COMMISSION MEMBERS:

Ric Williamson, Chairman
John W. Johnson
Hope Andrade
Ted Houghton, Jr.

STAFF:

Michael W. Behrens, P.E., Executive Director
Steve Simmons, Deputy Executive Director
Richard Monroe, General Counsel
Roger Polson, Executive Assistant to the Deputy Executive Director
Dee Hernandez, Chief Minute Clerk

PROCEEDINGS

MR. WILLIAMSON: Good morning.

AUDIENCE: Good morning.

MR. WILLIAMSON: It is 9:00 a.m., for the record, Mr. Monroe, the first time in five years this meeting has started on time.

I would like to call the May 2006 meeting of the Texas Transportation Commission to order. It is a pleasure to have each of you here this morning.

Please note for the record that public notice of this meeting, containing all items on the agenda, was filed with the Office of Secretary of State at 1:38 p.m. on May 17, 2006.

Before we begin today's meeting, I would appreciate it if each of you would join with me in removing your pager, cell phone, Dewberry, Blackberry and everything else you have in your pocket or purse, and place the device on the silent or vibrate or power off mode so that our guests will not be interrupted while they deliver their testimony. And I thank you very much.

Before I turn to my fellow commissioners for their opening comments, I would like to call your attention to the upcoming Texas Transportation Forum which will be held here in Austin on June 8 and June 9. There are postcards with more information about the forum located in the foyer to your right. If you wish to sign up and participate, I think we have five or six slots left. We'd be very appreciative of your attendance and hope we'll be able to share some valuable information with you about the future of transportation in our state and in our nation.

It is our custom to open with comments from the commission and we traditionally start with the commissioner with the least amount of service, and that's Mr. Houghton from El Paso, and then we proceed to Hope Andrade and John Johnson, and I wrap it up.

So Ted, if you'll lead us off.

MR. HOUGHTON: Yes, good morning. Thank you, Mr. Chairman. Glad to see the folks from the Metroplex is it North Texas? I think Amarillo is supposed to be North Texas. But I'm glad to see you here, and thank you for last night, that was a lot of fun. The energy displayed in the room on the economic viability of the Metroplex, it's an integral part of this great state, and I welcome those of you here today and I look forward to the presentation, Michael Morris, so thanks a lot. Thank you.

MS. ANDRADE: Good morning. I also would like to welcome all of you to our May commission meeting, and we have some special guests with us this morning. I had the great opportunity to meet with a group of young men and women from the University of North Texas. They're all in a masters program, a masters in public administration, and they've been in Austin for a couple of days visiting with some of our state agencies. And I'd like Dr. Benavides, if you would, please stand with your group.

MR. WILLIAMSON: Welcome.

(Applause.)

MS. ANDRADE: I have to tell you, Mr. Chairman, that they're quite interested in transportation, and I think we've got great future leaders here in this room this morning.

MR. WILLIAMSON: Well, I wouldn't be surprised that they were interested in transportation as their chancellor was one of the leading advocates for regional transportation planning and execution in North Texas for many years, Lee Jackson, who is also a former member of the legislature. So it doesn't surprise me a bit.

MS. ANDRADE: So welcome.

MR. JOHNSON: Good morning. If my memory serves me correctly, I think Lee Jackson's father was a TxDOT man.

MR. WILLIAMSON: Absolutely. A TxDOT man to the core.

MR. JOHNSON: And Lee Jackson was indeed a great advocate of regional transportation and statewide transportation.

Mr. Houghton, with regard to your query about the Metroplex and North Texas, if the University of North Texas is properly situated and located according to its name, the Metroplex is indeed North Texas as is Amarillo, I hasten to add.
I want to apologize for not attending last night's function. I've been to Austin twice, Albuquerque and Washington, D.C., and I got back from Albuquerque at 2:00 a.m. on Tuesday night/Wednesday morning and it set my Wednesday schedule behind and I never got caught up, and so I apologize for not being there. I know everybody had a marvelous time, and as usual, the hospitality was quite excellent. So please accept my apology for not attending.

We have a very full agenda. It's great to see you here. You do a great job of planning and bringing a very complex region together to speak with one voice and I think that's very important. Thank you.

MR. WILLIAMSON: Thank you, members. And I associate myself with the remarks of my colleagues. We welcome all guests from across the state, and in particular, we extend a welcome to those from the Weatherford/Dallas/Fort Worth/Rockwall County area who will be speaking for that great part of the state and the northern part of the state.

Let me remind everyone that if you wish to address the commission today, we ask that you complete a speaker's card, and you can find that at the registration table in the lobby to your right. Now, don't confuse that with the enrollment card for the Transportation Forum that's the multicolored form although, please fill it out if you wish to attend.

If you're going to comment on an agenda item, that's something posted on our agenda, we need for you to fill out a yellow card, and if you're going to comment in the open comment period towards the end of our meeting, we need for you to complete one of the blue cards. In any event, unless you're a standing member of the legislature, we ask that you limit your remarks to about three minutes or if you're one of the presenters. Members of the legislature are welcome to lecture us as much as they wish. And try to limit your remarks to the topics that you indicate on the card. That will be helpful as well.

We structure our agendas well, let me begin by saying that until several years ago, it was the habit of the commission to entertain and hear delegations, such as Partners in Mobility, at almost every monthly meeting, and traditionally those delegations were put at the very first of the meeting. People were permitted to explain their agenda for their area and then move on.

One of the goals of Governor Perry with regard to this commission was to put in place a system where people didn't feel like they had to come to Austin, Texas and beg for limited funds, or display any special reason why their area of the state was more important than any other area of the state. And over the years the commission has tried to honor that goal of the governor to bring to the transportation world a well-understood system of how you finance a local, regional, or state road and how we can be partners in the local and regional process.

As a consequence, our meetings are more and more occupied with public discussions of policy matters which is the appropriate forum for a commission to dialogue with each other and consult with each other about our position on relative matters in compliance with the law, and it takes quite a bit of time to do that. So what we've tried to do when delegations come to the commission, we've tried to scatter out the discussion items so that the delegation can be through as soon as possible in the mornings and back on the airplane and on their way home, but we don't end up holding people who have to stay here to the last of the meeting too late.

So if you would indulge us, we're going to stick to a strict schedule. The Dallas/Fort Worth/Weatherford/McKinney crowd will be allowed to lay out everything they want to lay out at exactly ten o'clock. No matter what we're doing, we'll stop and we'll start the Partners in Mobility at that time, and we're going to take up a few matters of business that we think might make a difference to you first so that when you head back home which is where we'd all rather be you might have picked up some information about how we approach problem-solving in a way that will be valuable to you back in the region.

The first item on our agenda is the approval of the minutes of the April commission meeting. Members, what's your pleasure?

MR. JOHNSON: So moved.

MS. ANDRADE: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you. Mike?

MR. BEHRENS: Thank you, Chairman. We're going to go to agenda item number 2 which is a minute order that authorizes the issuance of bonds that relate to the Texas Mobility Fund.

MR. BASS: Good morning, commissioners. I'm James Bass, chief financial officer at TxDOT.

Through this minute order, the commission directs the department to execute any necessary documents and to issue $750 million of Texas Mobility Fund bonds. The commission also approves the documents in the exhibits which are associated with the bonds and authorizes the department representative to approve any necessary revisions to the documents in order for the issuance.

Staff would recommend your approval, and I'd be happy to answer any questions that you may have.

MR. WILLIAMSON: James, we're going to have several questions of you and of Amadeo with regard to this matter because the matter of mobility fund bonds is very important to Michael Morris and the entirety of the North Texas delegation. So if you'll bear with us just a moment.

Members, we won't call for a vote on this matter until we've all had an opportunity to express ourselves about the mobility fund, and with your indulgence, I'll lead the way.

