STAFF:

MICHAEL W. BEHRENS, P.E., Executive Director
STEVE SIMMONS, Deputy Executive Director
RICHARD MONROE, General Counsel
DEE HERNANDEZ, Chief Minute Clerk

PROCEEDINGS

MR. WILLIAMSON: Good morning.

AUDIENCE: Good morning.

MR. WILLIAMSON: It is 9:07 a.m. and I call the April 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 9:42 a.m. on April 20, 2005.

As we always do, before we begin today's meeting, let's all take a moment to place our pagers, cell phones, and Dewberries on the silent mode. And please don't just assume it; check it and make sure yours is turned off. We prefer silence around here. Thank you very much.

As is our custom, we will open with comments from the commission, and we'll begin this morning with Commissioner Houghton. Ted.

MR. HOUGHTON: Good morning.

AUDIENCE: Good morning.

MR. HOUGHTON: Mr. Chairman, I don't know what's on the agenda, or lack thereof, but we have a sparse audience today, so we must not be giving away anything.

MR. WILLIAMSON: Or taking away anything.

MR. HOUGHTON: Or taking away anything. That's right.

I look forward to visiting with those who have a spot on the agenda, and I appreciate all the people here today, and for their attendance and their support of the transportation commission and TxDOT. Thank you.

MS. ANDRADE: Good morning.

AUDIENCE: Good morning.

MS. ANDRADE: Thank you so much for being here, thank you for your interest in transportation.

I'm looking forward to taking care of business today. I believe we also have some of our friends from the Port of Corpus Christi. Welcome.

And I look forward to our discussion items also so that we can learn more and make decisions that we need to to expedite transportation in Texas. Thank you.

MR. JOHNSON: I'll give you another chance. Good morning.

AUDIENCE: Good morning.

MR. JOHNSON: Thank you. I'll just echo what my colleagues to my right, your left have said. It's great to have you here this morning. Obviously these meetings are extremely important to a lot of people and the issues that we consider are important to the state because it has such an impact on the quality of life.

I want to just make special note. It's nice to see the Chair has a lot of spring in his step, and it's nice to see that Mr. Nichols also has a lot of spring in his step.

MR. NICHOLS: I'd like to also welcome everyone here and let you know how much we appreciate those of you who have traveled long distances to be here to talk about your communities' transportation issues.

A lot of you are volunteers from your communities that have come here to do that, some of you are paid staff, but you're all welcome and we do look forward to your input.

In particular I want to recognize a special group in the back of the room. Mr. Chairman, we have the Jacksonville Leadership Institute in the back of the room.

Would you guys from Jacksonville stand up?

(Applause.)

MR. NICHOLS: The stores are shut down because they're all here.

MR. JOHNSON: Who's left in town?

(General laughter.)

MR. NICHOLS: That's it. Thanks.

MR. WILLIAMSON: I thank each of the commissioners for their comments. And I also welcome all and appreciate your participation.

I, over the last year or so, developed a habit of taking this moment to point out the things on the agenda that we believe are important to the state's interests.

We're going to discuss today how we deal with toll credits and the distribution of toll credits, primarily to transit systems in the state.

You know, the whole matter of toll credits is kind of interesting. The United States Congress is currently considering reauthorization of the Highway Administration Trust Fund, Highway Program, and on the House side, led by Michael Burgess, Kenny Marchant, and Majority Leader DeLay, the House adopted a more forward-thinking definition of how toll credits could be used that will greatly benefit the State of Texas.

We hope that our two United States senators, who so far have not been too engaged in the transportation world, will step back and reflect on the importance of toll credits, design-build, and other federal initiatives that are possible and their impact on the state.

And we hope that each of our United States senators will become more personally involved in the business of redefining how the federal government and the state government interact on transportation matters.

We will also give some thought and perhaps make some decisions on our continually expanding pass-through toll program.

And in that context, Joe, had my colleague not recognized his hometown, I would not have drug you through the embarrassment, but since he did it, now I've got to do it.

WE also have, in addition to great Texans from Jacksonville, great Texans from Weatherford, Texas with us today, and I'm not sure of all who made the trip but I know our city manager, our mayor, I believe, are here.

Anyone else from Weatherford? Y'all stand up if you're from Weatherford, Texas, please.

And my county judge Mark Reilly is all the way back there.

So county judge, city manager of the City of Weatherford and the mayor of Weatherford, who will make comments later on, who also -- Hope, you'll be interested to know -- retired as one of the all-time greatest school superintendents in the state of Texas, Joe Tison. All my kids learned under Joe.

We will continue and probably conclude our rolling discussion of how the department's relationship with consulting engineers has developed over the years and will be changed over the next few months. That will have some impact on how we make decisions about engineering contracts.

That will be the highlights, I think, of today's meeting.

So as my colleagues said, we welcome all of you and we appreciate your participation.

I want to remind each of you that if you wish to address the commission during the meeting today, I need for you to complete a speaker's card. You can find a card on the registration table in the lobby.

If you want to comment on an agenda item, I need for you to fill out the yellow card and identify the agenda item upon which you wish to comment. If you want to make an open comment, comment on something not on the agenda, that is permissible, but I need for you to fill out a blue card for the open comment period.

Regardless of which card you fill out, we'd ask that you try to limit your remarks to three minutes, unless you're a sitting member of the legislature, in which case you may speak as long as you wish.

Our first item of business is the approval of minutes from our last meeting, our March meeting.

Members, you have copies of the minutes in your book. Do I have a motion?

MR. JOHNSON: So moved.

MR. HOUGHTON: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries.

At this point, we will deviate from our schedule and we will ask a great member of the legislature, Senator Seliger from the greater western Parker County area of Amarillo, who wishes to comment on an item and we wish to listen. And welcome to the legislature and welcome to us, sir.

SENATOR SELIGER: Thank you, Mr. Chairman and members. It's important to note that my district, the 31st Senatorial District, is larger than ten states, and so everything that goes on in transportation is particularly important to us.

But today, I represent those two great cities, as you develop criteria for toll credits to emphasize how important these are specifically, as they are all over the state of Texas, to this area.

The Midland-Odessa Urban Transit District is not an old entity. It is one that's developing to meet a very profound need in those two cities to ease transportation between those two, and it will become increasingly important to the State of Texas and the United States to cut down on automobile traffic, to preserve much-needed fuel and to control emissions.

Specifically what this transit district chooses to do with the toll credits is to leverage them into the federal money and buy renewable fuel buses, liquified natural gas, in this case.

And I think that this will be a pilot program, though it is not designed to be, but an example of efficiency and reduced emissions in toll systems which is going to be critically important as Texas continues to urbanize.

And I simply make this appeal and request of you to remember West Texas and the sub-metropolitan communities all over the state of Texas as they choose to avail themselves of the same sort of amenities and efficiencies that all people of the state of Texas will want to have in the future.

And while you've offered me unlimited time and I could certainly use it, I won't today, and I appreciate your time very much.

MR. WILLIAMSON: Well, we appreciate your being here.

Members, do we have any questions or dialogue we wish to have with the senator?

MR. NICHOLS: Do you have a particular application that they are working on that you know the dollar amounts they need for the toll credits?

SENATOR SELIGER: I think the toll credits themselves are about $250,000.

MR. JOHNSON: And there's a sensitive time issue here also, is there not?

SENATOR SELIGER: There is because of some federal program that will expire. The cost of that loss is about $983,000. And so it is time sensitive. I assume that it is in many areas around the state of Texas, but acutely so here.

MR. WILLIAMSON: We always take seriously any House or Senate member who takes the time to come over here and tell us what's on their mind. So we appreciate you taking time out of your busy session to come over, and certainly we will pay close attention.

SENATOR SELIGER: Thank you very much, Mr. Chairman and members.

MR. WILLIAMSON: Good to see you.

SENATOR SELIGER: You too.

MR. WILLIAMSON: Okay, Mike, let's return to our agenda and I think agenda item 2, and it's your ball game, buddy.

MR. BEHRENS: Thank you, Chairman.

We'll go then to agenda item number 2; it's our Aviation item for the month and that will be presented by Bill Fuller.

MR. FULLER: Good morning. My name is Bill Fuller with the Aviation Division.

This minute order contains a request for grant funding approval of ten airport improvement projects. The total estimated costs of all requests, as shown in Exhibit A, is $9,134,745, of which $7,447,270 is federal, $432,000 are state funds, and the remainder is comprised of local support from airport sponsors of $1,255,475.

A public hearing was held on March 21 of this year. No comments were received. We recommend approval of this minute order.

