RIC WILLIAMSON, CHAIRMAN
JOHN W. JOHNSON
HOPE ANDRADE
TED HOUGHTON, JR.

STAFF:

MICHAEL W. BEHRENS, P.E., Executive Director
STEVE SIMMONS, Deputy Executive Director
RICHARD MONROE, General Counsel
ROGER POLSON, Executive Assistant to the Deputy Executive Director

PROCEEDINGS

MR. WILLIAMSON: Good morning.

AUDIENCE: Good morning.

MR. WILLIAMSON: It is 9:14 a.m. and I call the January 2006 meeting of the Texas Transportation Commission to order here in Conroe and Montgomery County, the birthplace of the Lone Star Flag. It's a pleasure to be here this morning and we thank each of you for being here.

Please note for the record, public notice of this meeting, containing all items on the agenda, was filed with the Office of Secretary of State at 2:40 p.m. on January 18, 2006.

For those of you who attend our meetings each month, you know what's coming next; for those of you who are new to our meeting, we ask that you participate with us. We take this moment to all pull out our phones, pull out our PDAs, our Blackberries, our communication devices, and put them on the silent mode. We'll all do that together where we won't be disrupted by someone's communication device. Thank you very much.

This is the Transportation Commission's first official visit to Conroe. It is our practice to take the commission meetings on the road three or four times a year. This gives us the opportunity to learn firsthand about local transportation projects in an important part of the state, and it gives people who pay taxes in this state the opportunity to see how their state government works each and every day.

We hope that your participation today will give you some insight as to the transportation challenges of this part of the Houston area, and we also hope that you will gain some insight in how we make our decisions, how we discuss problems, and how we try to arrive at solutions.

It is our custom to open our meetings with comments from our commissioners, and we always start with the commissioner with the least amount of tenure on the commission, and in this case I think he's also the youngest commissioner, so we'll start with Commissioner Houghton.

MR. HOUGHTON: Thank you, Mr. Chairman, for giving me my youth back.

I appreciate being here. This is a great venue, and for the hospitality that has been accorded us and myself, I thank you very much.

There's a lot that we'll go over today and I hope it is a fruitful meeting for everyone that is here today, and I again thank you for having us here in Conroe, Texas.

MS. ANDRADE: Good morning. I think I'm going to save my voice for the meeting, but thank you for having us here, thank you for your hospitality, and look forward to hearing your presentation.

MR. JOHNSON: Well, I'll echo the good morning part. It's indeed a great pleasure to be here. I did not have to travel as far as most people to attend. I look around the room and I see a lot of friends and a lot of people who have been so actively engaged in solving the transportation issues that we have around the state, and it's wonderful to see you here this morning.

I wanted to thank the local people, especially Judge Sadler and Mayor Metcalf, for the reception that they had for us yesterday, and wanted to say particular thanks to the area office and area engineer, Karen Baker, of TxDOT. Seldom do we get the hospitality that we received here yesterday. We get great hospitality all around the state because no state is as welcoming as Texas is, but yesterday was very special for us in a number of ways, and one of the ways is that it was the chairman's birthday, and so you can wish him a happy birthday a day late if you so desire. At any point you can interrupt the meeting and sing happy birthday if you'd like.

MR. WILLIAMSON: Or we could try to forget that that occurred yesterday.

(General laughter.)

MR. JOHNSON: We'll wait 364 days for the next opportunity. Great to see you here.

MR. WILLIAMSON: I echo the comments of my fellow commissioners with regard to the thank you and the recognition of the great staff we have here in the northern end of the Houston District. Karen does a great job.

And Mayor and Judge, we appreciate your hospitality, and Judge, we particularly are appreciative of a county commissioners court with a vision to look ahead and say this is what we have to do today to solve a problem that will occur 20 years from now. I think your leadership and the leadership of your commissioners is admirable for the entire state, I mean that sincerely.

What we will do next is listen to the direct comments from public officials across this area before we start the formal part of our meeting, and I don't know what the preferred agenda is for local leadership, but it is my preference to ask my former colleague and good friend and great state senator, and soon to be agricultural commissioner, Todd Staples, to illuminate whatever needs to be illuminated for us and to take it wherever you choose to take it.

SENATOR STAPLES: Mr. Chairman, commissioners, thank you very much. I'll do my best on illumination here this morning. Happy birthday. I didn't realize that. I'm not going to lead in a happy birthday song, I'll tell you that. But it is a pleasure.

I do want to thank the commission for being in Montgomery County here today and being in Senate District 3. This is a dynamic part of our state, it's a growing part of our state, it's represented here today in Montgomery County, all the way to Smith County, and then Northeast Texas, and there's a lot of projects.

I thank you for using the tools that you have helped develop with the legislature the last few years to meet the needs of a growing Texas right here in this region of the state. The pass-through tolling projects that the local leadership here in Montgomery County have worked on, the RMA that was developed in Smith and Gregg counties, these are things we know that have to happen in order to meet the needs of a growing population.

Texas today has 22 million Texans; we're going to have 40 million Texans plus, if our state demographers are right, by the year 2050. We cannot wait to meet those needs in the future, they have to be met today, and you're doing that. And I know with growing there are growing pains, but I've got to tell you, I would much rather work on those growing pains than work on issues like New York and other states have with a declining population and trying to meet those needs.

We're growing today and this last legislative session, these members with former Commissioner Robert Nichols, helped me, as chairman of the Transportation Committee, that I think developed legislation that will move our state forward. We thank you for your commitment, for your timeless efforts to get things done, and I appreciate the leadership of the elected officials that are represented here today from Smith County, from Montgomery County, from all of East Texas, for their willingness to roll up their sleeves and get the job done.

Thank you for making good things happen for our state. We appreciate it.

MR. WILLIAMSON: We appreciate your kind remarks, Senator.

Ted, anything?

MR. HOUGHTON: Senator, thank you very much for your leadership, and they were tough decisions, but those decisions now are being looked at, emulated all over the United States as Texas as the model and your chairmanship of the Transportation Infrastructure Committee of the Senate, and I thank you very much, I can't tell you enough. And I think Mike Behrens and Amadeo, in Washington, D.C., and everyone is pointing to Texas as the model now as to a lot going on down here and emulating the things that we do.

SENATOR STAPLES: You've got a great team put together, and I think that sends the right message, and it's economic development, it's all of those things. We heard testimony in our committee where Texas businesses chose not to expand in Texas and move those jobs to other states because of congestion and delay, and you are addressing that, and that just bodes well for our state.

MR. HOUGHTON: Thank you for your support.

MS. ANDRADE: Senator, thank you for your leadership, thank you very much.

SENATOR STAPLES: Thank you, Commissioner.

MR. JOHNSON: Senator, I guess I'm going to repeat a lot of what you've heard, but working with you over the last two terms in the Senate and what we've been able to accomplish -- and you've been a leader, especially as chairman of the Senate Transportation Committee, for establishing a lot of that -- and it was not an easy road to pave in certain instances, and you were always a true stalwart for getting solutions to where there seemed to be no light, and I'm deeply appreciative.

I did notice that in order to stay as close to the situation as possible, we've had to infiltrate your office via a marriage proposal.

SENATOR STAPLES: And it's beyond me, as hard as we worked, how that would have time to develop.

(General laughter.)

