserve funding, which allows much more flexibility and more horsepower.

MR. HOUGHTON: We had a lot more horsepower.

MR. BASS: Prop 12 can only do the funding for funding highway improvements. I believe the interpretation to date has been you can make progress payments with that money and yes, we think you can make loans -- or actually you can make loans. But using that money to establish a reserve to then make others, I don’t think we’ve gotten acceptance of that concept by the Office of the Attorney General using Prop 12 funds. Would that be a fair statement?

So I’m not sure and I wanted to point this out that the revolver could do ten things, Proposition 12, even if deposited into the revolver or a revolver mechanism could not do all ten things because of the limitation placed upon those funds in the constitutional language. It was not as robust as the revolver itself.

MS. DELISI: How much General Revenue do we get in our budget?

MR. BASS: We get $165-, this upcoming biennium, $100- of that is for debt service on Proposition 12, and actually I have to adjust that $30 million -- I apologize -- $30 million of that, roughly, is associated with Auto Theft Prevention, which is now a part of the Department of Motor Vehicles, so we get a minimal amount of General Revenue.

MR. HOUGHTON: What can I do with Fund 6 money into a revolver?

MR. BASS: If it is constitutionally dedicated money, you can do highways and you can make loans; if it is non-dedicated Fund 6 money, I’m not sure what additional things that adds.

MR. HOUGHTON: You see where I’m going with this.

MR. BASS: My point is the color of money is important, and the most flexible money is General Revenue, not GO bond proceeds but pure General Revenue. Unfortunately, we don’t have a great deal of access to that or opportunities historically utilizing that fund.

So what we’ll need as we go forward, asking for the additional $2 billion, if you will, of Prop 12, how the commission wants to allocate that between the traditional program and the SIB, if any. Another question is are there other areas of focus where we should ask for funding that perhaps it’s increased funding for transit, which would, generally speaking, would need to be requested out of the General Revenue fund. Is it additional funding for rail? Again, that would, generally speaking, need to come out of the General Revenue fund, or those things the commission wants the department staff to be thinking of and what could be accomplished in the upcoming years and how much should we ask for in those areas.

MR. HOUGHTON: I would think you would want to think about those, rail relocation, rail projects, et al, transit.

MR. BASS: And are there other things? And again, it doesn’t have to be here in the next ten seconds, but those are the type of things that the earlier we learn of those, it’s easier to integrate into the appropriations request.

MR. HOLMES: I would put commuter rail in there too.

MR. BASS: The last question I have for you -- and I think I know the answer but I don’t want to want to presume anything -- is on FTE levels. In the appropriations request should we request merely the current levels that have been utilized, or what we’ve done in the past few years, request to maintain the current cap that’s in the appropriations bill, and then manage according to our workload. So right now we’re 1,500 below our cap because the workload has not dictated that. Do we want to request 1,500 fewer FTEs or continue to request that same cap and then just continue to manage based upon the workload.

MR. HOUGHTON: Let me ask you a question, James. How many retirees attrition do we have on a normal biennium or annual basis?

MR. SAENZ: Five percent.

MR. HOUGHTON: Five percent of what?

MR. MEADOWS: Is that annually?

MR. HOUGHTON: Annually?

MR. SAENZ: Annually. Our attrition rate is about 5 percent.

MR. BASS: A few years ago the number I had heard was in the neighborhood of 8 percent, but I’m not sure what it currently is. My 8 percent is aged, probably three or four years old.

MR. HOUGHTON: So if we have -- and I don’t understand this piece of the budget cycle -- if we’re below 1,500 in FTEs but we’re funded at --

MR. BASS: Say 14,000 in round numbers, it’s north of 14,000.

MR. HOUGHTON: What happens to that funding for those 1,500?

MR. BASS: That money is provided in particular strategies and then it’s not allocated out to the districts and divisions, it’s put in a contingency or reserve, centrally a statewide reserve. What used to happen prior to this year when those things would happen, that money could be redirected to additional construction projects and additional progress payments at the department’s independent request.

MR. HOUGHTON: In other words, we don’t have control of it.