MR. WILLIAMSON: Members, you heard the information. Do you have questions or comments?

(No response.)

MR. WILLIAMSON: Do I have a motion?

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. BEHRENS: Agenda item number 3 under Public Transportation will be presented by Bobby Killebrew and will be a recommendation for an additional member to the Public Transportation Advisory Committee. Bobby.

MR. KILLEBREW: Once again, good morning Chairman Williamson and commissioners, Mr. Behrens and Mr. Simmons.

For the record, I am Bobby Killebrew, the Public Transportation Division interim director.

For your consideration today is a minute order which authorizes the appointment of one member to the Public Transportation Advisory Committee.

Selected by the commission and governed by statute, the committee consists of four members representing public transportation providers, three members representing public transportation users, and two members representing the general public.

One of the nine members of the committee which was appointed in September 2003, whose term expires this coming September 2005, has resigned.

The minute order today appoints Mr. John Wilson to serve the remainder of that term, representing a public transportation provider.

Your consideration and approval of this minute order would be appreciated.

MR. WILLIAMSON: Members, you heard the information presented. Do you have questions or comments, and do we need to have any dialogue amongst us?

(No response.)

MR. WILLIAMSON: Is there a motion?

MR. HOUGHTON: 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.

MR. BEHRENS: Agenda item number 4 is a discussion item where James Bass will give us a current status on our toll credits and also discuss some possible distribution of toll credits. James.

MR. BASS: Good morning. I'm James Bass, director of Finance at TxDOT.

At the August and October commission meetings from last year, there were discussion items that involved toll credits. Today what I hope to do is present you with some additional information, and along with Mr. Killebrew, respond to any questions that you may have.

To start off, I'd like to provide a little background material, and as the chairman mentioned earlier, toll credits can be earned by states for expenditures they make entirely from non-federal funds for capital improvements to toll roads.

To earn toll credits for expenditures in a particular year, the state must also meet a maintenance of effort requirement. Once earned, these toll credits can be used as sort of a soft match that would allow the federal share to be increased up to 100 percent to the extent that toll credits are available.

An important thing to note is that toll credits are not cash but they serve as an alternative matching mechanism and provide funding flexibility.

Texas has earned just over $153 million in toll credits for 1992 through 2000, and has utilized over $39.4 million of those toll credits, leaving a balance today of slightly over $114 million.

MR. WILLIAMSON: Available to us to be used.

MR. BASS: Correct.

One thing I omitted, the numbers are allocated and credited through the year 2000. We have the ability to increase that through data for 2001 and 2002. Unfortunately, the state did not meet the maintenance of effort calculation for 2003 or for 2004, so under existing rules, we would not be able to get any credit for expenditures in those years.

MR. JOHNSON: James, do you have an estimate on the amount of toll credits that would be obtainable for the years '01 and '02? And why did we not meet the maintenance of effort requirement?

MR. BASS: Well, your first question, I do not have an estimate at this point because we're waiting for information from one of the key players during that time frame that would allow the state to earn toll credits.

MR. WILLIAMSON: And who would that be?

MR. BASS: That would be Harris County Toll Road Authority.

MR. WILLIAMSON: Thank you.

MR. BASS: And that's more so because of us, not a timing issue from them, but we have not sought and received that information from them.

The issue of the maintenance of effort, it looks at the state expenditures for capital improvements in a particular year and compares that to the average of those expenditures of the previous three years.

And there's an exception there. If one of those three years is offline with the other two by more than 30 percent, you can ignore it. We didn't run into that situation, and actually one of our calculations for one of the years -- I believe it was in 2003 -- we were $100,000 short in expenditures from meeting the maintenance of effort requirement.

And some of that just has to do with the fluctuation of expenditures on capital improvements from one year to the next.

MR. WILLIAMSON: Hold on, James.

MR. NICHOLS: Let me ask, please, sir. Part of the maintenance of effort and some of the critical points which trigger states to not be allowed to have those, those are some of the things that we have been requesting, as I understand it, in our federal legislation and the reauthorization. Is that correct?

MR. BASS: Correct.

MR. NICHOLS: Okay. So had that legislation already been passed, we may not have lost?

MR. BASS: It's quite possible we would have met the maintenance of effort in 2003 and in 2004 -- almost certainly for 2003 since we were so close.

MR. NICHOLS: And that just shows what the critical nature of that federal legislation is in the reauthorization.

MR. WILLIAMSON: And as a follow-up to Commissioner Nichols' line of questioning, I just want to make it clear once more, toll credits are not things issued in anticipation of states building a toll road, toll credits are issued after a state has actually made the decision and expended funds to build a toll road.

So improving the federal language to assist the state will in no way be encouraging additional toll road construction -- if you happen to be opposed to it -- because if we don't end up building any toll roads, then it wouldn't matter. But if we do build the toll roads we think we're going to build at the local, regional and state level, it will matter to us in terms of billions of dollars in flexibility. Correct?

MR. BASS: Correct. If local governments make that decision to toll a particular road, this will bring advantages to the state as a whole with funding flexibility.

MR. WILLIAMSON: So like design-build, like federal rail flexibility and the other four pillars of our seven-point federal program, this is very important to the state's financial position in transportation.

And we wish that all of those who are in the audience that intend to contact our two senators -- and I'm sure there are many -- will emphasize that Texas benefits as much from this stuff as it does from the never-ending battle to get more equity -- which we never seem to win that battle, but these battles we can win.

MR. BASS: And from the federal perspective, it doesn't, in theory, cost the federal government. We're not potentially taking federal dollars away from any other state, it's just allowing us more flexibility with the federal dollars that are already allocated to Texas.

MR. WILLIAMSON: To do things faster, better, cheaper.

MR. BASS: Yes.

MR. WILLIAMSON: Which is every bit as important to a Texan as always losing the battle of equity.

I can't resist saying those things for the record.

(General laughter.)

MR. WILLIAMSON: No greater sin than wasted time and wasted energy. Go ahead.

MR. BASS: In the spirit of that, Texas has used toll credits to serve as the non-federal match for both highway and transit projects to date. Other states utilize their toll credits also for the required match of non-federal funds for highways, transportation enhancement and transit projects.

And I believe in the materials you have it lists how some of the other states have utilized their toll credits.

In the earlier discussion items with the commission last year, you wanted to know what interest there was by transit providers in toll credits. A questionnaire to evaluate industry interest was sent to 77 small urban and rural transit operators, and 43 of those, or 56 percent, responded.

They expressed an interest in $12 million in toll credits from those various systems. The important thing is that this $12 million of toll credits would serve as the required match for $46.2 million of project costs to be funded by federal funds.

In addition, the Texas Transit Association recently completed a survey that reflected a need of $3.3 million of toll credits that could be used to secure $12.8 million of federal funds that's currently at risk of being lost.

If you'll recall, I believe in some of the public comments from some of the earlier discussion items, a lot of the local transit providers at times are faced with a very difficult position: they have federal funds that are available to them but they're required to come up with a local match.

And so they're either having to look at their local budget and pull money from some other priority area locally to redirect so they can capture and pull down these federal funds, or reduce services in one area to gain a savings so they can gain access to the federal dollars.

Through the utilization of toll credits, they would not have to rob Peter to pay Paul, if you will, in order to gain access to those federal funds.

And what the survey from the Transit Association said, there was about $12.8 million of federal funds that could be accessed through the utilization of $3.3 million of toll credits.

Another question that arose during the earlier discussion items, and I think maybe the primary point today, was what would some possible distribution criteria be for toll credits for transit projects.

And some potential criteria for your consideration and discussion today, before deciding to award toll credits for projects, would be:

Does the project support regional and local coordination efforts;

Is the project a part of or fit within TxDOT's public transportation plan;

Does it reduce air pollution and/or contribute to attainment plans;

Does it have benefits and/or ties to other health and human services programs;

Does the project generate cost efficiencies;

Does it improve service delivery, making additional services available;

And does the use of toll credits provide an incentive for performance.

And having said that, I'll welcome any questions or comments you'd like to make, and also point out that Mr. Killebrew from the Public Transportation Division is here as well to attempt to respond to any questions you may have.

MR. NICHOLS: Are you providing us information or are you making a recommendation?

MR. BASS: I think since this is dealing with transit projects, I would defer any recommendation or possible recommendation to Public Transportation.

MR. WILLIAMSON: Members, we are going to hear from one witness, Edna Johnson with TTA. Do you wish to hear from her first, or do you want to talk to Bobby first?

MR. NICHOLS: Let's listen to her first.

MR. WILLIAMSON: Okay. If you don't mind, Bobby.

Edna?