Amadeo, where are you? Do you want to identify yourself for the record?

MR. SAENZ: Good morning, Mr. Chairman. Amadeo Saenz, assistant executive director for Engineering Operations.

MR. WILLIAMSON: Thank you.

Four years ago when we started the discussion about mobility fund bonds, I guess when we were still a three-person commission and Mr. Nichols was part of the brigade, the commission attempted to link the use of mobility fund bonds to certain behaviors in the districts, the TxDOT districts, or the COG regions. Without going into a great bit of detail, would you touch upon what the commission's general goals were in deciding how to distribute the mobility fund?

MR. SAENZ: Okay. Thank you.

MR. WILLIAMSON: Don't you love it when I don't give you any warning about these things?

MR. SAENZ: I like that.

(General laughter.)

MR. SAENZ: Several things were going on at the time back around 2001 when we were working on this thing. We were restructuring the UTP and making it much more simpler, going from 36 categories down to 12. And at the same time, because of the input we were getting, we were restructuring, and instead of the commission selecting projects for mobility, we moved towards that we would allocate an amount of money to the eight big metropolitan areas so that they knew and they could plan and prioritize. That was on the UTP process.

Normally for mobility projects, historically we've always allocated about two-thirds of the mobility dollars to the metropolitan areas, 5 percent to the urbanized areas, and the remainder was for statewide connectivity. When the mobility fund was in place, one of the requirements that we had was that we had to put together a strategic plan or an action plan of how the mobility fund would be spent.

So we took the historical data and we said, okay, two-thirds of the mobility fund should go to the metro areas and at the same time we had some work groups that were working to determine the allocation between the different areas. There was a work group that was made up of TxDOT people as well as MPO people and other state officials, and they came up with a formula of how money in the metropolitan mobility area, what we call Category 2, would be allocated. And they used about 15 or 16 criteria, they went through a whole bunch of iterations, and they finally came up with a recommendation on how they would distribute metropolitan money for the different areas of the state.

That came before you all in the latter part of 2001, early part of 2002, and you all signed off on it, and we've been working under that scenario. So in essence, we took the mobility fund, we used historical data, we got input from the locals and got them to give us a recommendation how to distribute it among themselves, and that is the scenario we're using now. It gives them the opportunity to not only know what their resources are which is the most important thing over the next 30 years, they know what their needs are, and then they can apply the resources to the prioritization of their needs.

MR. WILLIAMSON: And in the discussion and eventual minute orders that the commission passed on the distribution of the mobility fund, did we make it clear that mobility fund dollars could be distributed not just to road construction?

MR. SAENZ: Yes, sir. The strategic plan for the mobility fund allows the money to be spent for highways for also for public transportation projects. And again, it's the area that decides where their priorities are and in which direction they want to be able to utilize that money.

MR. WILLIAMSON: And in the process of developing those alternatives for the metropolitan areas, did we also begin a process, that we're soon to conclude, on indexing the impact of investments in a transit or construction or regional toll system in other words, a set of indexes that we could use and the regions could use to assess the value of the dollar on congestion, safety, air quality, so forth?

MR. SAENZ: Yes, sir. We're working on that now and we'll have a discussion on that I guess after James finishes on this one, so I'll be right back.

But one of the things that we did at the same time when we provided them the resources, we asked them to put together the Texas Metropolitan Mobility Plan which was kind of identify your needs for your region, and identify your needs across modes, not just concentrating on highways because you may have a public transportation project that will address some of the needs, and now since you have the flexibility of using money for public transportation, that may address some of those needs and have a positive impact on congestion.

At the time when they did the plan, what we asked them to look at is the Texas Congestion Index. As we've moved forward, we've identified that based on the five goals that we have, that we should have some indices that they can apply towards meeting those goals, where of course, congestion could be the congestion index or an offshoot of that, we would have a safety index, we would have an economic opportunity index, preservation of the asset index, as well as a

MR. WILLIAMSON: Air quality index.

MR. SAENZ: Air quality index, yes, sir.

MR. WILLIAMSON: And the ultimate goal, as stated by the commission, and I would hope as was reinforced by staff, was the governor was interested in a planning and distribution of funds process that as much as possible eliminated the politician with the loudest voice or the biggest stick, the interest group with the best paid representative, and instead put everybody on equal footing across the state competing for limited state funds based on the ability to either reduce congestion, or improve air quality, or improve safety, or attract economic opportunity to the state, or preserve the asset value of the state's transportation grid.

MR. SAENZ: That's correct, sir.

MR. WILLIAMSON: Has the staff maintained that focus?

MR. SAENZ: We're working on that and we have been working on developing these indexes and today we're ready to give you pretty much a final report for some final comments so that we can wrap it up in the next month.

MR. WILLIAMSON: And the reason that this discussion is appropriate with regard to the mobility fund bonds is because as we move forward with the distribution of those bonds over the next few years, the instinct around the state will be I need to have the loudest voice or the most cohesive argument, and what we want is we need to reduce congestion as much as possible or improve air quality we want it focused on our goals as opposed to other considerations.

MR. SAENZ: That's correct.

MR. WILLIAMSON: Ted, anything?

MR. HOUGHTON: One word I did not hear in the discussion was leverage of the mobility fund.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: I was hoping you would bring that up.

MR. SAENZ: In our strategic plan we did also identify that the mobility fund was additional money and we wanted the large metropolitan areas, really everyone that gets an allocation, to be able to go out there and leverage, and you can leverage in several ways. We've have some of the areas that have identified toll projects that will leverage, they'll use the mobility fund to build a toll project, and that in itself will create a future funding source, so they're leveraging that dollar to replace that money in the future.

The other thing that the commission did that was very important was that you all passed a minute order that said that any revenue that's brought in through one of these leverage mechanisms tolling, for example surplus money remains in the region for the region to decide on what project to use. Again, if you have your indices and you can identify, you prioritize based on those indices, you go back and you pick the next project

MR. HOUGHTON: Did we not also, Amadeo, talk about a time period that these communities need to identify projects to leverage under the mobility fund?

MR. SAENZ: We had a time period in the strategic plan; I don't recall it off the top of my head.

MR. HOUGHTON: Was it three years?

MR. SAENZ: I think it was three years.

MR. HOUGHTON: Because I do remember a letter from one person in the state of Texas back to the department that said when El Paso forfeits its mobility funds, we'd like to have it.

MR. WILLIAMSON: I remember that letter.

MR. HOUGHTON: Where is Michael Morris? He's probably solely responsible for spurring on El Paso to form their RMA.

MR. SAENZ: We've had several requests or several assumptions that there will be some mobility funds that will be forfeited, and once it's forfeited we'd be more than happy to spend it for you.

(General laughter.)

MR. WILLIAMSON: Hope, anything?

MS. ANDRADE: Yes. Amadeo, I know we talked about leveraging because that's what we went out in the communities to educate them on: it was one-time money and we wanted them to leverage it. But refresh my memory, did any community use it for public transportation?

MR. SAENZ: To date none have used it for public transportation. Most of them have identified toll projects. The Lubbock District has identified a different funding scheme where they are going out there and putting in another levy or tax, and then they're using that to come up with the leverage amount. But no one has identified a public transportation project.

MS. ANDRADE: Why do you think that was? Was it that perhaps we didn't advocate as much or that they could use it for that?

MR. SAENZ: I think part of it, Commissioner, was that they identified the easiest thing that they could to be able to leverage those dollars, and the needs were so great that there was additional capacity needed on the transportation system. The surplus money staying in the region also has the same flexibility that in the future they can use. The other thing is through the planning process, even though they're commingled, most of the time the planning process for public transportation items and highway items kind of part ways, so we concentrate a lot on our highways and it's going to take a little bit of time to see how you can commingle and bring back.
The indices will help you in the future because you'll be able to evaluate what a public transportation will provide you and you can compare to what an equivalent highway project will provide you, and then can help you make the decision.