MR. BASS: Now we can do the same thing but we would have to submit a request to the Legislative Budget Board and Governor’s Office that the workload is down, we’re scaling back on FTEs because of the workload, that’s saving X amount of money, we want to redirect that money to other project deliverables. It used to be we could do that independent, we could always put more money in. One of the riders in the current budget requires the department to request approval of the Legislative Budget Board and Governor’s Office in order to do that, and we actually have some pending requests, just sent over in the last few weeks, to do just what I described: take FTE savings, salary savings, if you will, by utilizing fewer FTEs and redirect that to some additional project delivery.

I’m sorry for the long answer. We can do that, the difference is now we have to get the approval of the Legislative Budget Board and Governor’s Office prior to doing that, prior to redirecting those savings to projects.

MS. DELISI: But there’s another issue, if you read the clips and read what state leaders are saying is that we’re likely going to get something from somebody saying cut current year budget.

MR. BASS: And we may. Generally speaking, that is focused on General Revenue, and historically in the past what agencies have been directed to do is cut your GR budget, which to most agencies is all of their budget, to us it’s a much smaller portion of our budget and at times it’s been you need to reduce 5 percent or 7 percent, and that would be something the department would certainly do. In other occasions the department, even though the issue had been primarily focused on General Revenue, the department had taken those same actions with the rest of our operations, even though it impacted the Highway Fund and not General Revenue. So technically, it wasn’t something that was required or requested, it was something the department took on to do in all areas.

MR. SAENZ: We would reduce our operational costs, administrative costs, and that money stays in Fund 6 and then we could, in essence, do more projects is what it winds up. We would cut down on travel, we would cut down on training, we would cut down on other administrative functions, leaves more money in Fund 6 that would allow us to let some additional projects, and that way, at the same time, we did take the same cuts as all of the other state agencies did with respect to the operational costs.

MR. BASS: And so getting back to the policy question on FTEs, do we want to request -- and again, it’s not something I need to know in the next ten seconds, but just to leave you with the question, I’ll let it kind of hang there and I’ll slowly back away -- on the FTEs we’re currently utilizing 1,500 less than our legislative cap, in our request do we want to maintain our current cap or only request our current usage. The approach historically has been to request the maintenance of the current cap and then the commission and the department would manage under that cap based upon workload levels. But that will be a question because in addition to dollars, we also request FTEs in the appropriations request and we’ll need the commission’s guidance on that point, the earlier in the process, the better.

MR. HOLMES: James, you want to be able to manage to the workload, irrespective. The issue is where is the cap. Is that right?

MR. BASS: Right.

MR. HOLMES: And so do you change it and lower it a bit, since you’re already 1,500 lower.

MR. BASS: Correct. It’s not an A or B question, there might be something in the middle, exactly.

MR. HOLMES: Right.

MR. SAENZ: Normally, the most flexibility, commission, has been that we would budget for the cap that we had, even though we were under, and then we would not increase unless we actually needed people, and then the savings from there would then be transferred over to construction. If you go in there and you request the lower number based on the actual people that we’re at and somehow during the legislative session we got some additional money, we wouldn’t have the capability of gearing up and bringing in more people, we’d have to use consultants to be able to do that work. So we can’t go up once they set the cap but we can stay below that.

So going based on what we’ve done in the past gives us the most flexibility in that we still manage, we’re not going to go out there and go to that FTE allocation that they gave us if we don’t need it, but if for some reason we get more money during the year, like economic stimulus and such, then if we need to gear up, we have flexibility of going up with people instead of just having to go contract out.

MR. HOLMES: Being 1,500 under the cap, it seems like that is a slightly larger number than in past years. Is that correct?

MR. BASS: Yes, and one of the things that I think was provided to your offices here in the last couple of weeks, there’s a summary of financial data, a little chart book, one of the charts in there tracks the FTE cap and then the department’s usage, and you can see in recent years the usage has been on a steady decline over the last year and a half, two years. And that, I think, quickly conveys the picture of how the department has managed the FTE levels along with the workload.

MR. HOUGHTON: What does 1,500 equate to in real dollars?

MR. BASS: In real dollars, $60 million.

MS. DELISI: That’s salary, retirement, the whole nine yards?

MR. HOUGHTON: That’s fully loaded?

MR. BASS: That’s more so salaries. There’s probably another $15- to $20 million you could put on for retirement, insurance, there’s other benefits, but I’d probably conservatively put it at about a quarter of the baseline salaries.

MR. SAENZ: Less than $100-.