MS. JOHNSON: Good morning, Mr. Chairman, members of the Transportation Commission.

For the record, my name is Edna Johnson and I'm the executive director of the Texas Transit Association.

I am pleased to be here before you today to urge the commission to set aside and allow the uses of toll credits for public transit agencies for eligible capital projects which include 5307, 5309, 5310, 5311, JARC and VCR programs.

We are aware that the commission must continue to evaluate funding for the entire transportation arena, to determine whether toll credits and other financial tools would best maximize benefits to the public.

I am here to present this testimony today to ensure that the use of toll credits by public transportation systems does, in fact, provide many benefits to Texans.

When toll credits first became available to transit systems, public transportation systems were able to effectively use the credits in a number of ways that help both local transit agencies and the state to pull down the use of federal dollars.

Toll credits will be used to draw down federal dollars to replace aged and high-mileage transit vehicles. With the added increase in purchasing alternate-fuel vehicles and the increase in cost of operating these vehicles, where many of the propane-operated vehicles are only averaging three to seven miles per gallon, toll credits would allow these transit agencies to continue to purchase vehicles while using their local dollars to operate them.

Another need for toll credits are for transit facilities, vehicle maintenance shops, transit operation facilities and intermodal bus terminals which increase the coordination between the city bus, intercity bus carriers, local taxicabs and used as Amtrak passenger stops, along with planning ahead for when commuter rail does pass through many of our rural communities.

Again, toll credits have been a critical source of match for these facilities and have brought in an economic stimulus to these local areas.

Public transit agencies rely heavily on these credits to access and draw down federal funds to replace and purchase vehicles as well as construct intermodal facilities.

If an operator has to use their current operating monies to match for eligible capital projects, then the result is that service must be cut because there simply are not enough funds available to maintain or grow the existing system and obtain additional funding for capital projects.

Mr. Bass has presented the results of our survey to you, and we strongly urge you now, as we have on prior occasions, to immediately set aside $10 million in toll credits to be used as matching funds for capital projects that have been on the books for FY '03 through FY '05.

And on another quick note, Mr. Russell asked that I address a question that Commissioner Nichols had raised at the last meeting.

Mr. Russell indicated that the TTA's executive committee had approved the position that was laid out on our funding formula. We have surveyed rural and small urban providers, and at this point we offer you this information.

Out of the 38 rural transit systems, 31 support the TTA position, 5 had no comment, and 2 supported the proposed formula.

Out of the 30 small urban transit systems, 23 support the TTA position, 6 had no comment, and one supports the current proposed formula.

And with that, I thank you for the opportunity to appear before you, and should you have any questions.

MR. WILLIAMSON: Does that mean you're going to come back up and comment on the formula when it appears elsewhere in the agenda?

MS. JOHNSON: Well, of course. It will be, I think, next month it's on your agenda.

But toll credits are really, really needed and I can't say enough how much they affect people's lives. The majority of toll credits are for vehicles and that allows the service to continue on.

MR. WILLIAMSON: I apologize. You're right, that is next month.

MS. ANDRADE: Mr. Chairman, I have a question.

MR. WILLIAMSON: Please.

MS. ANDRADE: Edna, thank you so much for coming before us and thank you for everything you do for public transportation.

But I have a question. Give me again the results of your survey.

MS. JOHNSON: For the proposed formula?

MS. ANDRADE: Uh-huh.

MS. JOHNSON: Of the 38 rural transit operators, 31 support our position, 5 I have had no comment from, and 2 support the proposed.

Of the 30 small urban, 23 support our position, and 6 had no comment, and one supports the current proposed formula.

I have found with calling them and talking to them, we're like a big family and everybody supports each other. And it's a tough decision and I understand what you have before you, but everybody kind of just supports each other and wants what's best for each other.

MS. ANDRADE: Thank you.

MR. WILLIAMSON: Or maybe another way of saying that is everybody just wants to leave everything alone. Those are the two perspectives of the same conclusion.

MS. JOHNSON: I think that, no, I kind of find that the systems that are proposed to receive cuts want them to just maintain their funding, and those that are standing to gain -- people want the ones to gain, gain.

I mean, there is huge support, people understand what other people are going through and what it takes to put service on the street. So I find a huge support for one another.

You know, you can look at the numbers, some that have been under-funded, you can see where they need to have the money to grow. Just don't cut them but let's help support the other systems that are under-funded.

And I get little comments here and there that I find are real supportive of each other. Somebody from West Texas goes: I don't know what she's going to do if she gets cut. You know, so I think they support each other.

MR. NICHOLS: I think I kind of found that from your first teleconference. Before we'd have public hearings, people in East Texas would meet, South Texas would meet and West Texas, but when we did the teleconference where everybody from all over the state could have a conversation at the same time, I think people were surprised at the different concerns.

I thought it was very awakening.

MS. JOHNSON: Yes. It's kind of different because, as you know building roads, people in West Texas have it different than South Padre.

MR. NICHOLS: I think we're talking about two different subjects here.

MS. JOHNSON: Okay.

MR. NICHOLS: Unless I'm mistaken. One relates to toll credits and how they're distributed, and I think you were also commenting on urban/rural distribution formula.

MS. JOHNSON: Correct.

MR. NICHOLS: Are we just talking about toll credits here?

MS. JOHNSON: Which would you like?

MR. NICHOLS: I understand. There's an issue with both. I think this one is focused primarily on the toll credits.

MS. JOHNSON: On toll credits, right.

I think the urgency right now is that there is a lot of federal projects that are coming up that people need to apply for, there's a lot of projects that they have that they don't have the local funds. So I think the urgency right now is to release some toll credits for use because they either will not apply for them or they will lose them.

And I just did a survey -- and people hate surveys, as you know -- in March and there are projects out there that they will let go back of the federal dollars.

MR. NICHOLS: I think on the toll credit portion of this issue, I think it's real important for you to know, and others who are interested in this issue, we are very interested in having a formula for toll credit distribution to try to incentivize and fix real needed problems and certainly maximize federal draw-down and increase flexibility with either local or state money.

I think we would have been there a year-and-a-half ago except for the fact that the question going forward on how much toll credits we have is so dependent on the federal reauthorization that the United States Government has been expired, they let it expire a year-and-a-half ago, and we're all in limbo.

MS. JOHNSON: Right.

MR. NICHOLS: We've been thinking for a year-and-a-half that every three months they were going to have a vote. And so they're a year-and-a-half behind on a six-year formula, and it's continuing to mess up our transit.

So I think our commission is very interested in trying to set up something, even if it's temporary, until we know exactly what we've ended up with at the federal level.

MR. WILLIAMSON: Members?

MR. JOHNSON: Mr. Chairman, first of all, I think the issue of toll credits has been one of those that's sort of been off the center of the screen, but it's extremely important and I appreciate your having it in such a prominent place on the agenda.

My sense is that the accrual of toll credits that we have currently is one of those things that's just been sitting there, and as Robert pointed out, we don't have either informally or formally a plan of the distribution or use of those toll credits, and yet year after year or meeting after meeting, the number stays the same.

And there are agencies and providers that would like to qualify or apply for and receive these toll credits because they're very important to what they do, and nothing transpires.

I think you and I have had a personal conversation. I have great empathy for the plight of the rural and the small urban transit providers and their needs, and we've talked about the idea of utilizing toll credits. And I think James Bass's presentation has some bullet points of some excellent ideas that we sort of put as requirements.

You know, the senator appeared here and there's some hard federal money that is not going to be achieved unless one of two things happens: we either distribute to the Midland-Odessa Transit Authority maybe $200,000 worth of toll credits, or they come up with the cash themselves.

I don't think it takes a Nobel laureate in economics to realize which is better, a toll credit or cash, from their vantage point. So I have a great deal of concern and sympathy for what they do, and I support that we do come up with a plan. I mean, these $113 million in toll credits has been sitting here for a long time.

I would also urge our agency to: one, make application for the toll credits that we think we've qualified for as a state, but secondly, to track these things and make sure that if there's a time period that we're in danger of not qualifying for the lack of maintenance, that we take our actions into consideration.

Because it's shameful to allow something like that to get away from us, especially considering the small amount of money, James, that you mentioned was the case in that one particular fiscal year.

Please excuse my ramblings.

MR. WILLIAMSON: Anyone else?

MR. HOUGHTON: I just want to ask James a question.

MR. WILLIAMSON: Thank you, Edna.

MR. HOUGHTON: Thank you.

What fund does the money come from out of the displaced match? In other words, the local is not putting up cash, it's coming out of the federal fund. What fund?