MR. JOHNSON: But we're going to miss you, and I'll miss you personally, but I know the state is going to be very well served in your capacity when you're elected as agricultural commissioner.

SENATOR STAPLES: Thank you, Commissioner, appreciate that.

MR. WILLIAMSON: Thank you, sir.

SENATOR STAPLES: Thank you, Mr. Chairman.

MR. WILLIAMSON: How do you wish us to proceed, Karen? Okay, so Gary Trietsch will take it from here.

Well, let me just make a sidebar remark. Todd Staples is a great transportation senator, but you're blessed actually with an unusual situation in Montgomery County and the counties touching you: you have two state senators and three House members, all of whom, in the face of some fairly sharp criticism about decisions we had to make, have been steadfast in adopting the laws that are necessary for this state to reduce congestion, improve air quality, bring economic opportunity to the state, make our roads safer, and preserve the value of our system.

Tommy Williams has been a great advocate of transportation, as has Mr. Hope and Mr. Eissler and Mr. Otto, John Otto -- all three have been good House members for the state of Texas transportation system.

Gary Trietsch, our great district engineer, Houston, Texas. Mr. Personality.

MR. TRIETSCH: Mr. Personality, sometimes.

MR. WILLIAMSON: We had dinner last night and his wife made a passing comment that will stick with me the rest of my life.

MR. TRIETSCH: And I will repeat that. She introduced herself as Gary Trietsch's personality, which is very true.

MR. WILLIAMSON: In front of 200 people.

(General laughter.)

MR. TRIETSCH: She's done more than that, Chairman.

We do want to thank you for attending here. The county of Montgomery and the folks of Montgomery County and the city of Conroe have helped out, and I think, as you said, had a warm welcome.

Our dinner last night, which was kind of a potluck supper in the garage at the area office, perfect time of year, perfect type of weather. At least it wasn't in July with no air conditioning. Karen has some presents, if you want to distribute those.

MS. BAKER: Just a small memento of your meeting here in Montgomery County and Conroe, and it's an honor to have you here. And a belated happy birthday to you.

MR. WILLIAMSON: Thank you.

MR. JOHNSON: Thank you, Karen.

MR. TRIETSCH: You each got a pickup. Did you get District 12 on there?

MS. BAKER: No.

MR. TRIETSCH: Well, that's good enough; it will work for any district.

I would like now, it's kind of grown into our custom to do a video -- now it's not videos, it's DVDs -- and as you met the folks in the Montgomery County area office, I have a great staff all up and down the line that do marvelous work. And with that, Janelle, if you'll show our DVD -- that just doesn't sound right -- film.

(Whereupon, a video was shown.)

MR. TRIETSCH: Karen Baker is the only person I know that can look good in a hard hat.

With that, I'd like to first introduce Judge Sadler, Montgomery County judge, he's got a few comments, and then following him will be the mayor of Conroe, Tommy Metcalf.

JUDGE SADLER: Good morning, commissioners. Good morning, Mr. Chairman.

MR. WILLIAMSON: Good morning.

JUDGE SADLER: I think we've heard thank you about 85 times over the last ten minutes, but I'm going to make it 86 times. Thank you so much for coming to Conroe and Montgomery County. This is a big event for this county and we do appreciate it.

Before I go any further, several commissioners couldn't make the event last night. I'd like to introduce the other four members of the best commissioners court in Texas. Mr. Mike Meador, where are you? Right over here we have Precinct 2 Commissioner Craig Doyle, Precinct 3 Commissioner Ed Chance, and Commissioner Rinehart, Precinct 4, Porter, Texas. Thank you for coming.

One thing I want to talk about, we all know that the day of just federal funding passed down to the counties, those days are pretty much over. We cannot continue with pay-as-you-go like we've done in the last 50 years in Texas.

You all, including Senator Staples -- Senator, are you still here? He had to leave -- you are the ones that came up with these innovative methods of financing, commissioners, the pass-through tolls, the toll roads. Toll road is not exactly a great word in Texas, but you're exactly right, that is the reality we have to face. And as long as we have toll roads where you have an alternative free route, I have no problem with that. It is very innovative and it is a reality we have to face, and we accept that.

I want to also thank Steve Simmons. Steve, where are you? Steve, thank you.

I want to conclude my brief comments today to tell you about a new committee we have on public transportation. We have Steve Sumner here, and Julie Martineaux. If you all would stand up, please. These people are looking at the public transportation needs in Montgomery County. This has been an area we've talked about for ten years, nothing has been done. We do have Brazos Transit in Montgomery County that's done a great job with our park-and-ride lots. We probably need to expand that. Through HGAC we're doing a study on public transportation needs, Mike. We'll be getting back with you on what those needs are, but we will be asking you to please earmark about three-quarters of a million dollars for these public transportation needs, as per the study we're getting ready to do with HGAC.

But I want to conclude again, for the 98th time, thank you for coming here to Montgomery County.

MR. WILLIAMSON: Thank you, Judge.

(Applause.)

MAYOR METCALF: Mr. Chairman, commissioners, it's indeed a pleasure to be here today to really tell you something that you already know, it's how good a people that you have on your staff in this Houston District. Your Houston District are people that in the past two years since I've been mayor have worked diligently to make a difference in Conroe and Montgomery County, and I would be remiss if I didn't mention them specifically.

The first person I'd like to mention is your leader, Gary Trietsch. Gary is a very able and capable leader, he has great people underneath him. The two people that I'm most familiar with at the Houston office are Gabe Johnson and Pat Henry. But it's not without Gary's leadership that great things are being accomplished.

And also I'd like to specifically mention Karen. Karen, as you well know, runs the Conroe office, and Karen Baker is a credit to you, a credit to Gary and the Houston District. She shows bold leadership in what she tries to do with the limited amount of funds that she has available, but that's good bold leadership in both Gary and Karen and what they're trying to do here in Conroe and Montgomery County.

And I wish Senator Staples was still here, but I know he's a busy man, but that's another person that has done a great job to help you as commissioners in your job. He has bold leadership, and that's the reason why he's going up in the state, that's the reason why instead of being our senator for the next coming few years, he's going to be our agricultural commissioner, and I hope one day he's our governor of Texas because that's the type of bold leadership that we need in this state.

And I would also be remiss, Mr. Chairman, if I didn't mention one of your commissioners specifically, and that's Commissioner Johnson. Commissioner Johnson is a great tribute to your commission. He represents the whole state of Texas very well, but I've gotten to know him in the last year or two on his bold leadership.

And Commissioner Johnson, thank you for this lapel pin that you gave me, I'm going to wear it very proudly, because it's a pin that your great commission I think has commissioned. And I just want to thank all of you for coming to Conroe and Montgomery County and your bold leadership.

MR. WILLIAMSON: Well, thank you, Mayor, thank you for your kind words.

(Applause.)

MR. TRIETSCH: And I would conclude with a statistic, the engineer that I am, that I saw Alan Clark sitting in the audience, and I just did read one of your reports that in 2035, 30 short years from now -- and it gets shorter all the time -- this county's population will be over three-quarters of a million people. I think that tells you that Karen and I have job security as long as we can hold up to it.

With that, again I appreciate your coming, and the door is always open. Any questions?

MR. WILLIAMSON: Thank you, Gary, thank you for the presentation.