MS. DELISI: Fifteen hundred is a big percentage of our overall workforce, though.

MR. SAENZ: About 10 percent.

MS. DELISI: I can’t imagine we’ll get that much more money where we’ll need another 1,500.

MR. BASS: Thank you.

MR. SAENZ: Thanks, James.

Agenda item number 5, Mark Tomlinson will give us a status report update on the overall CDA Program.

MR. TOMLINSON: Good afternoon, Mr. Saenz, commissioners. My name is Mark Tomlinson, director of the Texas Turnpike Authority Division, and Merry Christmas to you.

In the history of our CDA Program, we have completed one project, the State Highway 130, Segments 1 through 4. It was a very successful design-build project, now functioning very well as a part of our Central Texas Turnpike System, five signed agreements underway, and I’ll talk more in depth about those, one that we do have pending with the Attorney General’s Office, and we’ll discuss that briefly as well.

I did want to just mention our management structure for the CDA implementation side of the program. We have set up a project board led by Steve Simmons, our deputy executive director; our statewide CDA coordinator is David Casteel; and then in the two areas of the state we have CDAs underway, the State Highway 130 project here in the Austin-San Antonio area, Frank Holzmann is our program manager there, but most particularly in the Dallas-Fort Worth area, Bob Brown, formerly our deputy district engineer in the Dallas District, is leading the program for all three of those CDAs in that region.

And the thinking there, for the structure overall, is to have a uniformity of decision-making process, a structure for issues escalation -- issues that can’t be resolved at the project level, program level, can come to the board -- but with three, really four major CDAs going on in the state, really wanted to have a close watch, I guess, over how we make decisions so that they are done in an uniform and kind of programmatic manner.

So talking about the CDAs we have underway, this one will be underway for a short time longer. This is the master development plan for I-35. As you know our no-action recommendation on the environmental side of 35, FEIS, will lead to the termination of this CDA. I do want to point out, we think we’ve gotten good value out of the CDA. We have a master development plan that will be used as we go ahead with corridor advisory committee participation and segment committee work, creating what we hope is a new vision for the plan, a new kind of citizen-level plan for I-35, and did want to mention that termination of that CDA will not affect the State Highway 130, 5 and 6 concession contract that’s underway now, and this is it.

This project going along very well, design and right of way is practically completed, construction is underway now, hampered only by a little bit of weather, but they have about 3 percent of the construction complete and estimated completion date for that project is November of 2012, although parts may be open sooner.

Going up to the Dallas-Fort Worth area, NTE was the first awarded by the commission, it has now achieved commercial close, financial close expected tomorrow, so real thrilled about that. Design and right of way acquisition is underway, the project management plan has been submitted to FHWA, and we expect to issue notice to proceed number 2 in possibly December but more likely January 2010. That will allow the developer to move on in to further design up to 60 percent of the design, keep the project going.

The other part of the NTE project that is outside the construction portion is a master development plan for the rest of the project as it was originally conceived, so that work is underway, the developer is working very actively with our TxDOT personnel and the cities and counties in that area. They’re looking very diligently to see if any other projects can come out of the master planning, can in some way be financed, can there be scope changes or additions to the project that might make other projects feasible there, so think a very worthy effort.

The LBJ Interstate 635 project, as you know, this project, as well as NTE, is led by the same group, Cintra Meridian. I think Cintra and Meridian are focusing on financing NTE first and then they’ll focus after that on LBJ, so less activity here but we do still expect commercial close -- well, we have the commercial close, financial close I think will happen well before that deadline of October 2010.

And then the last project actually awarded by the commission but the one that has the most progress really to date is the DFW connector. It is not a concession CDA, it’s a design-build, Kiewit Zachry leading that team, and they have jumped in very quickly and brought a lot of people on board, mobilized a lot of forces, so they have a lot of design underway, right of way acquisition is underway, we’re focusing really on the right of way there at the DFW International Airport entrance -- that’s a critical path issue.

We issued the second notice to proceed on December 8, and they expect a groundbreaking for February 17 in the year 2010. I’m sure you’ll be invited to that and construction activities should ramp up very quickly after that day.

And then our one pending CDA project, it’s a master development agreement, strategic partner type of CDA. It’s been on the back burner for a while but we have achieved Legislative Budget Board approval and is now under active review by the attorney general, so we hope they’ll be able to establish legal sufficiency for that contract very soon.