MS. ANDRADE: I guess now what we have to remind communities is that this surplus money that they'll have from their toll projects can be used for public transportation.

MR. SAENZ: Yes, ma'am. Part of House Bill 2702 identified surplus money and how that revenue could be spent, and it can be spent for public transportation.

MS. ANDRADE: I'll make sure I make that part of my talks.

MR. WILLIAMSON: And not only their surplus from their toll collections, but actually any cash payments for any concessions that they choose to execute in their regions can also be invested in public transportation.

MR. SAENZ: Yes, sir.

MS. ANDRADE: We'll make sure that we do talk about that.

MR. HOUGHTON: Develop a fully integrated transportation system. Right?

MR. WILLIAMSON: That is correct, a fully integrated transportation system.

MS. ANDRADE: [Indiscernible].

MR. WILLIAMSON: John, anything?

MR. JOHNSON: My observations are more of a conclusion and I think that what this illustrates a process that is by coming to these answers through goal-oriented steps, we eliminate, for all practical purposes, the external factors and what people might have referred to as pixie dust selection process, and I think if you're running a private enterprise or a public enterprise, when you have goal-oriented results and you have substantiation, you've built your goals based on solid assumptions, that everybody wins, and I think this is a great step.

MR. WILLIAMSON: The indices which we'll take up in just a moment I think are kind of the final piece in the cash distribution system. Hope spoke directly to a concern of the governor, and that is all of us that have been in this world for a while understand that every mode of transportation is subsidized. Whether it's an extension of Highway 75 north of Dallas, whether it's Loop 9 on the south side of Dallas, whether it's the DART train extension into the Duncanville area, whether it's DFW Airport or Love or Weatherford International, all forms of transportation are subsidized in some way by the common pool.

The question that transportation planners across the country I say humbly haven't been able to address that we're addressing is what is the relative cost and benefit of each of those choices. With the adoption of the index, the regional transportation council, whether they want to extend the train or not, now has the ability to say $100 million invested here will reduce congestion by this much, and that same $100 million invested in this train extension will reduce congestion by that much, what is the most rational decision for the region on the expenditure of this $100 million.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: That's where we want staff to be sure and take this up, particularly with regard to the mobility fund which has much more flexibility than does our state gas tax which is limited in the constitution to maintenance of the highway system.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Thank you, Amadeo.

MR. SAENZ: Thank you.

MR. WILLIAMSON: Now, James, on the matter before us, what would happen if we didn't adopt?

MR. BASS: We would, within a short order of four to six weeks, not have funds available to make payments on a number of the active projects that are tapped into the mobility fund.

MR. WILLIAMSON: And how much have we now issued against the mobility fund and how much remains to be issued, about?

MR. BASS: Assuming this is approved, it would be $1.75 billion with another $2-1/2 billion to be issued. And one thing I'd like to point out, we've had some questions if the transportation needs in the state are so great, why has the department not issued all $4 billion of the mobility fund bonds that we've received approval to do so from the Bond Review Board. And the fact is that through tremendous efforts of the district personnel and working with the MPOs, there are $4 billion worth of projects that are active, be it right of way, design work, or construction, that is ongoing today that wouldn't be going today if not for the mobility fund. However, these are mobility projects that are going to last several years so we don't need the cash in hand today, so what we're doing is as those projects go through their life cycle and the cash is needed, we're issuing the bonds to make payments for somewhere from six to nine months.

So all of that $4 billion is already committed, the work is ongoing, we're merely just issuing the bonds as we need the cash.

MR. WILLIAMSON: Very good. One more question, Amadeo. Where are you? No doubt later on in the morning the matter of comprehensive development agreements is going to work its way into the meeting. I want to give you a for instance. And again, I do apologize for not warning you about this; hopefully you're displaying your remarkable dexterity and intelligence.

I can't use North Texas as an example because there's really not a North Texas RMA, so I want to use the Alamo RMA as an example.

If the Alamo RMA chose to parallel 1604 with six high-speed toll lanes, and if the MPO in Bexar County or that COG area agreed with that decision, and if the Alamo RMA elected to go out for proposals to the private sector to compare what it could construct the toll system for and operate it as compared to what the private sector could do it for, could the Alamo RMA also say to the private sector at that time I want your proposal to design, build, finance and operate this toll road, I want your proposal to pay cash for a concession fee, and we will use mobility fund funds, we'll use our portion of the mobility fund, if we like your proposal, to buy one quarter of your deal after we approve it?

MR. SAENZ: That's exactly what toll equity will allow them to do. An RMA has the same authority as TxDOT so they can do a CDA that goes all the way from design-build to design-build-maintain-operate-finance. So depending on the project and the toll viability of the project and how much equity can be brought in, as well as the bonding, two things can be done. If it's what I'd call a revenue-positive project, then the RMA, working with the MPO, can buy into that project, and the amount that they buy into the project will certainly result in different amounts of revenue-sharing that they could realize, that in essence, through that toll equity they're able to, in essence, secure a percentage of a future funding source without them having to go out there and spend all the money themselves.

MR. WILLIAMSON: So a multi-county RMA, if it so chose, could sell a concession for a new road that the MPO had already planned on taking gas tax money and building.

MR. SAENZ: Right.

MR. WILLIAMSON: Then the gas tax money that would have been spent on that new road could then be spent on other projects in the region.

MR. SAENZ: That's also possible, yes, sir.

MR. WILLIAMSON: The RMA which is a creature of the counties that belong to the RMA could take the concession fee, if it were revenue-positive, and use that money to finance the extension of its commuter rail system and could take its share of the mobility fund and buy a quarter of the private sector's deal and own it just like the private sector does, sharing in the revenue growth if the toll road proved to be a quadruple winner that no one ever thought would happen.

MR. SAENZ: That's exactly right. You're buying into and investing into an asset and the revenue from that asset part of the revenue from that asset would then belong to them to do other projects as they so chose.

MR. WILLIAMSON: Any other questions about this option, members? Hope?

MS. ANDRADE: I have a question. Let me make sure I understand. So can they use the concession fee to buy that piece from the private sector?

MR. SAENZ: They could do several things, Commissioner. They could go in there and you can tell the potential CDA developers that you want to limit your concession fee to a certain amount, or that you want to reinvest a portion of that concession fee into the project.

MS. ANDRADE: Into the project they're building.

MR. SAENZ: And recover that through a revenue-sharing mechanism.

So there's countless different scenarios that you can use without even having to put in toll equity. If the project is revenue-positive, then you can look at that project and say instead of getting all the money up front and that's all I get, I would like to be able to maximize the amount of money that you can give me up front, Mr. Developer, but I want to keep a percentage of the future revenues.

MS. ANDRADE: And that's all part of negotiations

MR. SAENZ: And the revenue stream can be a revenue stream that is taken off immediately upon each transaction so that you're not subordinate to the operation and maintenance.
Of course, with every scenario that you use, there's pluses and minuses that you would have to evaluate and every project needs to be looked at on its own merits to determine which would be the best option to use.

MS. ANDRADE: Another question, Amadeo. And that's part of the negotiations. Right?

MR. SAENZ: Yes.

MS. ANDRADE: I want to make sure I understand this too. On the concession fee, can they use that on a non-toll project?

MR. SAENZ: Yes, ma'am. There's a definition in 2702 for a transportation project and it does not have to be a toll project.

MS. ANDRADE: Thank you.