Just so the audience will be aware of how we do things, the next few minutes we'll be approving the meeting minutes of the last meeting and we'll be taking up what we call routine matters, and then we will enter our first discussion item, and after that discussion item we will take a break which will permit those of you that need to go on to other things to leave, or whatever else you need to do.

I need to make you aware that if you are going to testify on a specific matter on the agenda, I need for you to fill out one of the yellow cards -- you can find them on the desk in the lobby -- and please specify the agenda item upon which you wish to speak. If you don't wish to speak about a specific item but you want to offer comments at the end in our general comment period, you can fill out the blue card, and again, that can be found on the table in the lobby.

Members, the first thing on our agenda is the approval of the minutes for December 15, 2005.

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.

Mike, it looks like we've got aviation and public transportation.

MR. BEHRENS: That's correct. Thank you, Mr. Chairman.

We'll go to our aviation item for the month of January, and this is to recommend funding for airport improvement projects throughout Texas. Dave?

MR. FULTON: Thank you, Mike. Commissioners, for the record, my name is Dave Fulton, director of the TxDOT Aviation Division.

This minute order contains a request for grant funding approval for six airport improvement projects. The total estimated cost of all requests, as shown on Exhibit A, is approximately $7 million, approximately $2.7- federal, $3.7- state, and $700,000 in local funding.

A public hearing was held on December 14 and no comments were received. We would recommend approval of this minute order.

MR. WILLIAMSON: Dave, are any of these grants going to this airport here in the Conroe area?

MR. FULTON: I don't believe so, no, sir. We have a very large planned project and we're building an air traffic control tower here as well.

MR. WILLIAMSON: But we could have made headlines.

(General laughter.)

MR. WILLIAMSON: Members, you've heard the explanation by staff. Do you have questions?

MR. HOUGHTON: So moved.

MR. JOHNSON: I have one observation, and it's about the local airport.

MR. JOHNSON: Dave, I know you've taken a very keen interest in the local airport. I had a little time yesterday and drove over there and visited with Judge Sadler last evening about it, and it's great to see what's going on. It's becoming a mini economic engine for this area and it's a great resource not only for Conroe and Montgomery County but some of the surrounding areas, and I take particular delight in the role that TxDOT Aviation Division has played in getting it to where it is.

MR. FULTON: Well, thank you, but I think the real credit, as always, goes to the community support, the leadership here, and the airport management which is excellent.

MR. JOHNSON: Second the motion.

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 is our public transportation item. We have three minute orders under that topic and they'll be presented by Eric Gleason.

MR. GLEASON: Good morning.

The minute order in front of you, the first minute order of the three, awards federal funds under the 5310 Elderly and Persons with Disabilities Program to public transportation operators across the state of Texas who provide elderly persons and persons with disabilities transportation.

The Exhibit A details out the specific awards included in this minute order for a total of $7,392,000. I will make a note that the amounts that we are awarding are a combination of Fiscal Year 2006 federal apportionments plus some remaining balances from last year.

The one note to make in addition to that is that the federal amount in here was on the basis of a December 20, 2005 publication in the Federal Register by the FTA. Subsequent to that, Congress did pass the 2006 Defense Appropriations Act which included a 1 percent recision that will affect these funds.

MR. WILLIAMSON: And a recision is a reduction?

MR. GLEASON: That's correct.

We have not yet received the revised amounts from the FTA and so the minute order addresses that by saying that when we do get those revised amounts that we will revise the amounts in here on a pro rata basis.

We would recommend approval.

MR. WILLIAMSON: Members, we have three matters of public transportation that come right in a row, and we have our worthy colleague, Ben Herr, from the Texas Transit Association, who wishes to comment.

Mr. Monroe, if it's okay with you, I'd like to leave pending, let him lay out all three, and then let's take Ben's comments, and then we'll vote in order.

Go ahead and lay out, if you don't mind, the other two.

MR. GLEASON: The second minute order awards federal funds from the FTA Nonurbanized Program, the 5311 program, to rural transit districts for rural public transportation.

Consistent with the formula that was adopted by the commission last year, the total award to the rural transit districts included in this minute order is just over $13.1 million. The funds are distributed among all of those districts per the allocation formula adopted by the commission, and again, these funds are also subject to the 1 percent recision when it does go into effect, and accordingly, we would reduce the amounts shown in Exhibit A per the formula once we do have that amount of money.

MR. WILLIAMSON: Do you happen to recall when did we adopt that formula? Was it recently?

MR. GLEASON: I believe it was in May or June of last year. And the Public Transportation Advisory Committee is considering changes to that formula that we would anticipate bringing before you in some proposed rules in March.

MR. WILLIAMSON: Very good. And then item 3? We're going to ask all our questions at once.

MR. GLEASON: Item 3?

MR. WILLIAMSON: Yes.

MR. GLEASON: All right. The third minute order authorizes allocation of unobligated funds to small urban and rural transportation operators for replacement of fleet. The minute order awards $643,000 to a variety of different small urban and rural providers to help them replace their aging fleet. These funds actually have become available to us because previous awards, the projects have been completed and we have some unspent dollars, and so we are re-obligating them to the next set of needs in the system, and so we recommend your approval.

MR. WILLIAMSON: Members, in keeping with our habit of the past, if we have a witness, we prefer to hear from that witness before we question our staff, so with your indulgence, I'll ask Ben Herr. Please identify yourself, sir.

MR. HERR: Thank you, Mr. Chairman, commissioners. My name is Ben Herr. I'm the executive director of the Texas Transit Association in Austin. The Texas Transit Association represents the large urban, the small urban and the rural transit providers in the state. I'd like to comment this morning in favor of all three minutes orders, the public transportation minute orders.

I've just returned from a regional transit conference where I had the opportunity to speak with officials from the FTA, and they told us at that conference that the 2006 federal funds would be available to the states very soon. Knowing that these funds have not yet been released by the FTA, the Texas Transit Association appreciates the proactive stance by the commission and TxDOT in making these funds quickly available to the transit operators once the FTA does release these funds to Texas.

At the conference I also had the opportunity to meet with numerous transit operators and the vendors that provide goods and services to the public transportation community. In our discussions, the importance of federal funding was very evident. These federal funds that are awarded by the commission in these three minute orders have a significant economic impact on the communities that are served by the transit operators and on the businesses in the state of Texas that sell their goods and services to the transit operators.

There is a need for these federal transit dollars throughout the state and awarding these transit dollars by approving these minute orders helps to satisfy this economic need and provide for expanded economic opportunity.

The Texas Transit Association is strongly in favor of these minute orders and would like to thank the commission for making these federal funds available to the transit providers in the state. Thank you.

MR. WILLIAMSON: Members, are there questions of this witness?

(No response.)

MR. WILLIAMSON: Thank you, Ben. We appreciate the role you play in the transportation system.

MR. HERR: Thank you, sir.

MR. WILLIAMSON: Members, we've heard the explanation from our staff on items (a), (b) and (c). I shall take them up in order. Item number (a), do you have questions of staff? Do I have a motion?

MS. ANDRADE: 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.

Item (b), do you have questions of staff?

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.

Item (c), do you have questions of staff?

MR. JOHNSON: So moved.

MS. ANDRADE: Second.

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

(A chorus of ayes.)

MR. WILLIAMSON: All opposed, no.

(No response.)