So as you know, we no longer have general CDA authority. We have some exemptions, projects that we could enter into CDAs if we do so before the end of August 2011, and in general, that’s any CDA that doesn’t have private equity. The three DFW projects, of course, are exempted. There’s a few others: notably Loop 9, the outer loop in North Texas, is exempted; Grand Parkway is as well, although we understand HCTRA has exercised primacy on that project; I-69 is exempted; and 161, even though NTTA is working very actively on the project, that is a pending procurement, actually, that is still outstanding.

A few other exemptions, did want to note we believe we do have -- with all the interest in rail around the state, I wanted to note that we do believe we have CDA authority for rail projects, even one that would be privately financed, but again, with that same August 31, 2011 deadline.

And another kind of different area, more interesting, I guess innovative to a degree, that we’ve been considering for a CDA is low carbon emitting freight transportation facilities, the freight shuttle type of technology, and there’s many other variations or somewhat similar types of concepts out there that we’ve found, and so we’ve been working on trying to get to the point of being able to, with your approval, issue a request for proposals that might lead to some type of development there, also reviewing the potential for a competitive lease of our right of way, which would, of course, be a key for any of that type of technology to be applied as well. So don’t have a clear direction on that front at this point but we hope to at some point.

So with that, that completes the update and I’ll be happy to answer any questions I can.

MR. HOLMES: Mark, do we have any projects that are in a primacy period where counties or entities are having a clock running on them determining whether they’re going to declare primacy?

MR. TOMLINSON: Yes, sir, we do. Of course, the Grand Parkway in Houston has just begun so it’s very shortly into that, and State Highway 161 in the Dallas area are the two that come to mind. Oh, Loop 9, and actually several months ago Mr. Saenz sent a letter to the NTTA asking for them to waive market valuation and release their primacy the southeastern portion of that loop, and we’ve been working with the NTTA staff to help supply information to them as they make that decision.

MR. HOLMES: It might be useful to kind of track those time lines as we go along.

MR. TOMLINSON: Yes, okay.

MR. HOUGHTON: What about US 290 here in Austin?

MR. TOMLINSON: The CTRMA has exerted primacy and I understand they are working to develop at least the Recovery Act program project that we have here.

MR. HOUGHTON: I’m talking about the entire project, not just the ramps.

MR. TOMLINSON: We transferred a number of projects, including 290, almost a year ago, so we will track that time line for you.

MR. HOUGHTON: Is there a clock running on them, Amadeo?

MR. SAENZ: From the time that they take primacy, I think the law gives them two years to enter into a contract.

MR. HOUGHTON: And where are we on that clock?

MR. TOMLINSON: Roughly a year, I think, has passed, but we can get you a more exact date.

MR. SAENZ: Commission, I’ll have staff develop a time line on all the projects, kind of where they’re at, so that you’ll have a complete picture.

MR. TOMLINSON: Thank you very much.

MR. SAENZ: Thank you, Mark.

The last item on the agenda, commission, is agenda item number 6, and Coby Chase, our Washington, D.C. traveler, has returned and he’ll give us a presentation on our legislative agenda update on the federal side.

MR. HOUGHTON: Are you going to read bedtime stories by Coby to us tonight?

MR. CHASE: Absolutely.

MR. SAENZ: He has been banned from reading.

MR. CHASE: For the record, I’m Coby Chase, and I talked to your assistant, Lauren Francis, and she said you were just kidding last time, I am to read.

MR. HOUGHTON: Really?

MR. CHASE: Yes.

MR. HOUGHTON: She misunderstood me.

MR. CHASE: No, not Lauren.

(General laughter.)

MR. CHASE: For the record again, I’m Coby Chase, director of Government and Public Affairs for the agency. I’m going to address, I believe, three things: appropriations, which is wrapping up on the federal level; extension of the current programs; and then our involvement -- well, four things, stimulus or son of stimulus --

MR. HOUGHTON: Coby, may we interrupt you from time to time during this process.

MR. CHASE: I see a trend evolving, yes, sir, absolutely, I am completely interruptible -- and our outreach efforts on what the agency’s policy considerations should be for reauthorization of the Surface Transportation Program.