MR. BASS: Well, in the case we're talking about here, it's normally from a Federal Transit Association program.

MR. HOUGHTON: There's only so many dollars in that program.

MR. BASS: Correct, and so it doesn't -- as we talked earlier, by using toll credits, it doesn't increase the transit pie for Texas or the highway pie for Texas, we're not pulling from other states, but I think as you heard some of the discussion, it does allow in some cases there may be federal money allocated to the state or to local transit providers, but as you know, that federal money requires some non-federal match.

And in the transit situation, a lot of times the local has to come up with that cash locally, and so this gives them the flexibility to get the money that's already available to them that they might be able to capture and pull down, they can do so now.

MR. HOUGHTON: But it's not an endless pot of money.

MR. BASS: Correct.

MR. WILLIAMSON: I mean, there's an allocation, an appropriation of money. So in other words, if we say here's $300,000 of toll credits, there is no formula for us to do that, we don't have that formula today.

MR. BASS: Right.

MR. HOUGHTON: Is that part of the reauthorization on the transportation?

MR. WILLIAMSON: No. The reauthorization that we try to speak of --

MR. HOUGHTON: I mean, is there dollars in there or is it a separate transit bill that comes out of D.C.? Separate transit bill or is this one bill? One bill, okay. So it is reauthorization, the dollars.

MR. WILLIAMSON: This 114- in credit we've got, we've already got. It won't depend upon whether or not the two senators from the state of Texas pay more attention to the seven point Texas federal program to improve transportation funding to the state, one piece of which is toll credits.

MR. HOUGHTON: So the real issue here is trying to come up with a formula that we distribute these credits equitably across the state.

MR. WILLIAMSON: And there's a little more to the story that we'll get into in just a second. We have another witness who has decided to speak, decided he wishes to offer us his wisdom.

Glenn?

MR. GADBOIS: Good morning. My name is Glenn Gadbois. I'm the director of Just Transportation Alliance.

And I don't want to take a whole lot of your time. Mainly I want to thank you for your generosity with the $114 million that you already have, and you have already dedicated some of that money to a JARC grant for the border colonias area.

I want to personally thank you for being willing to use toll credits to support public transit in this state.

I also want to thank you for your leadership in helping Texas to get more toll credits because as was pointed out earlier, I think that that can be a huge issue for the state of Texas.

Transit, as it has worked thus far, is only going to be a small portion of the overall toll credits you need. As you heard from the surveys, that is not anywhere near the amount of toll credits you have currently. If we start generating as a state a lot more, we will be able to use those strategically to go to discretionary programs from Core Bore to JARC, job access, to some of the new starts for rail, as well as possibly use that to pull down freight rail federal money that this state does not compete very well for now.

And so I am hugely excited and just wanted to come here and thank you folks for your leadership on this. I appreciate it.

MR. WILLIAMSON: Questions or discussion for Glenn?

(No response.)

MR. WILLIAMSON: Thank you, Glenn. And actually, Glenn, I didn't know what he was going to say, but he provided me the opportunity to sort of respond to your question -- thank you -- and to also maybe take some of the pressure off the four of you and off the staff, because as everyone in the department knows, I have been the principal resistor to distributing these toll credits based upon two concerns.

First, that the reauthorization, if it ever occurs, including the seven point Texas plan to improve transportation infrastructure in Texas, it may well be the case that these toll credits can be used for something other than assisting transits to buy buses.

The second reason is from the time I entered the legislature through the time I left the legislature, till the time I came to the commission, to this moment in time, it appears to me that the world of public transit has been relegated to such a seat far in the back of the bus as to not even have received the benefit of leadership on planning and execution, certainly at the same level we plan and execute transportation asset construction.

And there are many people responsible for that lack of leadership: the commissioners here, House and Senate members across the street, governors, and also the agencies themselves and the people who live professionally in the transit world.

And the second reason that I resisted us making decisions about toll credits, John, is because there has not been and there is yet a rhyme or reason for how those toll credits are distributed and what the state's interest is when they are distributed.

For example, how do we define that it's in the state's interest to send toll credits -- and I'm not picking on MoTran, I'm using them because they're the topic of the day -- how do we know that the state's interests were served in permitting them to purchase, help them purchase those buses through that federal program?

What is the impact on our new responsibilities in the health and human services world? What is the impact of doing that on the formula distribution of state and federal funds that we're still arguing about?

So I hear the membership clearly, we're going to move to resolve this because four of you feel strongly that we need to, we'll do it now. But I just warn you and staff, you know, you can keep doing things the same old way and never have a plan, never have a goal, never have a criteria for assessing success or failure, you can keep rewarding the same old way you do business, or you can decide to do business differently and manage for objectives and know what you're doing.

And I think this is part of the whole public transit world that still is a little bit ill defined.

But staff has heard the discussion and heard the members, and Mike, if you'll see to it that we start looking at something concrete on a distribution decision in the next month, that will be fine.

Other comments, members, discussion, dialogue?

MS. ANDRADE: Mr. Chairman, I have a question. So what I'm hearing is that we've resisted or we've held back on allowing these toll credits to move forward for public transportation because we don't have the right formula in place that will ensure us that they're used for the right reasons.

MR. WILLIAMSON: Or a criteria that's objective, whether it's a formula or some other kinds of criteria.

MS. ANDRADE: So then with the urgency on this, we must work on a formula, James.

MR. JOHNSON: Chairman, it occurs to me, after listening to some of the things that you said, that one thing that puzzles me or concerns me is that we are waiting for something that may or may not happen. When do you make the conclusion whether that they're going to be changes, what the changes are?

I hate to use a golfing reference because I know you're not a golfer, but there's a little known thing called a mulligan that occurs in various tournaments and a lot of people get so hung up over the use of their mulligan that they never use it.

And that's what concerns me with these toll credits is that we have $113 million worth of toll credits that have been sitting there, they're not drawing any interest.

We've had numerous requests, most of them, to my knowledge, have complied with the benefit to clean air that's going to provide some alternatively-fueled vehicles which I think, in my way of thinking, is in the best interest of this state and its citizens, and you know, there have not been any distributions.

So I salute what you've done and I think it's a good course of action, and we need to be expeditious about it.

MR. WILLIAMSON: And we shall be.

Okay, thanks for a good discussion item and a good give-and-take, and staff, if you would, react appropriately.

Before we go back, Mike, is Representative Riddle in the audience?

(No response.)

MR. WILLIAMSON: Okay, let's proceed then.

MS. ANDRADE: Mr. Chairman, I have one. Do we have a time line for this as to when they will bring back a proposed formula?

MR. WILLIAMSON: I believe they'll have something for us next month.

MR. NICHOLS: So we'll have an action item?

MR. WILLIAMSON: We'll have something to consider to take action on next month.

MS. ANDRADE: All right. Thank you.

MR. BEHRENS: We'll go to agenda item number 5, our Transportation Planning item. Jim Randall will lay out five minute orders that pertain to the Grand Parkway or the Grand Parkway Association.

MR. WILLIAMSON: Well, is this not the item Ms. Riddle wishes to comment on?

MR. BEHRENS: 5(c).

MR. WILLIAMSON: We don't want to take up 58 until she's here.

MR. BEHRENS: Go ahead, Jim.

MR. RANDALL: Jim Randall, Transportation Planning and Programming Division.

Item 5(a). The Grand Parkway Association was originally created by Minute Order 82325, dated October 25, 1984, for the purpose of facilitating the development of the Grand Parkway, a proposed 182-mile facility from State Highway 146 in Galveston County to Business State Highway 146 East in Harris County.

The department supports the development of the Grand Parkway as a toll facility with full multimodal capabilities.

This minute order authorizes additional funding of $700,000 to complete studies for the development of Segment B of the Grand Parkway from State Highway 288 east to I-45, a distance of approximately 26.2 miles.

Minute Order 108543, dated June 28, 2001, authorized funding of $8.3 million to the association for the development of Segment B from State Highway 288 east to the Galveston County line.

Under a separate agreement between the association and Galveston County, the county provided $1.2 million for the development of Segment B-2 of the Grand Parkway from the Galveston County line east to I-45.

The department and the association have coordinated the development of a comprehensive study of the entire Segment B from State Highway 288 to I-45.

Both Galveston and Brazoria County officials have participated in the early public involvement activities for the project.

Due to public comments to the proposed project study, it is necessary to consider additional alternatives. In order to remain consistent with commission direction and with current Houston-Galveston Area Council planning and conformity efforts, this segment will require revised modeling of the toll and non-toll travel demand analysis.

Staff recommends approval of this minute order.

