MEMBER UPDATE
July 2 , 2010
FUNDING HIGHWAYS: HOW MUCH DEBT IS TOO MUCH?
Does Texas even have a transportation funding problem? A recent set of "talking points" from a group of conservative legislators says maybe not. After all, according to the Texas Conservative Coalition, the Legislature has appropriated to TxDOT an average of $7.6 billion annually for the period 2006-2011. If that is sustained through 2030, the agency will receive a total of $182 billion, only slightly less than the $188 billion that the Commission calculated as the long-term "need."
Like most analyses of our current situation, this fails to take into account the extent to which our recent state transportation program has been funded by unsustainable levels of debt. For example, the Legislature appropriated to TxDOT $8.85 billion for fiscal year 2011. However, almost $2.9 billion is the proceeds of Prop 14 bonds, Prop 12 bonds, Texas Mobility Fund bonds, colonia bonds, or the "concession" fee paid on SH 121, which is not only a one-time shot but can only be used in the Dallas district. In addition, another $828 million is appropriated to pay debt service on bonds previously issued. (It is worth noting that over half of this debt service is paid out of existing revenues to the Highway Fund for Prop 14 bonds, which means that of the existing 15 cents per gallon in fuel taxes that go to the Highway Fund, almost a nickel goes to service debt.)
In the end, the sustainable part of the $8.85 billion appropriated to TxDOT is only around $5 billion per year. To continue to average $7.6 billion per year, as the TCC report suggests, the voters would have to approve and the Legislature appropriate revenue from $2.5 billion in general obligation bonds each year for 20 years, or over $50 billion in additional debt. This is not only unrealistic but probably not possible, since most believe that the State is already bumping against a constitutional debt ceiling.
Is it really conservative to pile debt on top of debt on top of debt rather than have users fund the system on a pay-as-you-go basis? That is the question that the Legislature will confront in 2011.
OTHER
- 2010 Salary Survey: The TEXAS CEC Salary and Benefits Survey, which reports salary ranges in a variety of professional and administrative positions, will be distributed to members in early August. One enhancement to the survey this year will be the addition of billing rates for certain positions. If the survey needs to go to a particular person in your firm, please provide that information to Michael Hancock at mike@cectexas.org . As usual, firms that provide their information will get the results more quickly and at a reduced price.
- Project Delivery Conference: TEXAS CEC has tentatively scheduled a conference on "Project Delivery: Lessons Learned" for November 17 in Austin. The goal will be to focus on specific Texas projects and lessons learned as design-build, construction management at risk, and related methods have expanded in recent years. More information will follow. If you have specific topic or projects to suggest, contact Steve Stagner.
- Attorney General's Opinion on CM-at Risk: Speaking of project delivery issues, Attorney General Abbott's office recently issued Opinion GA-0782 addressing several issues related to construction management-at risk. The question posed related to whether a company can be selected as a CM-at risk (essentially the contractor for a project) if is has been selected as the design manager. The statute is pretty clear on this matter and the opinion confirms it: there is no prohibition on a company being selected as both the design engineer and CM-at risk, provided that the company was hired as CM-at risk under a separate procurement. Although the opinion did not get into this, one other part of the statute is relevant. An owner is required to contract separately and independently from the CM-at risk for construction materials testing and engineering services necessary for the acceptance of the facility.
- Renew Houston: Houston CEC believes that adequate signatures have been collected to force a charter amendment election for Renew Houston, the effort to create a dedicated fund for street and drainage work in the City. The signatures must be verified by the City Secretary.
- TxDOT: TxDOT is moving forward with an initial $50 million in engineering work (out of a potential $150 million) involving 23 projects to be funded with Proposition 12 bonds. Eighteen will be done under existing contracts, with five new RFQs. Information on the work is available on www.cectexas.org . Also, at a meeting today the Transportation Commission selected Howard Wolf to lead an effort assist the Commission with implementing the Grant Thornton management review. It was also stated that Jay Kimbrough would be involved in the effort. Mr. Wolf is an attorney and a long-time associate of Lt. Governor David Dewhurst. Mr. Kimbrough formerly served as Chief of Staff to Governor Rick Perry.
IN THE NEWS
Go to Infrastructure News at www.cectexas.org/infrastructure for newspaper articles from around the state and country on transportation, environment, construction, public works and other areas including:
- Concerns grow that economic recovery is slowing.
- California high-speed rail prospects are called unpredictable.
- A record drop in pending home sales and a slowdown in construction contributed to a sluggish outlook for the economy.
- The US EPA overturned Texas' 16-year old air permitting program, saying it violates the Clean Air Act.
- A new Corpus Christi power plant could lead to faster taking of Colorado River Water.
- Engineers worried about the IH-35 bridge collapse in Minnesota a year before it happened.
- Austin's MetroRail ridership sends a discouraging message.
- Eleven projects around the state have been approved for the state's next round of pass-through financing.
- DFW Airport could see major construction.
- and much more . . .
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