Now, the short version -- and that’s what I’m going to stick with -- on extension of the program is Congress bundled up quite a bit of things and put them into the Defense Appropriations Act, which is a Christmas Tree, to use a seasonally appropriate analogy/metaphor -- and through a lot of negotiation, it ended up being a two-month extension, so two months was what they did, and it appears that the Senate will adopt the same thing that the House did. That was the end of a very long series of negotiations about a longer extension, front-loading money and other things. They just, at the end of the day it broke down and they went with the two-month extension that was put into the Department of Defense.

The question is in that extension -- that we don’t have an answer to and actually no one has an answer to at this point -- is it is based on the 2009 SAFETEA-LU levels but is it that peculiarity that knocks that down by 30 percent or is it the full amount, that’s the question, so that story is still writing itself. But we have a number of our friends in the delegation trying to figure out the two pieces of language that they’re not conflicting but they’re hard to read together right now. Unless something changes the next few days, you’ll see a two-month extension of the current program.

On the way to the president’s desk is the Transportation Appropriations Bill -- or THUD, as it’s called -- with a bunch of other things in it as well, but just some highlights from the Texas perspective, it includes $41.8 billion for highway construction, and they added in about $600 million extra in general funds for -- I’ll say it this way -- significant transportation infrastructure projects, which is basically earmarks, but the interesting news is earmarks seem to have been funded, at least to a significant degree, out of new money. If you’re going to do an earmark, might as well find new money for it, so that might be a good idea. And again, it’s subject to the same question: is it exactly a 2009 level or is it a reduced extension level? But we should see, one would think, approximately what we saw last year in the bill.

They didn’t fund a national infrastructure bank, which they were talking about but they got kind of cold feet towards the end of the process, but they did put in $2.5 billion for support of high-speed rail, and it may also include -- and we’ll see -- the ability to do planning work studies -- so maybe that’s in there. And of course, the ban on Texas converting any existing interstate road -- which we can’t really do anyway -- into a toll road is still in there. That’s appropriations.

While I was up there this week meeting with almost every delegation office -- but I believe seven members directly -- just like when Commissioner Houghton and Commissioner Meadows and I were up there and a stimulus bill just appears that day, same exact thing happened, and they’re all very interested -- at least on the House side -- on what that stimulus bill does for Texas -- and what I’m about to say is subject to change and subject to further reading, but the truth is it’s not going to get out of the Senate by the end of the year, this isn’t a Christmas present -- maybe Mardi Gras, but not Christmas.

It appears to push the money out in a very similar way -- if not identical, very close -- than what Stimulus 1 did. The estimate that would come to Texas Department of Transportation would be about $2.2 billion. I think it splits it the same way between MPOs and TxDOT and the other programs the same way. The one thing we need to verify that is kind of making our eyes go to the size of dinner plates is that 120-day obligation deadline looks like it’s 90 days again, so we’ll have to discuss that.

Very interesting discussion with the delegation. They had a lot of very positive questions -- a lot of questions, I’ll say, but the question was what we spend the money on, and Congressman Neugebauer from Lubbock started going down this path and I kind of completed the thought for him, the question was: Does this money only go to construction and maintenance, and the answer is yes, people who drive backhoes, people who you see out working on projects, and I said there’s a case to be made that money should be used for planning/design work, things like that -- I mean, engineers have to feed their families too.

And I talked at length about the HUB/DBE engineering firms that we’re trying to grow and make prosperous. They understood that completely, they committed to work with us to try to change whatever final stimulus package to include planning work as well, too.

And they also wondered how the commission selects projects because they had seen recently Prop 12 and Stimulus 1, and the first thing I had to put on the table was, I said, well, this isn’t your regular program, the predictable program which has become unpredictable -- gas taxes, you had to bail us out twice now -- that’s a process that, while occasionally byzantine, is very well documented and money goes out to MPOs and those selections are made

But when things come in with new deadlines, new qualifiers, you’ve got to push it out the door fast, the best you can do is look at your list of projects that are ready to go, you can’t dream much, you can’t do any planning dollars, just get the stuff out the door. The commission established a process, working with MPOs and local leaders and anybody who wanted to sit at the table from across the street, to figure out how we distribute the money, we did it regionally, it was pretty fair, and none of them really seemed to disagree with that, but they want to sit down and talk to us more about how those projects are selected, and if we’re going to go through this again, they’d like to see the universe of projects that are eligible and talk to us about that, and I made that commitment to them.