MR. WILLIAMSON: Members, you've heard the presentation. Do you have questions or comments?

(No response.)

MR. WILLIAMSON: Do I have a motion?

MR. NICHOLS: So moved.

MR. JOHNSON: 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.

MR. RANDALL: Okay, sir. Item 5(b). This minute order will authorize additional funding of $250,000 to conduct studies for the development of Segment C from US 59 in Fort Bend County south and east to State Highway 288 in Brazoria County, a distance of approximately 26 miles.

Minute Orders 107648 and 107649, dated October 29, 1998, authorized total funding of $2-1/2 million to the association for the development of Segment C.

Under a separate agreement between the association and Fort Bend County, the county provided $2.2 million for the development of C-1 and C-2 from US 59 south to the Brazoria County line.

The department and association have coordinated the development of a comprehensive study of the Segment C. A draft environmental impact statement was prepared and a public hearing was held in June 2001.

Since that time, an active Bald Eagle nest was identified in the vicinity of the proposed alignment. A biological assessment will be required to identify and propose mitigation for any impact to the Eagle or its territory.

Again, in order to remain consistent with the commission direction and with current HGAC planning and conformity efforts, this segment will require revised modeling of the toll and non-toll travel demand analysis.

Staff recommends approval of this minute order.

MR. NICHOLS: Let me ask a question.

MR. WILLIAMSON: Are you speaking for the Bald Eagle?

MR. JOHNSON: Some people think those are my relatives.

(General laughter.)

MR. NICHOLS: We're advancing the environmentals to clear these projects as toll roads. Yes or no?

MR. RANDALL: That's correct.

MR. NICHOLS: At what point do we designate them as toll roads?

MR. RANDALL: I'm sure we'll have to get through the record of decision before we'll be able to designate them as a toll road.

MR. NICHOLS: Is that a legal question? Is that the right answer? This is real important. I've got somebody over here.

MR. GORNET: I'm David Gornet with the Grand Parkway Association.

Commissioner, it is the intent in the final environmental impact statement which is being prepared and requires these additional traffic studies, to designate the recommended alignment as a toll facility. That will be done in the final environmental impact statement which is being prepared for Segment C, E, F-1 and all of those.

There is a preferred route identified in the draft, it's recommended in the final, and at that point it's designated as a toll facility.

MR. NICHOLS: The reason I ask the question is that there's various pieces of legislation working over there that have different definitions as to conversion and non-conversion, and I want to make sure that these projects are going to meet each and every one of those and that we don't run afoul.

MR. RANDALL: Yes, sir.

MR. NICHOLS: Okay.

MR. WILLIAMSON: Other questions or comments, members?

(No response.)

MR. WILLIAMSON: You heard the information and the comments of Mr. Gornet. Do I have a motion?

MR. JOHNSON: So moved.

MR. NICHOLS: 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.

MR. RANDALL: Item 5(c) is the one that I believe the representative wants to comment on. Do you want me to move forward?

MR. BEHRENS: 5(d). We'll come back to that one.

MR. RANDALL: Okay, sir. Item 5(d). This minute order tenders a proposal to the association for the development of Segment H and I-1 from US 59 to I-10 East, a distance of approximately 36 miles.

The association and the department have received numerous inquiries regarding the future routing of these segments. Development activities in this potential corridor may limit the department's ability to determine a route that avoids and minimizes impact to the natural environment, citizens and businesses.

Developing Segments H and I-1 will provide continuity to Segments E, F and G in Harris and Montgomery counties, and Segment I-2 in Chambers County.

In order to move forward with project development, these segments need to be analyzed in a comprehensive study. This project will alleviate congestion and improve traffic flow in the north and northeast Houston metropolitan area.

The association would be responsible for providing the corridor feasibility studies, preliminary engineering, environmental studies, traffic and revenue studies, and right of way mapping, including entering all necessary contracts.

The association will submit all contractor invoices to the department for approval and payment. It will also consider any in this corridor feasibility study the alternative of developing Segments H and I-1 as a toll road.

In turn, the department will fund these studies in an amount not to exceed $8 million.

Staff recommends approval of this minute order.

MR. WILLIAMSON: Members, you've heard the information. Do you have questions or comments?

MR. NICHOLS: So moved.

MR. JOHNSON: 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.

MR. RANDALL: Okay, sir. We're going to move on to item 5(e).

This minute order appoints two members to the Grand Parkway Association Board of Directors. Since its creation in 1984, the commission adopted Sections 15.80 through 15.93 of the Texas Administrative Code relating to the creation and operation of transportation corporations.

Section 15.85 states, in part, that the commission will review an individual's application, financial statement and letters of reference and may appoint members of the corporation's board of directors.

The board has nominated Hans C. (Chris) Olavson of Houston for a first term and has submitted the required information to the department.

John Chiang of Houston was originally appointed by the commission in March of 1999 and has been nominated for a second term to the board. He has also submitted the prescribed documentation to the department.

Based upon the review and consideration of all relevant information, as documented and filed with the commission, and based upon the board's recommendation, it appears that the nominees are fully eligible and qualified to serve as members of the board.

We recommend your approval of these two appointments to the Grand Parkway Association Board of Directors.

MR. WILLIAMSON: Members, any questions or comments?

MR. JOHNSON: Might I ask a question of David Gornet?

MR. WILLIAMSON: Please. David, are you out there, still?

MR. GORNET: Yes, sir.

MR. WILLIAMSON: Identify yourself for the record, please.

MR. GORNET: I'm David Gornet, executive director of the Grand Parkway Association.

MR. JOHNSON: Chris Olavson is a former TxDOT employee.

MR. GORNET: Yes, sir.

MR. JOHNSON: Is he currently employed by a consulting engineering firm?

MR. GORNET: No, sir, he is not. He resigned that position about a year ago.

MR. JOHNSON: Thank you.

MR. WILLIAMSON: Did he retire or did he just leave on his own? What's the deal behind Mr. Olavson?

MR. GORNET: Mr. Olavson retired from the department after 30-plus years of service, and was engaged by a local consulting firm to assist them in some of their planning efforts. He's decided that it was not in his financial best interest to continue to do that, and he retired from the consulting firm.

MR. WILLIAMSON: And who is this fellow Chiang?

MR. GORNET: John Chiang is a current board member. He is vice president of Suba Corporation which is a local developer in the Houston region. He has been very effective in helping us with the local politicians; he has frequent communication with them to make sure that we're meeting the goals of the community, and with TxDOT also in meeting TxDOT's goals.

MR. WILLIAMSON: Good board member.

MR. GORNET: Yes, sir.

MR. WILLIAMSON: Other questions, members?

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.

MR. BEHRENS: Jim, if you would, we can now go ahead to item 5(c). We understand the representative won't be able to join us today, and so you can go ahead and lay out that minute order.

MR. RANDALL: Okay, sir. Item 5(c). This minute order will authorize $2.5 million in additional funding to conduct studies for the development of Segments E, F and G of the Grand Parkway from I-10 West to US 59 North, a distance of approximately 52 miles.

A supplemental draft environmental impact statement will also be prepared for Segment F-2 from State Highway 249 to I-45 North.

Minute Order 107844, dated May 27, 1999, authorized $8 million to the association for the development of Segments E, F and G.

Harris County, the association and the department have determined that due to public comments to the proposed alignments of Segment F-2, a supplemental draft environmental impact statement will be needed in order to revisit alternative alignments.

In addition, all the Segments E, F and G will require revised modeling of toll and non-toll travel demand analysis.

Staff recommends approval of this minute order.

MR. WILLIAMSON: David, are you still out there?

MR. GORNET: Yes. David Gornet, executive director of the Grand Parkway Association.

MR. WILLIAMSON: David, Representative Riddle couldn't make it over, she had important business. What would she likely have wanted to make the commission aware of? Do you know?

MR. GORNET: I would like to think that she is appreciative of TxDOT's responsiveness and agreement to go back and revisit this and provide a supplemental draft environmental impact statement that addresses the concerns of her constituents in that area.

And that she is supportive of this minute order so that we can move forward with that project and help alleviate some of the concerns that have been ongoing as people try to plan for their lives.

MR. WILLIAMSON: It seems like she was here a few months ago and was very plain-spoken about some concerns she had.

MR. GORNET: Yes, and she continues to have those issues with where the project may or may not go within her district. And this will allow us to help respond to those concerns that she has.

MR. WILLIAMSON: Okay. Thank you.

MR. WILLIAMSON: Members?

MR. HOUGHTON: So moved.

MR. JOHNSON: 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 say no.

(No response.)

MR. WILLIAMSON: Motion carries.