MR. WILLIAMSON: Motion carries. Thank you very much.

How are you enjoying Texas?

MR. GLEASON: I'm enjoying it quite a bit. I haven't got a chance to travel as much as I want yet, but we'll get there.

MR. WILLIAMSON: Well, we're glad you're here.

MR. HOUGHTON: Have you missed that 30 consecutive days of rain in the Seattle area?

MR. GLEASON: I think it was just 27.

MR. HOUGHTON: I'm sorry, 27. Pardon me.

MR. GLEASON: Yes, just 27, not too bad. I was watching that closely, you bet.

MR. BEHRENS: Thanks, Eric.

Item number 4 is a discussion item, you know, we're a little bit less than a year before the start of the next legislative session, so Coby Chase, who is the director of our Government Business and Enterprises Division, is going to start planting some seeds on what we need to be thinking about for our next agenda for the upcoming legislature. Coby?

MR. WILLIAMSON: And by way of explanation to the audience, Mike, we should probably share the fact that the legislature doesn't normally authorize state agencies to formalize recommendations to them about changes in the law. Several years ago, for whatever reason, the legislature decided that they wished the Transportation Commission to adopt recommendations to them for their consideration on changes to the law. We take that responsibility very seriously.

This is the beginning of the commission's communicating to Ruben Hope and all the other members of the legislature, Rob Eissler, Tommy Williams, whomever you choose to take Mr. Staples place, Mr. Otto, and also to our transportation partners, whether it's Alan Clark in Houston or Michael Morris in North Texas, whether it's Judge Harris in Collin County or Judge Eckels in Harris County, this is the beginning of our communicating what we're going to stand for.

And what I've learned in my four years here is frequently what we at the commission stand for isn't necessarily met with arousing amount of applause by every county judge and every House member and every Senate member and every transportation advocate, and we understand that, but this is one way of avoiding the unfounded accusation that you surprised us, you caught us off guard, you didn't include us in the process, whatever the excuse people have. This begins it so this is a very important part of our meeting, and we hope you'll enjoy listening to the dialogue.

Okay, Mr. Chase, tell us how we should shake up the world a year from now.

MR. CHASE: For the record, my name is Coby Chase, and I'm the director of the Government and Business Enterprises Division of the Texas Department of Transportation.

Thank you for this opportunity to begin what I believe will be a year's worth of appearances on the commission's state legislative proposals, our strategic plan, and our federal legislative priorities.

Because I cannot miss an opportunity to limit my career at every turn, I'm going to go a little bit off script. I couldn't resist this.

I've been with the agency for 12 years, and I have had the benefit of working with a commissioner who is no longer on the commission, Robert Nichols -- who I saw this morning -- and one of the joys of working with Robert Nichols was that he always shot straight with people that he talked to, always without exception. You never, ever didn't know where Commissioner Nichols stood, you never didn't know where your project stood, and you never didn't know how he was going to get it funded if it was ever going to be funded. It was a bit of a shock and awe, but we got used to it and we built it into our business to help those recover from people who were telling them directly the truth.

When he decided to resign to run for the Senate, we thought those days were over, but apparently not -- the governor gave us Ted Houghton.

(General laughter.)

MR. CHASE: And I have always been a great admirer of Robert Nichols, and this is kind of an interesting story, and it will make sense to you if you know Robert Nichols.

I got to know him over the years he was on the commission, and one of the things -- I don't know if everybody knows this, but when you know Robert, it makes perfect sense -- his family, maybe it was his father, maybe his grandfather, or both, made their living by making and selling to all of us the cap guns we used as kids.

MR. WILLIAMSON: The what?

MR. CHASE: Cap guns, bang-bang, pop-pop.

MR. WILLIAMSON: The red rolls with the black powder on them?

MR. CHASE: You were playing with a Nichols cap gun. You go on E-bay, they go for a fortune right now. And you go to his house and if you go beyond all the hunting trophies, there's a big glass case that looks like you could start a war with it but they're cap guns. And I looked at that and said, first of all, I should have kept some of these, and two, it's an impressive collection to those of us whose families let us play with cap guns -- that might not be so true anymore -- and we had a Nichols cap gun.

Well, we found one, we found a Nichols -- I'm going to call it a Saturday Night Special, but an authentic Nichols cap gun, and we didn't know what to do with it until Ted showed up. And so we created the Nichols Straight-Shooter Award for eradicating mythological transportation funding creatures in the false hope they spread. And that's a little bit of an inside joke.

But we had the Nichols cap gun framed for you, and if you don't want to fly home with it, that's okay, we'll mail it to you. No, actually, Ted, it's fine, just get on the airplane with it.

(General laughter.)

MR. CHASE: But it is the Nichols Dynamite model and we found it at an antique toy store in Austin.

MR. WILLIAMSON: Now, is this because he shot the Road Fairy?

MR. CHASE: This is because he shot the Road Fairy in a number of places in the state.

MR. HOUGHTON: Wait until you see what I shoot next today.

(General laughter.)

MR. CHASE: I can't afford any more of these guns, so this is the first and last award.

MR. WILLIAMSON: Well, let's please present that to him.

(Applause.)

MR. WILLIAMSON: We sometimes get locked up in our center and don't recognize that there are people watching or participating who don't know our world, so for those of you who don't and wish to know -- and it may not be any of you -- for the last several years I have been fond of commenting that there is no Road Fairy, that you won't wake up one morning and find $500 million under your pillow to fix Interstate 45, it just doesn't exist. And when Ted came on, he began to carry the tradition on, and John and Hope and Robert, when he was with us, about the Road Fairy.

Well, Ted was in South Texas speaking to a group of articulate and compassionate transportation people who have been waiting a long time for a project. I mean, these people are really compassionate. And just out of the blue he said, Look, there's no way this project is ever going to be built unless it's a toll facility, the Road Fairy is dead. And that was the headline in every newspaper in South Texas: Commissioner Says Road Fairy Dead. So we recognize Ted as the commissioner that shot the Road Fairy.

(General laughter.)

MR. CHASE: You can get me back later, Commissioner, it's okay.

Now let me start out by saying there is a handful of people in the audience -- I would hope everybody but I know not everyone is as enamored of what I'm going to say as much as I am, but there are people who do follow the commission's legislative and strategic plan priorities very closely, and my comments are available from my office, everything that I'm going to say, plus some. We'll be more than happy to share them with anyone and e-mail them to anyone and explain them to anyone. But like I said, I'll probably be up here a number of times between now and December, so there will be a long, healthy dialogue.

I'll begin with the state legislative agenda, but before I dive right into that, I think it's important to note some of the external drivers, so to speak, that define our operating environment. They've been touched on quite a bit here this morning, but let me reinforce some of them.

We are well aware of the growth trends we are expecting for the state in terms of congestion, population, the number of vehicles and vehicle miles traveled. Relying primarily on the gas tax is no longer the best long-term approach to these challenges. In fact, a recent report from the U.S. Chamber of Commerce stated that the Federal Highway Trust Fund could become insolvent as early as 2008, leaving a serious gap in the ability to maintain and improve the nation's transportation system.

I've been working on this issue with the department for almost 12 years now, and I can say when it comes to the gas tax there's nothing really new. Predictably, I hear groups again talking about stopping the reallocation of gas taxes for other uses and seemingly failing to remember that the trend grows and shows no sign of abating.