But the Stimulus 2, like I said, it’s doubtful that it will occur before the end -- highly doubtful. I’d be shocked if it occurred before the end of the year -- and it did have an extension of SAFETEA-LU in it through September 2010, and that was one of the negotiating things that kind of fell by the wayside at the end of the day, but it’s in there so we’ll see how that goes.

MR. HOUGHTON: Coby, can you see that I’m getting ready to ask a question?

MR. CHASE: I’m sensing that.

MR. HOUGHTON: First question, something you said earlier on, conversion of interstate highway, we know we can’t do that, anyway, under state law.

MR. CHASE: You can but the voters in that area have to approve it.

MR. HOUGHTON: But there’s a process. If you wanted to put center lanes down an interstate highway and call them managed lanes, new capacity, could you do that?

MR. CHASE: Yes, you can do that, it doesn’t change anything you’re working on now.

MR. HOUGHTON: Okay. My second question is it seemed you glossed over and it’s hypothetical that a second stimulus would come along, if it’s 120 or 90 days, are we ready to meet that challenge?

MR. CHASE: And I’ll let Mr. Saenz answer that. Remember, we ran a calculation recently for AASHTO that said about $4 billion in projects, that was 120 days.

MR. HOUGHTON: But my question is: is it just going to be -- what do they call them -- pave-overs or --

MR. CHASE: Just things off of a list versus big priorities.

MR. HOUGHTON: High-priority projects, are we just going to be sweeping and striping and pothole-filling, or what are we going to do.

MR. SAENZ: We were asked to put a list together by AASHTO to submit to them, projects that were ready, and we pretty much followed the same approach that we did before when we identified and put the projects in place, not only looking at maintenance projects that are ready to go but really all projects that are ready to go, projects that would also allow us for them to bring some additional economic development themselves, not just the little projects. Still, that requirement of 120 days is going to be a hard requirement to make.

MR. HOUGHTON: Can the MPOs meet those?

MR. SAENZ: No, and I’ve got John looking at that as to what projects -- the list of the projects that were approved as part of the Economic Stimulus 1, it was $2.25-, $1.7- that you all selected, the other $500-, $600 million that was selected by the MPOs, I’d like to know what the status of all those projects are to find out which projects are the ones that are still yet to be obligated and by when will they be obligated. But so far, based on what we have, pretty much everything is in line to meet the deadlines that were required as part of Economic Stimulus 1.

MR. CHASE: Mr. Saenz, Mr. Simmons reminded me, and this is going to be very important -- and when I spoke with members of the delegation, they understood this, the breathing-room idea -- the 90 days is different than the 120 days in the current stimulus bill -- this 90 days is to get it under contract by 90 days, not obligated -- big difference. Sorry -- thank you.

MR. SAENZ: To get it under contract in 90 days, then it’s probably going to, in essence, require projects to be much more those smaller maintenance projects.

MR. HOUGHTON: Are we preparing for that?

MR. SAENZ: Yes, sir.

MR. HOUGHTON: And correct me if I’m wrong, on the 290 ramp projects, wasn’t there opportunities to build more ramps if we had more money -- the 290/610 -- what was it? My point is an example, if that is designed, can you contract that if there’s enough money to do that, are we that far ahead?

MR. SAENZ: First of all, I don’t think that that project is designed yet, so I don’t think that we could meet the 120 days or the 90 days to get to construction on that project.

MR. HOUGHTON: That’s just a hypothetical. Are there projects out there?

MR. SAENZ: We do have projects out there that we can move forward and get under contract in 90 days, the answer to that is yes.

MR. HOUGHTON: High-profile projects?

MR. SAENZ: I would imagine that there are some high-profile projects because we have been working on getting projects ready to go and having projects on the shelf. We can get you a list of those projects, if you’d like.

MR. HOUGHTON: I’d love to see that list.

MR. HOLMES: I think it would be good.

MR. SAENZ: Steve, have you got anything?

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

You know, we’ll have to see the bill when it comes out in regards to that, as that’s always the preference, but if you took what the ARRA was that we just had -- and for example, a project that we could go forward with more project on is the DFW Connector, we only got to phase 2, but under the old rules, we could not use that because it’s a project that’s already let, we could not extend existing projects already let, so it’s going to be very questionable when that comes out.