MR. SAENZ: One thing that you also want to look at is as you're doing revenue-sharing, you want to be able to take advantage of if the project is a great project and it basically realizes a lot more traffic much sooner than was originally projected, and so you can set up revenue bands. For example, if the traffic is within our projection, we'll keep 10 percent of the revenue, but if traffic increases by 50 percent more, then I would like to get a higher percentage of that next band, and then if the traffic increases above that, I would like to keep even a higher percentage of that. So you can start from, say, a 10 percent revenue-sharing band, increase it to a 25 percent revenue-sharing band, and then maybe even increase it to a 50-50 percent revenue-sharing band.

Again, you look at the project and you run scenarios to be able to find out which is the best scenario that would be applicable or best for each party.

MR. HOUGHTON: One of the things, Amadeo and I'll piggyback Commissioner Andrade's question is that the MPO is an integral partner in this decision-making and shares in those revenue sources.

MR. SAENZ: Yes, sir. And I think it all goes back to the planning discussion that we first started when Chairman Williamson asked about the planning. The money is going to the MPO, the MPO has identified the plan. Using the RMA as a tool, they work together and they should work hand in hand to identify what projects the RMA can implement, and then with the revenue, either the toll equity that came in from the MPO or through agreement, they can say from the surplus revenue or from concession revenue that you get, Mr. MPO, we would like you also to develop these other projects, whether they be toll projects or not toll projects, and then that all becomes part of the plan.

MR. HOUGHTON: I think it's very important that the regions understand the three-legged stool, that it's the MPO, the RMA if they have one in that region, and TxDOT.

MR. SAENZ: We all need to work together because if you have one entity that's off pushing and pulling by themselves, you don't get any of the benefits of being able to commingle all the funds and get all the projects done.

MR. HOUGHTON: Right.

MR. JOHNSON: Amadeo, I'm assuming that since everything is negotiable, that the concession fee could be zero, and in the chairman's terms, the working interest could be a lot higher. It's difficult to set a template the way these things are going to fall.

MR. SAENZ: That's why you almost have to look at every project and say you look at the project, you look at the traffic, evaluate the risk whether the traffic will be there or will not be there, and you can go from zero up-front payment in a maximum revenue-sharing to a 100 percent up-front payment and no revenue-sharing, but you've got your money up front or somewhere in between, and it's just a matter of deciding which is the best scenario for that particular project.

MR. HOUGHTON: You speak with some authority. Have you negotiated a CDA recently?

MR. SAENZ: We're working on some.

MR. WILLIAMSON: And then, of course, the other thing, John, that you would balance, or I would assume, regional leaders and MPOs would do is you would balance what you could buy with your full cash payment up front for your consumers versus what you're giving up for your consumers 15 years from now if you guess wrong and the revenue goes through the ceiling. I mean, watching the North Texas discussion on 121 play out, it's been, I think, illuminating that there's been almost no attention paid to if the concession fee is $200 million, which grade separations and overpasses and congestion-relievers get built that otherwise wouldn't have been built and what was the value of that. And it seems to me that that's almost as important a consideration as how much of the toll road you would own or the business enterprise you would own.

Because the problem that we're trying to address is we're $86 billion short. All of these things are designed to close the shortfall between now and 2030 when we believe our state's transportation system is going to collapse if we don't close the shortfall.

MR. JOHNSON: Well, I think your point is interesting because it shows the difference in the way we build things on the commission. I'm partial to future cash flow as opposed to up-front payment. Now, I recognize that there are a lot of variables here that we do not know the answers to, but philosophically and we talk about building value into the system to me future cash flow has more value than an up-front payment. Now, it depends on the size of the up-front payment and it depends on the amount of the future cash flow, but it's interesting that we've sort of come to the same conclusion through different roads, if you will.

MR. WILLIAMSON: Following different paths?

MR. JOHNSON: Yes.

MR. HOUGHTON: And I think one of the things that's driving it, Commissioner Johnson, one thing is the demographic growth in this state. We've seen Chicago on the Skyway take up-front cash, we've seen Indiana take cash and no revenue, we've seen Virginia do the same thing, but when you look at their demographics and their growth, it's somewhat flat-lined, and you look at Texas, we'll benefit in that demographic growth on these roads, and it's pretty profound numbers that we're seeing.

MR. JOHNSON: Well, the other interesting thing is the Chicago sale was an existing asset and the Indiana is a future asset, and so it just depends on the way you value what you have currently, the knowledge plus what you're anticipating in the future. And I think your point is an excellent one, we anticipate this state is going to continue to prosper and grow and that's another reason I think the cash flows are going to be higher.

MR. SAENZ: One of the things to look at is the immediate needs for the area that you cannot address, and that should be one of the factors that you take into account in determining do I need some immediate up-front dollars that will allow me to address these immediate needs. And these immediate needs could be projects that would, in essence, facilitate the movement of traffic onto this facility that would, in essence, get more traffic there easier and would allow you to get more traffic faster, and you also take the benefit of having revenue-sharing.

So really most projects, your best position would be probably to take some money up front to address immediate needs for the area. Which is kind of what the region in the Dallas-Fort Worth area has been doing with what they call their Near Time Near Neighbor policy is they want to free up some money to do some of those projects through Near Time Near Neighbor, but they could also use some of that concession fee for Near Time Near Neighbor, but at the same time they want to keep the opportunity to get some money over time through delaying a percentage of that concession fee over time so that can create a funding source.

MR. WILLIAMSON: Amadeo, Senator Shapiro has been very direct in her conversations with me about 121 and its impact, particularly on the Frisco-McKinney parts of the state, and I've tried at every opportunity we've visited to assure her that the department, either at the Austin level or, I hope, at the district level, has no dog in the argument over who runs that toll road or who owns it or who makes the money off of it, and we do have an abiding interest in making sure that the concession fee, if there is one, is distributed as close as possible to improve the lives of the people who use that road on some percentage basis.

Is it your view that the RTC and our employees in the different negotiations that are going on regarding 121 are taking into account that if a concession fee is paid, the reinvestment is the Near Neighbor Near Time frame that Michael has led the way on?

MR. SAENZ: The RTC has put in place and I'm sure Michael will cover it in the delegation presentation has put in place a mechanism of how they're going to share in the revenues, both from concession fees as well as any future revenues that any of the toll roads generate. Part of it is outlined in House Bill 2702 but the RTC has then taken that and has identified how they're going to address the sharing of that revenue so that they can address other transportation projects within the counties where the projects are that would directly affect the McKinneys and the Friscos and the cities within there, and then also how they are going to apply some of it to improve the transportation system of the region. That's through concession fees and surplus revenue.

By going through the development of toll projects through the CDA process, it is freeing up some money that was already available to the region and they're using some of those dollars for their Near Time Near Neighbor projects. So they're putting in place a mechanism to try to maximize or optimize the resources that they have to be able to develop those projects.

MR. HOUGHTON: Based on your experience, Amadeo, in negotiating a CDA, how much say and influence do you have on the toll rates?

MR. SAENZ: The toll rates, you can fix the toll rates, you can fix the toll rates very low, you can allow flexibility, you can set a beginning toll rate and then have a say-so in the escalation mechanisms. Whatever decision you make will have an impact into how much money is generated through that toll road and how much money will be available through revenue-sharing or an up-front concession, and such and so forth. So every project needs to be looked at individually.

The region, because we have been working with the RTC on the 121 project, has identified a business term where they've identified the toll rates and the toll escalation rates. These will go into the CDA process, into the CDA request for detailed proposals, and the proposers will propose based on that business term that has been agreed upon by the region.

But depending on how you vary it, your numbers will change dramatically.

MS. ANDRADE: One other question. Will different communities have different toll rates?

MR. SAENZ: They could. What the RTC has done and like I said, I'm sure Michael, if I say something that's not 100 percent total of what you've done, correct me it has identified a toll rate and a toll escalation rate for toll projects in the region. They've also worked up a mechanism for the tolling of managed lane projects, and they've got a policy on that end.