MR. WILLIAMSON: And by that you mean not only is the habit of transferring state and federal funds from the transportation item to other items of the budget, not only is it continuing but it actually grows every year.

MR. CHASE: Yes.

MR. WILLIAMSON: So while you've got a group on one side saying we need to stop that, the reality is not only is it not stopping, it's increasing.

MR. CHASE: Right. And at some point you just have to stop beating your head against the wall, at least a little bit, and look for other solutions. And that's true on the state and federal level.

I mean, recently all state DOTs were told to slow down or not to spend $2 billion, and Texas's share of that was, off the top of my head, between $150- and $159 million.

MR. WILLIAMSON: So out of the most recent apportionment, the federal government has already reduced that?

MR. CHASE: Yes. All states were hit proportionately. Texas is so large, our share was huge, it was -- I'm just going to round or average -- $155 million.

MR. WILLIAMSON: So $155 million that would have been programmed or has been programmed into our four-year budget has now been removed.

MR. CHASE: Yes. And the way the federal government and state government is so tightly wired, there's not room for emergencies, there's not room for whatever the case may be, hurricanes, so in that case, we all have to take a hit at different places. And I think what I'm pointing out is that we can't rely just exclusively on political bodies to keep sending the gas tax in the right place, and not to put too fine a point on that.

You'll also hear discussions about raising gas taxes or creating local option gas taxes which I believe will not occur at the end of the day -- that's simply my opinion.

The last gas tax hurrah, really, was a six-year effort of, well, Robert Nichols to move the point of collection, and that was a six-year effort. Without going through that entire history, the concept was very simple: all the state had to do was collect tax from higher up in the chain and a few layers of costly fraud would be eliminated. Other states did it which resulted in billions more in combined revenues. That simple move here in Texas brings in more than $110 million a year, and frankly, in my opinion, that is a very conservative approximation.

Taxpayers didn't pay a single dime more, collection paperwork was reduced and more state and federal money was put into the road system. I believe a technical term for that would be a hat trick. But that's really about the last thing you can do with the gas tax.

MR. WILLIAMSON: That's what's called point of collection.

MR. CHASE: Point of collection, yes, sir.

MR. WILLIAMSON: So prior to the legislature moving collection from the retail point at the station to what we call the rack, the terminal, there was conservatively $150 million in fraud somewhere in between, or uncollected taxes somewhere in between there. The consumer was paying the tax when he or she filled up at the Exxon station but the tax wasn't making it to the Transportation Fund.

MR. CHASE: You're exactly right. And it was actually moving it from the distributor to the rack, and it was quite a fascinating six-year lesson in the way you can lose an entire tanker of gas. It's phenomenal what can be done, big money.

MR. WILLIAMSON: Are you going to be making recommendations about additional changes or things we should do? Is that going to be part of our legislative discussion or part of your recommendations?

MR. CHASE: To the gas tax?

MR. WILLIAMSON: Point of collection.

MR. CHASE: No, sir, at this point I do not. I think the process could be streamlined but I'm not making any further recommendations on the point of collection.

MR. WILLIAMSON: Do you have an opinion about that, Robert? Where are you Robert? I know you're out there. Do you have an opinion about any additional changes that can be made at point of collection?

And in fairness, there's no secrets here, we know that Robert is in an election and we know that there are other persons who are in that same election, and we're going to give the opportunity to comment as well because everybody should have their shot, so if Mr. Kleinman or Mr. Denton -- and who is the other fellow?

MR. NICHOLS: That's his job to tell you.

(General laughter.)

MR. WILLIAMSON: If you're here, you will be given the opportunity also to comment, if you wish. It's in all fairness.

MR. NICHOLS: The point of collection issue, the numbers that we had calibrated, both combination state and federal, had saved approximately $1.4 billion to the taxpayers as of January 2005. It was to preserve the integrity to make sure that the taxes that are paid at the pump by the people actually get to the school and transportation system of the state. That's what was picked up; took six years.

Your question has to do with?

MR. WILLIAMSON: Coby indicates we won't be asking the legislature to make any additional changes. Are there additional changes we should make?

MR. NICHOLS: The ones you might consider is to monitor it very closely to make sure that there is not an erosion. Last session there were a number of bills that went in and tweaked that began to erode that process somewhat. Most people are not aware that there are other fuels that do work in big tractor-trailer rigs and stuff, like aviation fuel will work in trucks, has no tax. I'm not talking about taxing aviation fuel, but monitoring the collection and distribution of it.

MR. WILLIAMSON: In other words, there are instances where the consumer thinks he or she is paying the tax and the tax isn't really ending up in the system.

MR. NICHOLS: That's correct. Fuels that are outside the system that get in the system is something that needs to be watched very carefully.

MR. WILLIAMSON: Any other recommendations for us about that?

MR. NICHOLS: The primary is to prevent the continued erosion in that system.

MR. WILLIAMSON: And by erosion you mean legislature going back in and exempting certain --

MR. NICHOLS: Yes. Special interest groups that want to make little changes that benefit them that breaks away the collection of that tax paid by the public to ensure it goes to schools and to transportation.

MR. WILLIAMSON: Who is responsible for collecting the tax? Refresh my memory.

MR. NICHOLS: The Comptroller's Office.

MR. WILLIAMSON: And then from there is it the distributor that seizes it whenever the gas is purchased, or how does that work?

MR. NICHOLS: The way it's set up right now, the way it was set up, the people in the middle sent the tax in to the state. The change that we primarily made, the legislature approved, was the collection at the refinery. Previously there were over 4,000 entities reporting taxes that had to be audited; now there are approximately 33 terminal owners, like Exxon, people like that, that everything is done electronically and automatically wired into the system on computers, internal and external audits. So now there's only 33 to 35 entities that really pay that.

MR. WILLIAMSON: Are they paid or compensated somehow for collecting taxes for the state?

MR. NICHOLS: They are paid. The refinery gets a fee as well as the distributor for the administration of that tax.

MR. HOUGHTON: Let me ask a question, Mr. Chair, on that before you move away from that point. In the old regime, when you received the gasoline, the distributor, how long did he have or she have to pay that tax?

MR. NICHOLS: It's roughly whatever is collected in one month is paid toward the end of the following month, roughly 30 days. That timing mechanism stayed the same. So the amount that the public paid was exactly the same, the amount that the distributor was supposed to pay stayed the same, and the cash flow, the time in his hands was exactly the same, so none of those terms were changed.

MR. HOUGHTON: Why the resistance then? What was the resistance?

MR. NICHOLS: What was the resistance?

MR. HOUGHTON: Why the resistance, in your opinion, to the change?

MR. NICHOLS: The resistance to the change, change creates fear and fear sometimes drives out common sense. There were billions of gallons involved each year, there obviously was money missing, and I'm not going to say that part on the public speaker, but there were funds missing. There were a lot of people, very good, honest, taxpaying citizens that ran their businesses well, that paid their taxes; there were some that did not. The ones that did not hurt the schools, hurt the transportation system, as well as competitively had an unfair advantage to the ones that did pay their taxes well, and the public's money that was entrusted to them was not getting to the schools and to the transportation system.

Likewise, every gallon or dollar that was not reported, we lost at the federal level the same dollar, or 86 percent of it, or now 90 cents.