MR. RANDALL: Item 5(f). This minute order increases the department's Strategic Priority funding participation in the Joe Fulton International Trade Corridor at the Port of Corpus Christi by $5.2 million.

Recently, Governor Rick Perry announced that the State of Texas would commit $5.2 million to allow the port to make critical needed improvements to rail infrastructure. This is part of an effort to better support additional military missions as well as increased commercial traffic at the port.

Your approval to increase TxDOT's participation in the Joe Fulton International Trade Corridor highway project will allow the port to redirect its funds to rail improvements consisting of additional rail yard tracks for loading and unloading of rail cargo and the rehabilitation of existing rail yards.

We recommend approval of this minute order.

MR. WILLIAMSON: Members, we have one person who wishes to bitterly oppose this -- no, I'm sorry -- he's for it. John LaRue.

(General laughter.)

MR. WILLIAMSON: Would you like to hear from John before?

MR. NICHOLS: Sure.

MS. ANDRADE: Please.

MR. WILLIAMSON: Welcome back, John.

MR. LaRUE: Thank you, Mr. Chairman, commissioners. John LaRue, executive director of the Port of Corpus Christi.

And as usual, your staff got all the particulars right on this. The governor was with Commissioner Andrade in Corpus Christi at the port back in March and really took a leadership position on this.

What has occurred is the federal government, through the Department of Defense, over the past eight or nine years has made significant rail improvements at the major forts throughout the United States, and in Texas that would include Fort Hood and Fort Bliss. What they didn't do was make any improvements along the rails or particularly in the public port authorities.

We're trying to correct that through our efforts with our senators and in the House, but the governor stepped forward and made this major investment and it will allow us to double the unloading capability that we have for moving equipment.

As I think you know, both Corpus and Beaumont are strategic ports. There are 13 in the United States, but those two ports handled and continue to handle 40 percent of what has been moved to support our troops in Iraq.

And what we need to be able to do is unload that equipment off the rails quicker as it comes into the port and be able to get it on the ship and over there as quickly as they need it.

So this support and leadership from the governor and from the commission is going to be well used by the port now and in the future, and we thank you for that.

MR. WILLIAMSON: Members, do you have questions or comments for John, a good friend of TxDOT?

MS. ANDRADE: John, thank you for being here. Also, I believe that the port was honored yesterday?

MR. LaRUE: Yes. In fact, our Commissioner Hawley would have been here but she had to go to Nashville to receive an award. Both Corpus Christi and Beaumont were honored by the Army for the Quality Port Award, the only two ports in the United States and in the world.

They survey all the ports they use throughout the world and they were honored at an Army event last night in Nashville. So that's something positive not just for those two ports but for the entire state.

And the commissioner sends her regards. She was actually going to try to get a 5:30 flight out of Nashville to be here, but we convinced her that we could cover it for her.

MS. ANDRADE: Thank you, and congratulations.

MR. LaRUE: Thank you.

MR. JOHNSON: John, over the last few years has the tonnage that comes across the Port of Corpus Christi shown a steady increase?

MR. LaRUE: I would say if you looked at ten years, yes. It's probably a 5 or 6 percent increase every year.

We're still principally a petrochemical port, as you know, handle about 85 million tons of cargo a year. Houston is obviously the largest port in the United States, but Beaumont and Corpus are right there with them.

So we have seen an increase in our general cargo and it is because a lot of it is from the military load-outs, and we're also bringing equipment back.

MR. JOHNSON: Has Whataburger Field had any impact on the port and what has been the impact on the community?

MR. LaRUE: The impact on the community has been phenomenal. The first ten-game home stand which was just completed the other day there averaged over 7,000, and it only holds about 7,000.

It's a beautiful facility. It's right there, as you know, in the port. The port actually owns the land around the stadium, we sold the land for the stadium to the city and the city built it and leased it to Nolan Ryan and his group, and we built the parking lots and have a part of that operation.

So it has been a tremendous success for the entire community and we think it will lead to a lot more development.

Actually, the rail yard that we're talking about is just south of where the parking lots and the ballpark are, and one of the things that has occurred is we have a number of military there on permanent duty doing these logistics. They're given free tickets to the game so they've been getting into all of them.

It's been a tremendous success. Thank you.

MR. HOUGHTON: What's the status of the container facility that you're working with?

MR. LaRUE: We have a memorandum of understanding with a company out of the Philippines called ICTSI which is one of the seven largest container terminal operators in the world. That's in its final month-and-a-half, that agreement.

We expect them to come back to us with a decision, I would say, by probably mid to late May, whether they want to proceed with negotiations.

We have all our environmental permits from the federal government and from the state.

As the chairman was talking about the highway bill, there's another bill there that affects us as much that's called the Water Resources Development Act, WRDA, and Congress hasn't passed one of those since the year 2000 -- they usually pass them every two years.

It came out of Senate Committee and it's on the floor. That has $180 million in it for the Port of Corpus Christi for deepening of our ship channel from 45 to 52 feet, and extending our ship channel to the land where we are building our LaQuinta Container Terminal.

So the pieces are coming together but we're not there yet.

MR. HOUGHTON: Are you involved with the Land Office for financing?

MR. LaRUE: Yes, that's correct. We have been in discussions with the GLO about participating in that project, and they look very positive.

MR. HOUGHTON: Great.

MR. WILLIAMSON: Other questions or comments for John?

(No response.)

MR. WILLIAMSON: Okay. Thank you, John.

MR. LaRUE: Thank you again. Thanks especially to your staff. They've done a great job working with us.

MR. WILLIAMSON: You and your board, the people of Corpus Christi, you all do a great job on transportation. We like working with you.

MR. LaRUE: Thank you.

MR. WILLIAMSON: Jim, do you have a recommendation for us?

MR. RANDALL: Yes, sir. Recommend approval of this minute order.

MR. WILLIAMSON: Members, you've heard the information and you've heard the testimony.

MS. ANDRADE: 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. Congratulations, gentlemen, and best regards from the governor.

MR. RANDALL: Okay, sir. The last item 5(g). This minute order authorizes $18.9 million in Federal Discretionary funds as approved by the Federal Highway Administration. These funds will be used specifically for the development of the 17 projects listed in Exhibit A.

We recommend approval of the projects identified in the FY 2005 Federal Discretionary Program.

MR. WILLIAMSON: So let's have a teaching moment, shall we, Jim?

MR. RANDALL: Okay, sir.

MR. WILLIAMSON: These are earmarks. Is that correct?

MR. RANDALL: Yes, sir.

MR. HOUGHTON: Earmarks?

MR. WILLIAMSON: Not to individuals but by Congress.

MR. HOUGHTON: Do we submit these to Congress?

MR. RANDALL: Yes, sir. We submit them through FHWA; from various sources they're submitted to FHWA.

MR. WILLIAMSON: I think what he means is are these earmarks our ideas or are they the congressperson's ideas.

MR. RANDALL: I believe it's a mixture, sir.

MR. HOUGHTON: It's who?

MR. RANDALL: It's a mixture.

MR. HOUGHTON: A mixture?

MR. RANDALL: Yes, sir.

MR. WILLIAMSON: And is this extra money? Is this free government cheese?

MR. RANDALL: Well, no, sir. Now, this is coming from, I believe, some additional funds that were available that they went ahead and formed earmarks from.

I don't have the exact; Coby might have that.

MR. WILLIAMSON: Is this out of apportionment or is this extra money, Coby?

MR. CHASE: Coby Chase, Legislative Affairs.

If I remember correctly, these come through the appropriations process. Am I right, Jim?

MR. RANDALL: I believe so.

MR. CHASE: So this is in that tricky world where it is, as you've heard me describe before sometimes in painful detail, that a certain amount of money comes to us by formula -- that's what's in TEA-21 and what will be in its successor bill; a certain amount of the money is divided up through appropriations or what is sometimes billed as new money which at the end of the day it really isn't.

These appear to all be from appropriations, and the question becomes -- and follow me here for a second -- it's new money only in the sense that it was never guaranteed to us. It still comes from the Gas Tax that we send to Washington, D.C., and through the appropriations process, if you look at all the money that is divided up, it does not look like it does through the formula process.

We tend to lose money; other states tend to do better than we do in that process.

So it's new money only in the sense that it had never been guaranteed to us before. Does it comprise what we consider to be our fair share of that money? Absolutely not.

MR. WILLIAMSON: That's the point I was getting to. We would be better off if this money were left or sent to the apportionment process.

MR. CHASE: Absolutely.

MR. WILLIAMSON: Thank you, Coby.

MR. CHASE: Sure.