Did I cover it well, Michael? Okay.

And so they have identified and have put in place, and they did it through public involvement. They had a series of public meetings and through those public meetings was how they have come up with this tolling scheme that they want to apply for projects.

MS. ANDRADE: But different regions will most likely have different tolls.

MR. SAENZ: Different regions can set their own tolls rates, yes, ma'am.

MR. WILLIAMSON: Okay, thank you, Amadeo. James? Members, are there questions of James?

MR. JOHNSON: I have one question.

MR. WILLIAMSON: Please, go ahead.

MR. JOHNSON: James, on the response from the comptroller on the estimated contributions to the mobility fund, as the years go by, the estimate is that the contributions will increase, and yet I've noticed in the column on the depository interest that that remains pretty constant and then it gradually increases and then stays at one number, $4-1/2 million. Why does that number not increase?

MR. BASS: I think it's just the conservative nature of revenue estimates in the state as they've been historically, and this depository interest appears to ignore the interest that is earned on the proceeds while we're holding them and spending them out over time. So I think it's just another layer and level of conservatism that helps us achieve a strong credit rating for the bond program.

MR. JOHNSON: Thank you.

MS. ANDRADE: Chairman, I have one.

James, were we able to give other members of the team an opportunity on this time around?

MR. BASS: Yes, ma'am. This will be our third debt issuance out of our underwriter pool, and after this third issuance everyone in that pool will have had an opportunity to perform on a pricing day for the department.

MS. ANDRADE: Good. Thank you.

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

MR. JOHNSON: So moved.

MR. HOUGHTON: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you.

MR. BASS: Thank you.

MR. WILLIAMSON: Amadeo, we've got 15 minutes before we welcome our North Texas friends to the podium. Your explanation of the indices will probably take longer than 15 minutes. What I want you to do is to touch on the four and I want you to focus on the tax ratio. That's the one that will have the most impact on assessing the value of a road. And that will probably get us right to the time we can take a short break and let the Partners in Mobility get ready to go.

MR. SAENZ: All right. Thank you, commissioners. Again, for the record, Amadeo Saenz, assistant executive director for Engineering Operations.

I will very quickly kind of just start my presentation and talk about that we have been developing some indexes to our five goals, and I will briefly go over the progress that we've made. We have put together a report through a work group and have come up with indices that we think will allow us to be able to and I guess we're trying to do two things I want to be able to have something that as people come to you to ask for money for projects that we can give you an evaluation of those projects with respect to our four goals. In addition, these indexes can also be used by the metropolitan areas, such as RTC, and assist them in the decision-making of which projects would probably give them more of a benefit in the five goals.

I will talk about the indices that deal with increasing the asset value of our asset, the asset value of our facility.

MR. WILLIAMSON: What are the five goals again?

MR. SAENZ: Our five goals are: reduce congestion, improve safety, provide for economic opportunity, improve air quality, increase the asset value of the facility.

And I think you wanted to talk about the asset value of the facility, and what we've done in this is we've been able to put together a program that will identify the amount of revenue that a particular project would generate based on the traffic that uses that project.

MR. WILLIAMSON: By that you mean tax revenue?

MR. SAENZ: Tax revenue, yes, sir.

And then, of course, we can then compare that to the amount of money that it takes to build a project and then maintain and rehabilitate that project through a 40-year design life. Then you compare the revenue collected to the cost to maintain that facility, and you can do a ratio, and basically what we call that is our tax ratio. A project will generate so much money from taxes but it will take so much money to construct and maintain; the ratio of those two is what we call the tax ratio.

MR. WILLIAMSON: Do you have any examples?

MR. SAENZ: I've got some examples. Can you turn that on for me, please?

We usually also call this thing tax gap analysis, and what we show here, the parameters that we take, we take the amount of traffic, the length of the project, trucks, and we go through and we calculate. I'm going to go to the results. For example, this project was Grand Parkway in Houston. When you look at a 40-year total on the traffic, a projected traffic that would be using that project, we would generate $162.5 million of revenue. And that revenue is revenue that comes in from the state gasoline tax, the federal gasoline tax reimbursements, as well as its share of the vehicle registration.

MR. WILLIAMSON: Okay, we've got enough time we can explain this slowly, so let's lower the deal and let's go back to the top of this piece of paper. So what does ADT mean?

MR. SAENZ: ADT is the average daily traffic. Of course, length is the length of the facility thatwe were looking at in this case.

MR. WILLIAMSON: Average daily traffic is the number of cars that are going to go across this strip of road?

MR. SAENZ: Number of cars that are going over that facility.

MR. WILLIAMSON: So that's the number of cars that are going to cross that facility.

MR. SAENZ: That is the number of cars that are using that facility on a daily basis.

And of course, length is the length of the project that you're looking at.

MR. WILLIAMSON: So that's the number of miles on that particular road that we're analyzing.

MR. SAENZ: That particular road.

MR. WILLIAMSON: Is that a logical terminus point? I mean, you didn't just go out and whack 15 miles where you wanted to, you went from a logical point to a logical point?

MR. SAENZ: No, sir. What we do is we're able to go out there and identify a project. In this area we are identifying a project in Houston on the Grand Parkway from Interstate 10 to 290, and it's a 15-mile section. If we were looking at the section from 290 to another place that was only five miles, then we would use that five-mile section. So we take the logical termini or the length of the project that we're trying to look at.

MR. WILLIAMSON: And that's the percentage of trucks, that's the percentage of cars, that's the average miles per gallon.

MR. SAENZ: Right.

MR. WILLIAMSON: And that's the number of lanes on this project.

MR. SAENZ: Yes, sir, that's the number of lanes on this project.

And of course, we assume the type of facility that we're going to be building, rigid pavement, we're going to build concrete pavement, reconstruction cycle will be 30 years, our routine maintenance costs that we've developed through historical data, as well as the vehicle miles traveled growth rate that we are applying to this project. We do have a shoulder adjustment that we've done through a lot of statistical analysis, and of course, we look at the design and analysis period.

MR. WILLIAMSON: So is the period 2005 to 2044.

MR. SAENZ: Yes, sir.

So as we look at the results of that, then we're able to calculate, based on that traffic over that section of highway, and based on the mileage rate and the gasoline tax that is collected, the amount of dollars that are collected through state gasoline tax, federal revenue and its share of registration fees

MR. WILLIAMSON: Okay, stop. So that's the amount of money that we can apportion to that number of cars and those number of miles over that time period, state gasoline tax paid, federal gasoline tax reimbursed, and motor vehicle registration fees collected based on the age of the vehicles.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: So we feel very comfortable in this particular index that we know within a reasonable certainty that over the 40-year life of this project in Harris County $162 million in tax revenue will be generated by the use of that facility.

MR. SAENZ: And that's very important. It's by the traffic that is using that facility.

MR. WILLIAMSON: Okay.

MR. SAENZ: Of course, the cost of the project will take into account the initial construction as well as the routine maintenance, preventive maintenance and rehab that needs to be done over the 40-year life period. If you noticed, above I talked about a reconstruction cycle of 30, so at year 30 you would have a reconstruction cycle, and you would also have through that time period some additional improvements based on traffic growth.

So in essence, that tells me what the life cycle cost of that project is, same project, same limits, and in this case I would have a life cycle cost of $1.01 billion.

MR. WILLIAMSON: So we're going to collect $162 million in taxes and we're going to pay out a billion in tax revenues from other sources for a shortfall of $853 million.

MR. SAENZ: That's correct.

MR. WILLIAMSON: And what does that 16 mean?

MR. SAENZ: The ratio is basically what we call the gap I'm sorry the ratio is the revenue collected divided by the cost, so the revenue is 16 percent of the amount of money needed to basically have this project constructed.