So you may have to let a separate project is what I’m saying, that’s what’s going to be tough, and that’s why I wanted to point out that the difference being is you have a shorter time period and there’s a difference between just saying we’re going to put the money on this project to we have a contractor for this project, and going from 120 days to 90 days, that is a big change.

As Amadeo says, we’re doing everything we can, that’s why we asked for Prop 14 to be going towards design and right of way costs so we could get ready if there’s another stimulus, but again, with those tighter time frames, it’s still going to be tough to get those things out, and we may have to do project lettings with a contingency that if the bill passes, because of the advertisement requirements that we have to advertise projects.

MR. SAENZ: The other thing we’re going to get into -- and of course, this 90 days shovel-ready, when Economic Stimulus 1 started was 90 days to construction, there are some requirements that we have to have to get projects in the TIPs and the STIPs that require advertisement of 45 days and 30 days, that it’s almost impossible to get a project that’s not on a STIP already to construction, even if you had it completely designed and on the shelf.

So I would imagine that that will also be debated quite a bit and I would probably venture to say that we would probably come up with almost the same scenario as we had in Economic Stimulus 1.

MR. CHASE: Agreed, and please just keep in mind obligating in 120 days is very, very different than going to contract in 90 days, very different. I’m glad you brought that up, Steve.

But our delegation understood all this, we walked the very similar issues, two of our three Transportation Infrastructure members were at the meeting, and we also discussed economically distressed language -- the intention was there but it changed the whole dynamic, and they all agreed that was something that probably needed to be taken out or fixed. So anyway, that being said, we do have some time but we have to focus on it quite a bit.

The last thing, in August, the commission sent my office out, my division out to talk to stakeholders, as we say in government, about what should the State’s priorities be in new surface transportation legislation. And so we’ve reached out both internally and externally, we posted it in the Register, some people have found us to talk and we’ve gone out and found others, and what I sent to your offices last week, or this week, was the draft that’s circulating right now. The draft has some -- suggested by my staff -- commission priority statements and it also has the comments made by a number of groups, and we’ve had extensive meetings with the local toll-providing entities.

The ones listed up there -- they were very helpful -- the Texas Transit Association, the small and urban guys, they were fascinating in what they said. We talked about setting goals and performance measures and they said, Hold on, be careful what you ask for, because we have to do that and we have to continually hire people to do that, and it doesn’t do anything except create reports for us. It was kind of eye-opening.

The Border Trade Advisory Committee, which is operated out of the Secretary of State’s Office, was very concerned with the way that the Oberstar Bill basically takes away the border program, the one program we get a 25 percent rate of return, and turns it into a discretionary program to where US DOT or congressional appropriators decide where the money goes. And Congressman Cuellar yesterday handed me something else to put into this program, that’s not money but it’s how to speed up the traffic at border crossings, a program. And I think, Mr. Saenz, we probably should talk to them about the one-stop border crossing, maybe. They’re thinking that’s a good thing or not, we’ll see.

And then TMPO, that’s all the MPOs in the state, we met with them, they had some very, very good ideas about what we should do, and then the Municipal League, cities, interestingly, Commissioner Houghton, El Paso took the ball and ran with that. The city council adopted a resolution and the elements of that are in here about what we should look for in reauthorization.

And then the public, though, I will say we haven’t had a huge response out of the public -- we got three, and two of them didn’t have anything to do with this, but we forwarded those to the right offices -- but we’ll go back out, and what we’re going to do is -- the discussion fell around these areas, and this, at the end of the day, will be the commission’s document, anything it wants in there will be in there, taken out will be taken out -- but so if you have nothing else to do over the holidays, please look this over and either contact us directly or have your assistants do it.

But these were the topics that either we raised or they raised, one was the rate of return, and it was at a bare minimum, don’t go backwards, if any new money comes in through an increased gas tax, make it 100 percent rate of return flexible money, the new money. And I said that to the delegation yesterday and they kind of enjoyed thinking about that.

Again, the clearly established goals and roles, a lot of what we saw in our work with TEA-2, they understood that, and clearly defined performance measures and program consolidation, that’s where the transit guys said be careful, you can go too far too fast with that and then you’re stuck doing nothing but reporting to the federal government and it doesn’t do anything for you.