MR. WILLIAMSON: But fuel distributors, for example, in Conroe, continued to be paid a percentage of the tax?

MR. NICHOLS: Yes.

MR. WILLIAMSON: For, I guess, administering?

MR. NICHOLS: They, in law, several decades ago were allowed 2 percent, they get 2 percent.

MR. WILLIAMSON: Of the gross?

MR. NICHOLS: Of the gross.

MR. WILLIAMSON: Of the gross gallons or gross dollars?

MR. NICHOLS: Dollars of the tax.

MR. WILLIAMSON: So if I sell a million dollars a month gross in Conroe, Montgomery County, I get to keep 2 percent of that just for passing the money along?

MR. NICHOLS: Yes, under state law. That was not something we did. That was something that was already there.

MR. WILLIAMSON: What's the justification for doing that?

MR. NICHOLS: You would almost have to ask the legislature. When you go back and look at the records of when the law was put into place, it was to cover administration costs.

MR. WILLIAMSON: But they don't administer anything anymore.

MR. NICHOLS: That's correct.

MR. WILLIAMSON: Well, why do they get to keep the tax?

MR. NICHOLS: They did not change that portion of it. It's roughly $50 million a month.

MR. HOUGHTON: A month?

MR. WILLIAMSON: My goodness.

MR. NICHOLS: Excuse me. It's $100 million a year.

MR. WILLIAMSON: $100 million a year.

MR. NICHOLS: Yes.

MR. WILLIAMSON: I would think that would be something we would want to put on our list, or at least debate it and air it out and let's let everybody argue about it.

Are there any other things that you want to bring to our attention?

MR. NICHOLS: Related to fuel tax?

MR. WILLIAMSON: Right.

MR. NICHOLS: No.

MR. WILLIAMSON: Again, I am sincere. In the interest of fairness, I want to give everybody the opportunity to give their opinion. If Mr. Denton or Mr. Kleinman -- who is the other fellow -- seriously, we need to give them the opportunity. I can't remember his name.

If you have comments, please --

SPEAKER FROM AUDIENCE: I appreciate the opportunity but I will leave the politics out of it. Thank you very much.

MR. WILLIAMSON: Okay, Coby, go ahead.

MR. JOHNSON: Could I ask, Coby, one enlightenment issue here on the moving of the collection, how many years did the federal government move their collection point prior to the state moving theirs?

MR. CHASE: Well before we did, and I don't remember the exact year that they did it, it was quite a while back. And I remember, though, the alarming part of that was when they moved their point of collection from the distributor to the rack, nationwide they found, the first year, a billion dollars, and that's a very, very conservative estimate, and they stripped away every possibility. Just by removing a layer of fraud, it was a billion dollars, so there is money to be made in that.

My broader point is there might be a little more space to find some money in there, and we'll certainly do it.

MR. WILLIAMSON: Money to be made but who is making the money: the guy collecting the tax from me and not paying it to the state? Is that what you're saying?

MR. CHASE: Yes. And it's interesting, the 2 percent that's paid to distributors is high nationwide. In some states it's as low as zero, in some it's a half a percent. For instance, Foley's -- soon to be Macy's -- they handle millions and millions of transactions a year, and for processing their paperwork they're awarded a half a percent for what they do. Personally, looking at it, I've never really understood why 2 percent is a magic number.

MR. WILLIAMSON: I would think that needs to be on our list.

MR. CHASE: Yes, sir.

As in past years, we have started to poll the districts and divisions for their ideas -- I'm still on the state legislative agenda -- and we will continue that practice started by Chairman Williamson to ask legislators and the state's leadership for ideas as well.

Similar to last year, the agenda will be developed in the open and with an opportunity for the public to comment. While the chairman decides the frequency and duration of my appearances before you, I suspect this will be a reoccurring discussion in the coming months.

I will want to say to the listening audience, and I will try to remember to say this every single time, the staff in my office, led by Jefferson Grimes -- who is here, manager of State Legislative Affairs -- are open to anybody who wants to discuss this at any time and know what we're thinking at any point. There are no secrets.

MR. WILLIAMSON: Yes, no secrets. That's real important.

MR. CHASE: The agency has some research projects underway that I think will later in the year help to crystalize some issues with respect to rail. Our Transportation Planning and Programming Division is trying to determine the feasibility and method for obtaining revenue from freight movements, regardless of mode, and then there's an internal effort that's just started to suggest funding sources for the Rail Relocation and Improvement Fund.

We're about to commence -- I believe we brought TTI, Texas A&M on board to do this -- a temporary tag study, and we've had this discussion before, but those tags, those red-and-white tags you get when you buy a new car, they are very, very easily counterfeited. Anyone of us can do that at home. Police will tell you that they are a complete pain in the neck to them, so to speak, because you can't tell from a distance if that tag belongs to that car, you have to get up and look close to find a dealer's signature, and then you have to call the dealer. They're used in the commission of crimes. There are places that make these and sell them, and there have been a lot of notable, I guess, police busts of these, and it has been brought to our attention that that needs to be made a more secure system.

Also, the legislature required a study of utilities in our right of way and how to maximize the use of highway rights of way by public utilities, and we'll have to submit a written report by the end of the year. Those are in process.

The legislature is also looking, as they do in off-years -- not that they have so many off-years these days -- at interim charges. The lieutenant governor has not yet issued interim charges for Senate committees, the House has, and let me go through some of the ones in the House and then a few others very briefly.

House Transportation actually had its first hearing yesterday, and Commissioner Andrade did an excellent job talking about rail and the statewide rail needs, as did Amadeo Saenz, and Dave Fulton touched on aviation. And if I may say, Commissioner Andrade, we hope to see more of you in that capacity. Thanks for coming down to do that before you came here.

But what the House Transportation Committee will be looking at -- and you'll notice some overlap in some of these things on some of these topics -- they will, too, be looking at utilities and how they are in our right of way, if they should be compensated for being removed from our right of way, and things of that nature --that is a giant issue, the rail fund, funding Proposition 1, the Rail Relocation Fund, and to determine the rail needs around the state.

This one is very important and kind of hard to make it sound glamorous, but I will try, but it is intensely important. This bill got out of the House last session but did not get out of the Senate, I don't believe it even got out of committee, if I remember correctly: county transportation planning.

As the state is undertaking the next generation of Interstates or it's version of the next generation of Interstates, the Trans-Texas Corridor and other very large projects, as our planners will tell you and our people in the field will tell you, a line you draw on the map, when you go and see it, when you go that piece of property you notice how difficult it is when you see businesses that have sprung up along there and the new housing developments without any planning and so forth and so on, and not only does it create congestion before there is even a road, it makes it much more expensive to build that roadway because you have to negotiate to take those properties and so forth and so on.

Legislation that the commission proposed last session and Representative Casteel got through the House last session would put counties in the position of planning for large corridors if they want to, so you don't have developments and hospitals and car dealerships and whatever the case spring up in places where they want to put future roadways. While that can be a painful process, at the end it works very well because you have reserved large corridors for future road use.

And I think everybody in this business knows we wish we had planned for more land and we might not be in some of the situations that we find ourselves in now. Chairman Krusee is taking that very seriously, will take it very seriously, and we'll see how that goes.