MR. WILLIAMSON: So this highway is being subsidized at a rate of 84 percent.

MR. SAENZ: Eighty-four percent, yes, sir.

MR. WILLIAMSON: And what's this?

MR. SAENZ: The final number there is basically a calculation that says what would be the equivalent gas tax that would have to be collected in order to make that project self-sustain, that it would pay for itself. So in essence, for that project to be able to collect $1.016 billion over this 40-year life period, we would have to charge a gasoline tax of $2.22.

MR. WILLIAMSON: And if Chairman Carona were to ask us to recalculate that gasoline tax of $2.22 to a toll that would be necessary to pay for that facility if we wanted to pay for it in tolls?

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

MR. WILLIAMSON: So we're laying the ground work to ask ourselves how much are we subsidizing any road, what would it cost by way of toll, and then that can begin to become our comparison against other modes of transportation if the regional leadership wishes to compare those two.

MR. SAENZ: Yes, sir. And just on that question that you're asking, I've got another chart here where I'm doing the reverse: I'm taking toll rates that are being charged right now on the different toll systems across the state within the Harris County area and the North Texas Tollway Authority area is also what we're going to be doing where we can calculate what the equivalent gasoline cost per gallon is based on those toll rates.

MR. WILLIAMSON: Well, share that with us.

MR. SAENZ: The projects up here are actual toll projects that are in our existing system today. Of course, in Harris County the toll rates that they've had and in converting those toll rates, we used a little bit different calculation there, we used 22.3 miles per gallon, but at 22.3 miles per gallon, at the toll rates that they charge, they're charging the equivalent of $3.01 per gallon gas tax.

MR. WILLIAMSON: The equivalent gas tax rate.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Via the toll charge.

MR. SAENZ: Yes, sir, and that's for the electronic tolling, and of course it's higher for the cash toll lanes.

In the North Texas Tollway Authority area, based on their toll rates, they're at $2.35 and $2.82. And then, of course, our Central Texas Turnpike Authority project which is our 130 project, 45/Loop 1 project is going to charge equivalent $2.47 per gallon to $2.75 cents per gallon for our gasoline tax for our cash toll lanes.

MR. WILLIAMSON: Do you have other highway projects that you've analyzed?

MR. SAENZ: I've got several other projects that we've done some analysis on that I'll go back and we can look at. A couple of projects in Collin County in the city of Frisco.

MR. WILLIAMSON: The city of Frisco?

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: Randomly picked?

MR. SAENZ: Random project.

(General laughter.)

MR. SAENZ: Well, I took them from another presentation that we already had, I didn't go back and recalculate.

This project here is a project in the city of Frisco from Steward's Creek Road to US 380. We've done the same gap analysis. There is your ADT of 17,100; length of project is just under seven miles; going through this thing, the same assumptions using concrete pavement, the same cost of maintenance. When we look at this project over the 40 years, the revenue for the project is $40.1 million, the total cost of the project is right at $80 million, so my gap ratio is right at 51 percent.

MR. WILLIAMSON: So that's roughly a three times better investment for the state than the one previously because the tax gap is close to .51.

MR. SAENZ: Yes, sir. And of course, the real gas tax would be 57 cents per gallon.

MR. WILLIAMSON: Okay, continue. You've got two minutes.

MR. SAENZ: I've got two minutes. I'm going to do two other projects, and I'll stay in the north Dallas area. I won't do a Frisco, I'll just do a project in Collin County which is FM 2551 from 544 to 2170. This project the traffic is 6,3600 vehicles, a little bit over six miles long. When you go through the same scenario, this project generates right over $14 million but the cost for this project is almost $108 million. So in essence, this project is not as good as the other project, definitely not as good as the other project because its gap ratio is only 13 percent.

The last project that I've got is a project in San Antonio I've got two more. I've got a San Antonio project on 151, the project is 10-1/2 miles long, had almost 30,000 vehicles a day. We look at the results, of course, this project here generates $74 million in revenue, and of course, it's got a cost of $159 million, it had a gap ratio of .47. So this project is somewhere in the middle, it's close, it's a project that the equivalent tax rate would be about 62 cents per gallon.

The final project I have is a project more in the rural area, it's here in Travis County on US 182 south of 290 to Bolm Road. Basically it's got 52,000 vehicles a day, 40-year amount of revenue that it generates is $98 million, but the cost is extremely high, it's got $565 million, almost $566 million in cost over the 40-year life, so its gap ratio is only 17 percent, and of course, the equivalent gasoline tax would be $2.02.

But these are the scenarios that you will be able to use to determine which projects would be a better investment in protecting the asset of the facility.

MR. WILLIAMSON: Now, we're going to return, members, to the other four, the congestion, the air quality, the safety, and the economic opportunity because we've developed indexes to measure all of those five things, and we'll have an opportunity to question Amadeo about that.

Before we let our North Texas folks take over, Amadeo, the question that leaves us hanging in the room always when we talk about this matter, first, have we, in all of our research on this matter, found one road that pays for itself?

MR. SAENZ: So far I haven't, but we're still looking.

MR. WILLIAMSON: A good business person has recently asked me the following question: If you're so certain of this analysis, then that means every road in the state costs more than it generates in taxes but you have money in the bank this is your friend from El Paso that asked this question, actually, Mr. Houghton you have all this cash in the bank and you keep building highways, how is it possible that no road ever pays for itself but you're always building and maintaining roads, how can it be possible?

So the question I ask you is: Who is paying that deficit and how?

MR. SAENZ: Other parts of the state. When I build a road that has a gap, I'm, in essence, taking money from other parts of the state or other roads within the region to be able to address this one. That's why we're always behind. We don't have enough to be able to address all our needs so we have our own version of Robin Hood, and I take money from a certain part of the state and I'll go address problems in another part of the state, and then next year I'll go and address problems in the Beaumont area but I take money from Pharr.

MR. WILLIAMSON: But you can't keep that shell game going forever. Eventually what happens?

MR. SAENZ: Eventually we get into gridlock and cannot build anything.

MR. WILLIAMSON: So the answer is the taxpayers who are paying for that deficit are the taxpayers who are stuck in traffic.

MR. SAENZ: Yes, sir.

MR. WILLIAMSON: And the taxpayers who have kids who are breathing dirty air and are in the doctor all the time with asthma, and the taxpayers who won't get hired by Toyota because Toyota couldn't expand one more time in Texas because the roads were shot so they went to Tennessee. Is that the answer?

MR. SAENZ: That's correct.

MR. WILLIAMSON: That's a real good note to stop on.

DALLAS-FORT WORTH PARTNERS IN MOBILITY

(Senator John Carona, Senator Kenneth Brimer, Representative Vicki Truitt, Representative Charlie Geren, Michael Morris, Linda Koop, Ross Perot, Jr., Mike Baggett, Commissioner Glen Whitley, Wendy Davis, Pete Rickershauser, Mayor Mike Moncrief)

MR. WILLIAMSON: We have North Texas people with us here, Mike, and we have members of the legislature, and I always wish to welcome members of the legislature first.

In the manner that I was taught when I was a member, Senator Carona, I believe you are the senior member in terms of authority in the room today, sir, so you may choose the order in which you, Representative Truitt, Senator Brimer, Representative Geren, and did I miss anybody besides Ms. Howard who is observing? What's your choice, Senator?

SENATOR CARONA: Mr. Chairman, please give me a hard question. My colleague here, Senator Brimer, were it not for his presence, it would have been a very easy answer. But really at this point, if you don't mind, we'll proceed and I assume that you'll be calling each of the legislators up for brief remarks. Is that your intent?

MR. WILLIAMSON: Really, we do defer to the senior member, seriously. So do you want to open?

SENATOR CARONA: If I could open, that would be appreciated.

MR. WILLIAMSON: Please do.