MR. WILLIAMSON: So members, we all on the commission level understand this, but we take these teaching moments to remind our partners and the greater audience that watches the tape that it's very easy to have demonstration projects and earmarks and announce them and get press releases; it's a little bit harder to figure out every year how to deal with the shrinking pie.

Do you have a recommendation for us, Mr. Randall?

MR. RANDALL: Yes, sir. To approve this minute order.

MR. NICHOLS: So moved.

MR. JOHNSON: 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.

MR. BEHRENS: We'll move to agenda item number 6 which will be our second discussion item for today. This item concerns the consultant selection process, and Amadeo Saenz will go through this presentation with you on that process.

MR. SAENZ: Good morning, Mr. Chairman, commissioners, Mr. Behrens, Mr. Simmons.

For the record, I'm Amadeo Saenz, assistant executive director for Engineering Operations.

In December, you the Texas Transportation Commission, adopted your 2005 Legislative Agenda pursuant to the requirements of Transportation Code 201.0545.

One of the positions advanced in the agenda concerns the process you, the members of the commission, believe the department should follow in obtaining the services of private consulting firms to assist the department in the preparation of our project planning and design.

At the meeting of the Texas Transportation Commission in February, the staff provided information related to the department's use of consulting firms to provide professional services in the area of engineering, architectural services, and surveying.

This information was presented as part of the commission's ongoing efforts to have staff identify opportunities to enhance innovation and reduce the cost of planning, building and maintaining our state transportation infrastructure.

During the February commission meeting, the process was presented which TxDOT currently undertakes in the selection of consultant firms, or in most cases consultant firm teams, that will do work for us.

As you recall, the process begins with the department issuing a notice of intent, or an NOI. The interested firms reply with a letter of interest, or LOI. The department then has a consultant selection team that makes a selection of a short list from the firms that submitted their proposals.

And then an interview of those short-listed firms is done, and of course, we evaluate that information and make a final selection, and then negotiations begin with the top-ranked firm.

The commission's legislative agenda includes a proposed alternative process for consultant selection. Representative Sylvester Turner filed House Bill 2673 that outlines the proposed process.

It is important to note that the revised selection process is still qualifications-based. The alternative process would only be applicable to projects with very defined scope of work. The process would bring in elements of both design and also project innovation.

The alternative selection process is still a two-phase selection approach. The firms submit letters of interest, a short list is selected based on qualifications, the short-listed firms then submit proposals. The selection is based on the understanding of the project's scope, the experience of the team, and the ability to meet the schedule, as was done currently.

Two new parts of the selection would be based on design innovation and design cost as shown on the firm's proposal.

The current selection process, as it exists today, can still be used in addition to the alternative process that you have proposed. You could do them under either one, whichever one that we deem necessary.

During the March commission meeting, staff identified the history of the professional service selection process for government entities. In addition, a summary of historical cost studies was also presented.

A discussion of the cost components, including both direct costs and indirect costs was presented as background information.

As part of this discussion, staff also gave a breakdown of the different types of contract payment types and the project fee determination that we use.

In February the commission identified three goals for the department: first, it was your desire to promote and reward innovation; second, it was also your desire for more participation of private sector providers; third, it is your desire to increase the number of minority- and female-owned firms competing for contracts with the department.

To that end, we put together a group of our people that work in the area of the consultant selection process from the districts and the divisions, and these staff met to discuss the goals that the commission members had identified.

And the staff has identified several ideas that I will present for discussion on how these goals might be accomplished, mostly utilizing the existing process that we have today.

MR. NICHOLS: Let me ask a question. On the third one, increasing the number, that was through primary contracts?

MR. SAENZ: Yes, sir. When I talk about competing, for them to compete so that they could be selected as prime contractors.

As with most ideas, these ideas should not be interpreted as changes that we're formally recommending at this time. Some of these we're still requesting a little bit of time to study them a little bit further.

The administration would like to take the opportunity to further evaluate these ideas individually, and where appropriate, test them on selected contracts or selected solicitations before incorporating them into the standard steps or options that go into our current process.

The purpose of this exercise is to meet our responsibility to be vigilant by periodically reviewing how we, TxDOT, spends the state's money and what is provided in return.

Some of the proposed changes we will discuss today may be perceived as significant in comparison to our current process, while others represent only minor adjustments or improvements to what we do today.

We recognize that the implementation of our process involves significant time and resources not only to TxDOT but also the firms throughout the consultant community.

The growing volume of work being outsourced and the time associated with the process have influenced our decisions in the past to modify our process in order to streamline where possible.

Streamline is considered an advantage with respect to bringing the contract on line in much less time, however, over time a repetitive process that may lack incentive to do more than the minimum can create certain disadvantages.

A lot of TxDOT work is made up of repetitive processes that have been refined and perfected through the years of research and also application.

Balance this with a significant volume of engineering work that presents opportunities for all having new ideas, and that's what we're going to present to you today.

In review of our process, we're looking at a way to make these opportunities and ideas more integral to the process in an attempt to increase the overall value of our investment which brings me back to our first goal that we want to promote and reward design innovation.

For this goal, the primary objective is to increase the value of the overall product, whether it is in the selection of an alternative, as part of a route study, or a detailed design that is ultimately constructed and maintained at a cost to TxDOT.

Similarly, we want to reduce the overall cost of design, construction and maintenance of a project but we know that, for example, we may have to pay higher design costs to get a better product that will cost us less to build in the future.

As mentioned before, we want to return some traction to the competitive process but most importantly, to do things while still maintaining a fair and consistent process.

I will discuss some possible changes as they relate to the basic steps of our project selection process, and I'm reminded: we publish a notice of intent; we get a letter of interest; then from that letter of interest group we create a short list; we then either have proposals or interviews, and mostly we do interviews; and from there we select a firm and then of course we issue work.

How these steps are implemented can depend on the contract type being advertised, whether the project is project-specific or whether it's an evergreen contract.

So I'll discuss these steps for the project-specific contracts first. And it's worth to note that of the 167 contracts awarded this fiscal year, only 19 of those contracts have been project-specific, about 11 percent.

This has become a trend over the past four years to gain flexibility to meeting our project schedules, our districts are going with the evergreen contracts so they can have consultants onboard and then issue work orders as the need arises.

The first change considered would be internal to TxDOT. In order to receive approval to proceed with the selection process, TxDOT staff would be required to submit a scope of work and the cost estimate to support the funds identified that they need to do this work.

The scope would still be subject to negotiation and refinement during the negotiation with the selected provider, but the emphasis on the early scope development will assist in more thorough identification of TxDOT's needs and priorities before we initiate the work.

Do we really need to be doing this and do we need to be doing it to this level?

The early identification of scope will allow these needs and priorities to be communicated more specifically to the consultants in the notice of intent so that they can provide better and more focused responses on their letters of interest.

We also plan to review and expand the criteria descriptions and perhaps identify weights assigned to each criteria so that everybody knows what is expected from them in the notice of intent as well as what is the weighting criteria and what are the weights assigned to each weighting criteria.

Currently we have criteria included in the NOIs but we do not include the weights.

The next change considered would be the requirement of a written proposal from the short-listed firms based on the specified format to control size and content. So we've short-listed the firms and instead of going to just an interview, we would request a proposal.

The emphasis of this proposal, though, is intended to be on project approach and innovation. It would also allow for additional information related to project experience, quality control procedures, ability of staff, in addition to the construction cost and the time as appropriate to be able to do the design and then construct the project.

There would also be an interview process. In an interview process the consultant would be given the opportunity to basically come and sell their proposal that they've just presented to us, as well as give the opportunity for our consultant selection team to ask questions.

These changes for the selection and award of the project-specific contracts would obviously require an increase in time for consultants to prepare proposals and also an increase in time for TxDOT staff to review and evaluate these proposals.

As I mentioned, we are only doing 11 percent of our contracts using project-specific type contracts at this time, so this would not really impact us too much.

The other 89 percent, of course are the evergreen contracts. So we also looked at ideas and changes that we could look into the evergreen consultant contract selection process, and we'll cover those next.

Looking back at the beginning of the process for evergreen contracts, we're considering that staff identify one project that is representative of the work anticipated in one or more of the evergreen contracts that they wish to move forward with.

The notice of intent would more clearly identify the needs and priorities as appropriate for the project identified which will allow the consultants again to provide more focused responses.

Again, we also plan to review and expand the criteria descriptions and also identify and give assigned weights for each of them.

For evergreen contracts, the proposal would probably still continue to be optional. These are usually smaller projects, more simple projects, so the proposal would be optional. But the interview presentation would be required where the consultant would come and present in the interview phase their approach and ideas on the development of that selected project that was brought in by the district, and of course, at the same time answer questions that the consultant selection team will pose to them.