Eminent domain, in light of the last era, the Supreme Court decision on condemnation for economic development purposes, the legislature actually did a very good job of addressing that and actually were kind of ahead of the Supreme Court decision, however, that will be a topic of discussion during the interim and we'll be actively engaged in that.

MR. WILLIAMSON: What recommendations will we be making?

MR. CHASE: Regarding?

MR. WILLIAMSON: Eminent domain. I mean, the last couple of years has been dominated by the concern about the width of the Trans-Texas Corridor and the amount of roads we're building. I know in Harris County, for example, we have an issue with the court structure on condemnation hearings. Are we going to be recommending to the legislature that we be limited on eminent domain or on property rights matters?

MR. CHASE: I look at it and it falls along three lines: first and foremost is the court process, second is making sure no harm is done to the state's ability to acquire right of way for roadways, we don't go backwards on that; and then the third is the ability to acquire right of way in advance. It's a three-part approach, it's never just one.

The first is there is a compelling case that right of way cases do get tangled up in a certain level of court jurisdiction, especially here in Harris County. An efficiency argument could be made that it should be spread among more courts. I don't have all the details, I've forgotten then since last session, but there is a compelling case that that takes time and a lot of money and a lot of effort and it holds up projects.

MR. WILLIAMSON: Well, looking at it from the property owner's standpoint, should we be making recommendations to the legislature to strengthen the individual property owner's hand?

MR. CHASE: Absolutely. And I think part of the issue is they have been given more options than they ever had in the past, the ability to sell us an option. What we don't have yet, and I'll mention it here, was the ability to buy the right of way property from a willing seller in advance. That would be nice to be able to do that.

And it's kind of funny, as we're talking about Trans-Texas Corridor 35, there are a lot of discussions around that but I believe at the core of it is we will be acquiring a lot of land through that stretch of Texas, and you see a subset of that discussion is would you just hurry up and tell me so I can go on and plan with this.

MR. WILLIAMSON: Robert, do you have any recommendations to us in that regard?

(No response.)

MR. CHASE: But those are the three areas I see in eminent domain.

The governor, of course, appointed a tax reform commission, chaired by former Comptroller John Sharp, to discuss school financing, lowering property taxes, things of that nature, not that we have an active role in that, but 25 percent of the gas tax does go to fund schools, so we'll be, I guess, actively engaged in watching their deliberations.

There was an eminent domain also in the Senate, I believe a House and Senate committee set up also to look at eminent domain. We're going to be seeing that in a few places. So our guidance on those issues of eminent domain from you will be very important.

And frankly, the one that I find most interesting, and Senator Staples had mentioned it earlier, is the creation of a Transportation Finance Committee. Senate Bill 1713 creates a nine-member commission to study transportation financing. The speaker has appointed his members: Representative Warren Chisum, who is the chair of our appropriations subcommittee; Harris County Judge Eckels; Representative Mike Krusee is the co-chair. The lieutenant governor hasn't appointed his members yet, but the governor has appointed Mr. Houghton, our ringer, Joe Cryer from San Antonio, and William Madden.

And what they will do is they will look at how effective the gas tax is, is it truly able to meet our needs even if it's raised, even if it's stretched, even if it's turned inside out. It will also examine and evaluate expenditures of funds from the State Highway Fund that go other places; it will look at sources of funding for rail transportation projects and possible sources for that; and they will review all of the financing options for all modes of transportation including, but not limited to, motor vehicle user fees, fines, bonding and other debt financing instruments, and they should have all their work done by December 1, 2006.

But I think that's where a lot of the action is going to occur on any improvements in transportation funding and financing, and it's good to see, after at least 12 years in this job -- there may have been things before then -- that it's being given that level of attention. I think this is very positive.

Now, the things that we've discussed internally and publicly at commission meetings that are at least taking the shape of the commission's next set of state legislative proposals are: rail and of course funding the Rail Fund; addressing some issues remaining with bringing over Railroad Commission duties; making sure we have all the tools available to us in railroad planning; being able to spend any other money, such as the Enterprise Fund, grants from the governor's Enterprise Fund for rail relocation or rail matters.

Also at the top of our agenda are toll roads, of course. Whenever a toll road is sold in the state, we should seek the authority to issue revenue bonds for the purpose of acquiring existing toll roads and bridges. If a piece of infrastructure is being sold in the state, transportation infrastructure, it only makes sense that the state agency in charge of that has everything available to it in case it wants to enter the discussion.

We do need to discuss concession terms; we need to visit the cap and the length of concession agreements for the corridor. There's a 50-year cap for toll roads; we can go to 70; if there's a clause then we can just buy it from them after a certain number of years. We like the expanded use of comprehensive development agreements which the shorthand for that is turnkey project delivery for roads that the agency thinks are appropriate and other projects. And if concession fees from concessionaires, when appropriate, should be placed in the Texas Mobility Fund for their use when that decision is made, if that decision is made.

The commission has made a very, very strong statement last December that it is very interested in sobriety checkpoints and improving the safety on our system, and that will be on our state legislative priority list, regardless. I mean, the commission made that very clear in December.

And then one other thing that is fairly new, under federal law the Federal Highway Administration is authorized to delegate environmental oversight to TxDOT, and as we pursue this new federal program that we worked very hard to become a part of in SAFETEA-LU, it needs to be reflected in Texas law how we do that.

The commission's proposals did very well last session but there are some things that will require some more work if we want to continue to pursue them, so I will need some guidance on that, make sure we want to continue to do these -- I hope that we do.

One is professional services procurement. This was, again, speaking about Commissioner Nichols, he had tried his best to introduce price into the selection of engineering contracts -- which if I need to explain that for the benefit of the audience, I will.

MR. WILLIAMSON: By price you mean the proposed charges that an engineering firm would send to the department for their work prior to selecting them as a contractor?

MR. CHASE: Correct, and it's not low bid. It was mischaracterized as a low bid system for procuring engineering, and nothing is really farther from the truth than that. The way the current system works, if you need to hire an engineer to do a hydraulic survey of your property or whatever the case may be, you can call up three engineering firms, you determine they're all three qualified, and you can talk to them back and forth in any order that you want, look at their qualifications, what they're proposing and what they charge you, and you can weigh all three of those and decide which engineering firm you want to do the work on your business or your private property.

The state government, all governments have to --

MR. WILLIAMSON: You were talking about if you were a private sector person.

MR. CHASE: If you were a private sector person, you could compare prices and qualifications.

In government, I'll just say state government, you cannot compare prices. Once you've determined that three -- I'm just using three as an artificial number -- three firms are qualified to do a certain job, you look at the one you believe is most qualified, you enter into discussion with that firm, and once you look at their price and you discuss that price back and forth, if you don't feel that's the best price for the job, if you go to the next engineering firm, you can never go back and talk to the first engineering firm, once you walk through a door, you can't go back. Now, in your private business or in your home when you're hiring such services, you can do that.

I think almost every state operates that way, the federal government operates that way. The question is why and there's never been a very satisfactory answer to that.

MR. WILLIAMSON: So neither price nor value of the entire contract can be considered in negotiating with these engineering firms for the purpose of establishing the best value for the state.

MR. CHASE: Right. You can't line up all three and pick the best value. Once you've decided you didn't like the price of one, you have to go to the next one, and that door is shut and you can't go back.