SENATOR CARONA: Let me thank you very much, Mr. Chairman and commissioners, for allowing us just a few minutes to visit with you today and for allowing us to continue the 12-year tradition of allowing leaders of North Texas and they are here in numbers today to come and address you on transportation issues.

Transportation infrastructure is vital to all of us and so vital, in fact, that our cooperation as we hope we demonstrate today transcends city and county lines. Leaders from throughout our region are here today to give you unique perspective on how we can best work with you, what we can do for you, and of course, how we can make it all work for North Texas. In a region that adds, these days, about a million new people every seven years, you'll always have some healthy debate, some disagreement, and of course, that's what keeps local politics interesting, but the one thing I can tell you today is that we are united in what we lay before you today, and I am personally committed to seeing it through.

Some of what you'll hear requires legislative action. Reducing diversion of transportation funds certainly is an example, and my colleagues and I are already meeting in this interim well prior to the next session to address those issues and to begin the painful but nonetheless necessary process of reducing and ultimately eliminating diversion so that you do, in fact, have significant additional dollars to do the job that's laid before you.

And I'd also like to mention and please be advised that we hold no one in this room who may have been a former legislator at the time that diversion process was first begun responsible.

(General laughter.)

SENATOR CARONA: But we do expect everybody in the room, at least those that are seated toward the front of the room, to help work with us in playing an important role to use these limited dollars very wisely.

I want you to know I appreciate the opportunity to be here this morning. I have great respect for the work that you do and the difficulty that you face trying to tackle our enormous transportation needs in this state with very limited dollars and with new and creative ideas for doing it, and I really commend you for taking this in this direction.

But I'm proud to stand here today, as I mentioned, with my neighbors and friends. We're working united to present to you what we believe is the best option for all of North Texas, again, working together on an issue that we think is vitally important to our economic future. Thank you for allowing me to be with you this morning.

MR. WILLIAMSON: Members, anything for the Senator?

MR. HOUGHTON: Just thank you for being here, Senator. Look forward to working with you.

SENATOR CARONA: Thank you very much, appreciate all of you.

SENATOR BRIMER: Mr. Chairman, I had preferred we go by hair maturity.

(General laughter.)

SENATOR BRIMER: In my previous professional career which I still remember to some degree, I learned a few key presentation and sales techniques: tell them what you're going to tell them, tell them and then tell them what you told them. And that's before ask for the order and then shut up and listen. And I'm assisting today the sharpest minds that North Texas can ask to represent them before this commission. As a matter of fact, the government and the private sector food chain is well oiled for North Texas today, and many strong points are going to be presented to you.

In preparation for this meeting, I had hand-delivered to each of you the main concerns that I have at this time, and instead of repeating myself three times, I ask that you look closely at that article because it capsules the main concerns we have in the future of the Metroplex.

Our presentation today, I want you to know, shows unity I'm going to repeat it shows unity. We are simply asking that you understand our dignitaries today and listen to the integrated comprehensive approach that has been developed for North Texas. That's asking for the order, and then we're going to shut up and listen. Thank you.

MR. WILLIAMSON: Thank you, Senator. Anything for Senator Brimer?

MR. HOUGHTON: It's great to have you here.

MR. WILLIAMSON: Thank you, Senator.

Ms. Truitt?

MS. TRUITT: Thank you. Good morning, Mr. Chairman, commissioners. And I would have preferred that we go in order of beauty just kidding, just kidding.

(General laughter.)

MS. TRUITT: And younger age.

I wish simply to thank you for your attention this morning. I want to tell you how proud I am to represent the people of the 98th Texas House District, many of whom are here this morning, as well as representatives from all across North Texas. And we all appreciate the very difficult challenges that you face on a daily basis in dealing with the needs of this state, and we appreciate your time and attention and thank you for your efforts and encourage you just to pay attention to what these folks are saying, as you have done in the past, and appreciate all your hard work. Thank you.

MR. WILLIAMSON: We thank you. Anything for the House member?

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Mr. Geren?

MR. GEREN: Thank you, Mr. Chairman, commissioners.

I'd just like to echo what my colleagues have said. I was here for the first part of the meeting and I got your message very clearly: we need to work together. And I think that this partnership that will be making this presentation today shows you that the Dallas-Fort Worth area is working together, and these people have worked very hard and we hope that you'll look at their proposal for the Trans-Texas Corridor as it affects the Metroplex area. And thank you very much for your time today.

MR. WILLIAMSON: We thank you for being here. Anything for this House member?

(No response.)

MR. WILLIAMSON: Thank you, Mr. Geren, very much.

Historically I don't comment if it's not true, but when a House or Senate member speaks, I try to make a remark or two about their support of transportation generally, not necessarily agreeing with me. It's a rare occasion where four House and Senate members are in the room and all four of them can be accurately described as very strongly transportation. And Chairman Carona, Chairman Brimer, Mr. Geren, Ms. Truitt all have been strong supporters of transportation across the state, and we're very appreciative of that, very appreciative. How do you want to proceed, North Texas?

MR. MORRIS: Do you want to take a two-minute break or do you want to go right into it? Our speakers are ready, Mr. Chairman.

MR. WILLIAMSON: We're aware you have some travel concerns and we're willing to stay right here and start, or we can take a break.

MR. MORRIS: I think we will go right ahead.

MR. WILLIAMSON: We're ready. Ms. Koop?

MS. KOOP: Good morning, Mr. Chairman, and members of the commission, and Director Behrens. I'm Linda Koop, city council member from the City of Dallas and the chair of the city's Transportation and Environment Committee.

On behalf of the Dallas-Fort Worth Area Partners in Mobility, thank you for this opportunity to speak to you today. We're here to participate in a discussion with you on ways we can improve the surface transportation system in North Texas.

Our coalition includes mayors, city council members, county judges, commissioners, city managers, chamber presidents, business and civic leaders, and transportation professionals throughout North Texas. Our region takes great pride in the collaboration that is occurring among our transportation providers, all of which are focused on improving regional mobility in North Texas.

Representatives of each agency are also with us here today. I would like for our delegation to please stand and be recognized.

MR. WILLIAMSON: Wonderful.

MS. KOOP: We have lots of folks. Thank you to each member of our delegation for being part of the 12th annual presentation.

Through the combined efforts of our state leadership and this commission, we have new opportunities to address the transportation infrastructure and financing needs of our region, as well as those of the entire state. Our presentation today will focus on several of these initiatives and how we are making the most of these opportunities in a climate of rapid population growth and declining revenues.

First, we will discuss the population growth and economic climate for the Dallas-Fort Worth area, and we've wished to present ways that we can make use of public-private partnerships to leverage federal and state transportation dollars.

Second, we understand that a transportation funding crisis exists. The implication of no future capacity improvements is unacceptable, and today we will ask for your continued support for legislative strategies and commission policies to address the issue of funding.

Third, we will present the region's adopted policies related to comprehensive development agreements for toll projects and managed lanes. This is a very important issue to our region, considering the number of tolled and managed lanes we plan to add in the coming years. We will share with you and ask for your endorsement of an integrated comprehensive approach for toll facilities in North Texas.

Fourth, we will discuss the current activities taking place within our region in order to implement new passenger rail lines in North Texas.

Fifth, we wish to discuss the Trans-Texas Corridor and how the Dallas-Fort Worth area's regional vision for this much needed transportation project can be more fully integrated into the vision of the transportation commission.

I want to reiterate that the entire region supports this vision. The concern is where and when the segments will be constructed. Transportation is constructed in our region with significant attention to sustainable future, and we must make land use and transportation decisions simultaneously.

We recognize and support the commission's five goals for improving the transportation system. Our region has been working to decrease congestion, increase safety, decrease air pollution, and enhance economic opportunity for quite some time now. We are looking at ways to increase the asset value of the transportation system in North Texas and we will present some of our strategies today.