And then the flexibility to move funding among modes, everybody seemed to agree that was a good idea, and the expedited project delivery, streamlining every process that we can, and bringing every available resource to the table to fund things, and again, the delegation embraced that, or the people that I met with yesterday embraced that wholeheartedly. Private/public money, they know they’re not going to be able to fund that bill, they need to get as many resources to the table, everybody agreed with it. I guess the one qualifier that rolls around in my head on that from the groups we met with was, again, local decision-making needs to be step one before local providers, et cetera, and that’s fine, I don’t think we’d fight that battle in D.C. anyway.

And then earmark prioritization, that cuts both ways, there’s some people who will say they should not be done, others say there is a benefit because it raises the priority level of things. That discussion is probably going to be kind of a tough one to have. Again, back to my conversation yesterday with the members of the delegation, they understand the care that needs to be exercised there and that this legislation isn’t just about earmarks and they were very clear about that and that was good, it was a very, very good conversation about that.

And what we’ll do next -- and I’ll wrap up -- again, we will continue to take ideas from anybody. I will spend a good part of the month of January, including the forum but before and after the forum, meeting with -- this will be my top priority and one of my office’s top priorities to make sure we’ve talked to everybody in Texas who wants to be talked to.

We will be going up, and I’m issuing an invitation to anybody on the dais up there -- as long as we don’t form a quorum -- to go to D.C. Congresswoman Johnson wants to host us up there with some of these groups that we’ve talked to that have contributed to this document and sit and talk to all the offices at once about the thinking behind them. This will probably have to occur before the commission adopts something, but they want to host a meeting and have us talk about this because they were excited about a lot of what they saw, so my office is working on that with them.

We continue to get new people who want to comment, that’s good, new groups. If I’ve missed a group and you can think of somebody, we’ll pick up the phone and go sit in their office and talk to them about it for a day, we’ve been doing it for a long time. We have sent this back out for comment, the document you have, people are commenting on it, we’re going to put the draft document on our website for people to look at and comment. We’ll have some meetings at the Texas Transportation Forum, it will be brought up in the keynote speeches, et cetera, and then bring it to you finally, hopefully, at the end of January for your final adoption.

And that concludes my remarks.

MR. HOUGHTON: Coby, one last question, TIFIA, I hear TIFIA is rules, regulations, not favorable as to what they currently are.

MR. CHASE: If you’d asked me Friday, I could have recited it all, chapter and verse. Is James still here? No. Yes, US DOT has sent out some sort of revisions to TIFIA and part of it has to do with resubmitting applications that are already there. I don’t think TxDOT has any, but some of our partners out in the field do have some in there, and I’m going to call them squishy things like societal impacts and sustainability and those kind of words we hear now. I don’t know mechanically what else was in there but it’s given enough people pause that now US DOT is going back and thinking why did we exactly put this out there this way, but I assume the agency will be commenting on this. But again, I can’t do it all chapter and verse but you’re exactly right. Commissioner Holmes, in our last conference call with T-2, it was discussed at length, and the T-2 group has convinced US DOT to do a conference call with all of us to walk through it.

MR. HOLMES: Has that conference call been set?

MR. CHASE: No. The reason was when we raised it -- and others have been raising it with them -- they said we’re going to have to hold off for a second, we might have got out a little too fast, so we’ll see. But the deadline is December 31, so I know my shop has been working with other shops within TxDOT to write our comments.

Thank you so much.

MR. SAENZ: Thank you, Coby.

That’s all, Madame Chair.

MS. DELISI: That concludes the agenda for today. Is there a motion to adjourn?

MR. HOUGHTON: So moved.

MR. HOLMES: Second.

MS. DELISI: Thank you. All in favor?

(A chorus of ayes.)

MS. DELISI: No opposed. Please note for the record that it is 3:36 p.m., and this meeting stands adjourned.

(Whereupon, at 3:36 p.m, the meeting was concluded.)

C E R T I F I C A T E

MEETING OF: Texas Transportation Commission Workshop

LOCATION: Austin, Texas

DATE: December 16, 2009

I do hereby certify that the foregoing pages, numbers 1 through 90, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Nancy H. King before the Texas Department of Transportation.

 

 

 

12/21/09

(Transcriber) (Date)

On the Record Reporting

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