After the evaluation and the selection, the contracts are negotiated and executed with one or more of the providers, the identified project -- which we would assume that the project that was identified was one that the district was ready to move and begin with -- would then be awarded to the highest ranking provider and we would then complete negotiations as we normally do.

Another change considered for evergreen contracts affects how major work authorizations could be assigned. This is for evergreen contracts that are already in place.

Let me emphasize that what I describe would not be intended to be for major issuance of every work authorization but for select work authorizations where we see that we could get some benefit from this thing.

Prior to issuing a work authorization for a consultant to begin work on a project, we would issue a work authorization that would give the consultants that we have onboard -- these are contracts that we have onboard -- an opportunity to put together a proposal for a specified project.

I have three contracts in place for three consultants that are doing evergreen work for us in the area of bridge design, we have a bridge design project. We would give them an opportunity to put together a proposal and we're willing to pay for that proposal.

We provide them some hours to prepare this proposal on the particular project we have identified. We will then evaluate those proposals and then award that work to the consultant that provided us the best proposal.

For this proposal it would be very similar to what we asked for in what I talked about prior, we would get them to provide to us their project approach, innovations that they want to bring to the project, as well as their estimated cost of the construction and the time that they estimate it will take to give us this product.

You take all of that, and then based on the proposal that brought us what I would say the best solution, then that project would then be moved forward and assigned to that contract consultant.

Again, we realize that some of these changes would require more time and effort, not only for the consultants but for TxDOT staff as well. At this point in the development of our program, we think that it's an internal investment that is warranted because I think the innovations that will come to us and the improvements that will come to us will outweigh the extra time that we'll have to spend to run the changes in our process.

We will continue to evaluate and refine how these changes might ultimately be incorporated. The process that I just described for where we are working on trying to get the current consultant contractors with evergreen projects to submit proposals for work, we are currently trying it in our San Antonio District, and time will tell to see how that works.

The second part of your goals that I would like to discuss includes more participation of private sector providers.

The objective of this goal, as understood by staff, is to increase the number of contracts or opportunities for firms, primarily small or medium size, to compete for work and gain experience in working for TxDOT, and in addition, increase the number of firms with a share of the dollar volume under contract.

To accomplish this goal, several ideas have been discussed. These ideas are associated with decisions related to project development staging and outsourcing strategies that are made early on in the overall process, prior to requesting the use of a consultant.

One way to increase opportunities is to evaluate more closely the projects to be outsourced and make better decisions about which ones are well suited for evergreen contracts and which ones are better suited for project-specific contracts.

We think that there are opportunities for more project-specific contracts out there. So if we have more project-specific contracts, there's more opportunities for consultants to propose on the different contracts. This will allow us to maybe have more.

A method to provide more opportunities for small and medium size firms to participate is to develop more discipline-specific support contracts.

These contracts might be for hydraulic studies, subsurface utility engineering, traffic engineering, bridge design, et cetera.

Some of our districts, particularly some of our larger districts, are currently utilizing this approach and are seeing very positive results with newer firms participating in the letters of interest submissions and also in the selection.

A negative aspect to this approach is that if you assign work to one consultant, then of course he's responsible for his work, someone has to take and incorporate all the different pieces of the puzzle together as they put their set of plans, but it's something that can be worked on.

Another alternative to increase the opportunities is for the department to internally divide large design projects into design sub-components, select individual contracts for each sub-component, then hire either a project manager or internally manage the project so that each sub-component basically is responsible for putting together their pieces into the final design package. And then the manager will take those pieces and coordinate them.

MR. NICHOLS: Okay. So when we've had some of these what I'd call very large engineering contracts where big chunks of that are subcontracted out maybe to minorities or small businesses, instead what we would be doing, we'd be meaning each of those pieces as a whole.

MR. SAENZ: Yes.

MR. NICHOLS: And then issuing the contracts to the other entities as primary contracts.

MR. SAENZ: Right. We would have individual prime contracts for the components of the design and then we could have one general project manager to oversee and put the package together and get it delivered.

MR. WILLIAMSON: So to put it in a normal person's perspective, instead of issuing a $20 million contract, we might issue 20 $1 million contracts which would permit more smaller firms to compete for those $1 million contracts than they could compete for the $20 million contracts.

MR. SAENZ: Yes, sir, that's correct. Of course, each project would be looked at and you would break up the project so that you could be as efficient as possible, depending on the type of work that needs to be done.

MR. WILLIAMSON: I don't know what direction the commission is going to give you when we get through, but I suspect I know.

One fact I would like your staff to prepare for us in the proposal for actual rule changes next month -- if that be the case -- is a comparison of the overhead and cost between the firms that receive $1- or $2 million contracts with us as compared to firms that receive $15- or $20 million contracts.

I'd like some concept of are we driving the cost down by also driving the work out.

MR. SAENZ: We will prepare that. We have a lot of that information, we just need to piece it together.

MR. WILLIAMSON: Sorry, Robert. Did you have anything else?

MR. NICHOLS: That's it.

MR. SAENZ: The type of projects that I would describe as a typical large design project, such as a $40 million interchange, with this approach we're not depending on one prime to subcontract all the work, however many parts they choose, but TxDOT decides up front how many component parts and consultant firms we will use in the project.

There would be, obviously, an increase in the time required for the various solicitations. There would be some issues with working relationships among team members and ultimate accountability for final work product.

Under our current scenario, we hold the prime provider accountable regardless of the components. Under the proposed scenario, we would have to work something out to make sure that everyone would be responsible for their own part and we would be the ultimate decision-makers as to what needed to be done if something did not go right.

In the ideal scenario under this thing here, the district office would have the resources for TxDOT to act as the project manager and manage the component parts and put the final design package together.

In fact, some of this is currently already happening. I remember in Pharr, when we were doing some of the design in-house, we would contract out simply the traffic control for the project and ask a consultant to give us a traffic control plan. We would then incorporate that into our plans.

If we needed bridge detailing or bridge design or structure design, we would do the same thing. That would be brought in and it would be incorporated into the plans the department was putting together.

Yes?

MR. HOUGHTON: What percentage of our contracts are -- what do you consider large? What's considered large?

MR. SAENZ: We don't have a set definition, but almost 89 percent of our contracts fall under the evergreen type and on the evergreen contract the maximum is $5 million for metro districts and border districts and some divisions, and $2 million for all the other districts. So those are small contracts; we're doing a lot of work with these evergreens.

We can work on coming up with some definitions, maybe looking at some of our past history to identify how projects would fall out for you.

Another idea is to have more evergreen contracts in smaller amounts. This would enable more providers to be selected within a series. Some districts are already using this.

Another idea discussed centers more on enhancing opportunities for small firms or firms new to the process. TxDOT can continue to provide and improve on opportunities to educate these firms in doing business with TxDOT.

And of course, several of our districts are conducting workshops that let the consultant industry know what projects are coming up, what types of projects, what their needs are going be.

Our Business Opportunity Office conducts the seminars and conferences across the state to let people know what does it take to do business with TxDOT. Our Design Division people attend those conferences and try to get people interested in getting on.

The whole key is to try to go and get more people to get into our pre-certification process so that they can do more business with the department.

We've even had some of the smaller companies that have formed and we use them as our poster folks to go out there and help us promote and get more people involved. And the whole key is we're trying to get more firms to want to come and do business with us.

Another idea that we discussed is letting firms know that TxDOT does allow joint ventures. A joint venture is a partnership formed for a limited purpose, in our case, one particular contract.

The joint venture comprises of two or more firms that would join together and basically propose on this prime contract. Each one of them is independent, but together they use their resources are now able to do more of the work as a prime.

The requirement is that all joint venture parties sign the contract and they all take equally 100 percent of the responsibility for the contract.

We would allow probably only one project manager that would coordinate among the joint ventures, but they could have sub project managers.

A joint venture arrangement can provide an opportunity for smaller firms to participate and gain experience through the process as a prime.

As for pre-certification, we don't have joint ventures pre-certified, but if each firm is already certified, then the joint venture itself would also be certified, so they don't have to go through another process.

With respect to the distribution of work, a consistent concern we have is with the possibility of firms winning more work than they are capable of successfully delivering.

As you can imagine, we have 25 districts, each district has a budget, each district is going out and soliciting firms, so we could wind up having enough of an overlap of the same firms being selected statewide that we could have some of the resources of the firm basically be stretched.

One idea that we're considering to address this formally is that we would request the availability and commit