And now let me turn the podium over to Ross Perot, Jr.

MR. WILLIAMSON: Thank you very much. You did a good job.

MR. PEROT: Linda, thank you very much. Commissioners, how are you?

MR. WILLIAMSON: Good to see you.

MR. PEROT: It's certainly an honor to address you today and talk about North Texas, one of our favorite subjects, and clearly addressing the transportation commission's goals will be critical as the DFW area continues to be one of the fastest growing regions in the nation, if not the world. Last year our region added over 92,000 jobs; we had almost 49,000 new homes built in North Texas; we're averaging 40,000 new homes a year, we've averaged that for the past five years; we grew by 168,000 people. This marks the tenth consecutive year we've added over 100,000 people into the North Texas region. That's the equivalent of adding one million new residents every seven years.

If we're going to continue to see this kind of sustained growth, we need to continue to use the innovative financing techniques that we have, build a balanced transportation system, enhance the region's passenger rail system, and manage freight traffic more efficiently, improve safety, and grow in a more sustainable and environmentally friendly way which has become critical to the region.

Then the next slide, this is the gross domestic product of the state and the eight largest metropolitan regions of the state, and this makes up over 80 percent of our state's economy. It's critical we preserve mobility and access for people and goods within and between these metropolitan areas to maintain our economic strength. And Dallas-Fort Worth still leads on that chart, it's important we point that out. A little pride.

According to the U.S. Conference of Mayors, the Dallas-Fort Worth area currently ranks as the 28th largest economy in the world, and we're the fifth largest economy in the United States. The Dallas-Fort Worth area was the number one ranked metropolitan area by Site Selection Magazine for new and expanded corporate facilities in 2004. In 2005 we were number two, with 309 projects and investments of $3.5 billion.

It's critical that we have never played a more central role in the global economy than we do today. For the third year in a row, Texas is the largest exporting state in the nation, and the DFW area accounts for a fifth of that total. According to the Greater Dallas Chamber of Commerce, Dallas-Fort Worth did more than $10 billion worth of business with China in 2004. And all this means is jobs for Texas, it means jobs for North Texas. Between now and 2030 it's projected we'll add another three-quarters of a million new jobs into our community.

Clearly the economic health of North Texas is very important, and we must continue to improve transportation because it's a key element to that growth. As the commission's strategic plan recognizes, a reliable cost-effective transportation system is critical to business for timely freight delivery and access of customers and employees.

The DFW industrial market experienced a dynamic opening in the first quarter of 2006. We had demand of 4.1 million square feet. That's off of a base of 624 million square feet of space in North Texas, the fourth largest distribution center in the United States. We really are becoming the trading hub for North America, and it's an area that will continue to grow as long as we have transportation that allows this distribution to grow. And the warehouse and distribution sector really did lead the way with 80 percent of the demand.

We must improve the economic lifelines throughout the state, especially in our metropolitan regions, because on-time business systems are based on transportation reliability. Highway congestion affects all the motorists but freight shippers are particularly vulnerable. Nationwide delays due to highway bottlenecks cost the private sector nearly $8 billion every year. As international trade continues to increase, the delays cost will only rise unless innovative strategies are implemented to improve our state's transportation system.

The last two sessions of the Texas Legislature have produced meaningful transportation bills and our region would like to thank you for your leadership in that process. Texas is now at the forefront of using innovative financing tools to address transportation needs. Funding flexibility through the Texas Mobility Fund, toll equity, pass-through tolls, as well as increased private funding through comprehensive development agreements, the Trans-Texas Corridor, and goods and movement partnerships will be instrumental to enhancing the transportation system throughout this state.

North Texas is taking full advantage of all the new tools that you've offered to leverage scarce resources and build public-private partnerships. Combined with our passenger rail initiative, we estimate over $18 billion in near term initiatives are currently being developed. Private sector leaders recognize the need for an improved transportation system, and you see increased investment in highway facilities. It is a win-win for businesses and for commuters alike, congestion can be reduced, facilities can be built more quickly, and businesses can benefit by the ability to access potential customers traveling along these corridors, and once again, we can continue to improve and protect our environment.

Thank you very much for the time. I'd like to now turn it over to Mike Baggett. Mike?

MR. WILLIAMSON: Thank you.

MR. BAGGETT: Good morning.

MR. WILLIAMSON: Good morning, Mike.

MR. BAGGETT: Very nice to be here. I'm not sure I can follow that act but I'm going to try.

A major challenge we face and I'm sure you know this is the huge discrepancy between funding needs and funding availability. As documented in the Texas Metropolitan Mobility Plan, we face a $55 billion shortfall over the next 25 years. The shortfall largely comes from lack of rehabilitation funding and the need for $24 billion in mobility improvements. Clearly something needs to be done to address this gap if we are to meet our goals and meet our goals of our region.

As an area where considerable attention must be focused in the continued diversion of transportation revenues to non-transportation issues, we believe various transportation-related taxes or fees currently being deposited in the General Revenue Fund should go into the State Highway Fund or the Texas Mobility Fund, and we also believe that revenue going into the State Highway Fund should be spent for transportation purposes only. We ask that you stay focused with us to work with our legislators and eliminate these diversions.

We greatly appreciate the recent progress that's been made on a formula to distribute Category 2 funds among the state's metropolitan areas. As we move forward, please monitor the relative levels of need between rural, urban and metropolitan areas of the state and make sure that the right amount of funding is going to the metropolitan areas which serve as the economic engine of the state, as you heard from Mr. Perot.

Our region supports the new rules on transportation development credits. This is a valuable tool to leverage scarce resources, particularly in a region that is taking full advantage of toll roads. We appreciate your recognition that transportation development credits should be used in the region that earned the credits through tolling. The majority of regions generating toll credits are non-attainment areas. We ask that you consider a portion of these credits be a match for air quality projects.

The decisions being made by North Texas elected officials and commuters to pay tolls on many roads are very difficult, regarding a greater investment in our transportation system at a time when we're challenged by record high fuel prices.

We understand that you've developed criteria for distribution of Category 12, Commission Strategic Priority funds, that include promoting economic development, advancing system connectivity, improving access to and from military institutions, and utilizing pass-through tolls. Throughout North Texas we have needs related to these criteria. As you consider future allocations of Category 12 funds, we hope that you will pay particular attention to those regions taking full advantage of innovative finance initiatives techniques.

Let me turn the presentation over to Commissioner Glen Whitley to discuss the Trans-Texas Corridor. Thank you.

MR. WILLIAMSON: Thank you, Mike.

MR. WHITLEY: Thank you, Mike. Good morning, commissioners.

Another important part of the innovative finance is partnership with the private sector. One of the largest public-private partnerships currently envisioned in the nation is the Trans-Texas Corridor which represents a long term multimodal transportation solution for the entire state. North Texas fully supports the concept of the Trans-Texas Corridor, and I can't make that point I need to make it again, we fully support the concept of the Trans-Texas Corridor.

Our major interstate highway and railroad routes are at or near capacity, slowing the movement of people and goods throughout our state. We continue to ask that you strongly consider the needs of North Texas as you refine the alignment options. Our plan addresses current needs with highway and rail traffic moving through our region on a system to distribute such traffic throughout various routes, but it also addresses long term needs to move traffic to the outer portions of the region. The staging of transportation improvements is critical to creating sustainable communities in both the metropolitan core and in the rural fringe.

Before you is a map with signatures from leaders throughout our region requesting your support for this alignment. This vision makes alignment recommendations on a mode-by-mode basis to expedite auto, truck and rail freight improvements in our region. Our plan addresses how to phase the implementation of TTC-35 to address sustainable growth while focusing on urban connectors in the near term.