MR. WILLIAMSON: And the opposition during the last session was the best value would inevitably drive down the cost to the consumer which would permit us to build more roads faster.

MR. CHASE: Yes, and there's never been any true evidence presented that that would drive down quality. I mean, people lose their licenses if the quality is not delivered. I think that's a pretty strong driver there.

MR. HOUGHTON: Now, that doesn't hold true, though, Coby, in the procurement if we procure a CDA.

MR. CHASE: Yes, sir, that's correct.

MR. HOUGHTON: So a CDA which we talk about all the time and we have procured CDAs, the developer then negotiates with the providers within that CDA.

MR. CHASE: Yes, sir.

MR. HOUGHTON: And there will be engineers in those CDAs. Correct?

MR. CHASE: Yes, absolutely correct.

MR. WILLIAMSON: Robert, you were the lead on this. Do you have anything you wish to say?

MR. NICHOLS: The reason we got into the issue at the department was because TxDOT, over the next ten years, was going to contract out approximately $4 billion in engineering contracts and never get a second price. I think most legislators, most citizens are somewhat horrified that we are prohibited by law to get comparisons. The same thing falls true with counties, cities and schools on those types of construction.

The proposals that we had taken and requested the legislature consider -- there was a bill last session -- was to keep the existing system intact for government entities that want to continue using the existing system, but for those who wanted to follow an exception, they could have price proposals that showed innovation of what they were going to design and how much they were going to charge for it so that the government entity, TxDOT or a county or a city, could then look at the actual proposal of the design, how much that would cost, and how much the engineer was going to charge for it.

MR. WILLIAMSON: So you would recommend we pursue this again?

MR. NICHOLS: Absolutely.

MR. WILLIAMSON: Questions members?

MR. HOUGHTON: To get around those, Robert, though in the school districts, cities, counties, the others, they've gone to CMs, construction management kind of projects, and PMs, project managers, that like our CDA procurement, they in turn negotiate those fees and charges.

MR. NICHOLS: The legislature allowed us the opportunity, the department, a few years ago, on a limited basis what you're referring to, the CDAs, comprehensive development agreements, where we could get engineering and construction bid together, so then you could, for the first time, truly compare the proposal and the cost to construct it versus the proposal to design and so on.

MR. WILLIAMSON: Cost to the taxpayer to construct it.

MR. NICHOLS: Yes. And the one project that we were able to do those comparisons on was the major one in the Austin area, the 130, and the difference in the conceptual way it was going to be designed saved that project roughly $200- or $300 million.

MR. WILLIAMSON: Anybody else wish to comment on this discussion item?

MS. ANDRADE: Mr. Chairman, I just have a question of Coby.

Coby, the last time when this issue was brought up, one of the things that I heard was that they weren't given enough time, that they didn't know we were going to bring this, so I'm glad that we're discussing it now so that they know that we are probably going to look at this again.

The other thing that I'd like to make sure is that we hear from the small firms and what I would hear was that it was the small engineering firms that were going to get hurt by this process, so I just want to make sure that we get enough feedback from them too.

MR. CHASE: Absolutely.

MS. ANDRADE: Thank you.

MR. CHASE: And that's a very good point. I had forgotten about that last part, but that's right.

Advance right of way acquisition, I talked about that briefly. Sometimes when a property owner is aware that a transportation project will require some of his or her land, they prefer to unload it sooner rather than later. After all, there's no sense developing the land or paying taxes on it if the government will soon purchase it. In such cases where there's a willing seller, the department ought to be able to acquire the property is likely to need in advance of completion of the environmental work.

Local transportation planning authority, I already discussed that.

Sale of department property. Currently the proceeds from the sale of the department's surplus property are deposited into the General Revenue Fund. A bill that requires such proceeds be deposited back into the State Highway Fund passed the Senate but ran out of time in the House.

Utility reimbursements. Under certain conditions, utilities have the statutory right to be in the state right of way at no charge, but as utilities have to be relocated to accommodate a highway improvement, state law permits reimbursement to the utility for those who possess a compensable property interest -- in other words, they were there before the highway.

However, if the highway being improved is an interstate, interestingly, taxpayers must pick up the tab for moving the utilities whether they have a property interest or not, whether or not they have paid to be there or the state allowed them to be there. However, we could free up more federal money for construction if state law is altered to ensure that relocation of interstate highways are treated the same way as any other highway.

That concludes my discussion on the state legislative agenda portion. At any time in the next year you have something, we're always available.

MR. HOUGHTON: I'm getting feedback, Mr. Chairman, on these speakers. I don't know if they can get that corrected.

MR. WILLIAMSON: It's your dynamic personality.

(General laughter.)

MR. HOUGHTON: One of the things, Coby -- if you don't mind, I'm going to go back a little bit -- you talked about temp tags. Are we losing revenue or potentially losing revenue from unregistered vehicles that never get registered that continue to swap out these tags or for a variety of reasons, or do we have kind of an idea what we're losing as far as revenue?

MR. CHASE: The answer to the first part, are we losing revenue, yes, lost registration fees, late registration fees, things of that nature. Do we know how much? No, we don't. It is kind of slippery, and I think as part of our course of study we're going to look into that. And there are some systems that are very, very simple to use, like Arizona had a very simple system to use that is painless.

I'll be honest, I've approached this more as a safety issue, as a law enforcement issue more than anything else, but there is a component of lost motor vehicle registration fees in the state, and no, we don't have an estimate of what that is.

MR. HOUGHTON: Okay.

MR. WILLIAMSON: Well, $10, a million dollars? I mean, we don't want to, I don't think, invest a lot of resources on a $10 problem, we won't invest a lot of resources on a million dollar problem. So is it bigger?

MR. CHASE: Oh, it would be well over a million dollars, yes. At the off chance I'm disagreeing with my chairman, it is a safety issue in my eyes, it is a law enforcement issue.

MR. WILLIAMSON: So your recommendation to the commission is you need to pursue it because criminals, including potential terrorists, can hide behind the paper tag.

MR. CHASE: Absolutely. If I had a criminal mind -- and let's not discuss that here -- this would be the way to go. It is phenomenal how easy it is to do this.

MR. WILLIAMSON: Well, I think we'll probably pursue that then, but let's move on to the federal legislative agenda.

MR. CHASE: Okay. The federal legislative agenda, for over three years, TxDOT and its partners have fought hard for advances in funding flexibility and innovation in SAFETEA-LU, we've fought for flexibility in how we oversee and deliver many of our transportation programs, and at the end of the day, we were very, very successful.

We must now work with our federal partners throughout the rule-making process to ensure the stability of these gains so we don't go backwards and with our congressional partners throughout the second session to continue to move forward legislatively.

A procedural item I do need to bring to your attention. I would like to request that the commission approve a set of federal goals at its February meeting. This is much shorter than the state legislative agenda process, but Congress, you know, they never shut down, they go on forever, they're starting their next session, and what we will bring to you will tend to be broad in nature, not highly specific.

MR. WILLIAMSON: And you'll be providing that to staff ahead of time, you won't just be bringing it at the last minute.

MR. CHASE: Absolutely, within a week. And if anybody within the sound of my voice or the reach of my e-mail wants to discuss that with us, we will do that, but I don't think there is anything that is going to shock or surprise anybody.

But like I said, what we are doing is we are trying to protect and build on the gains in SAFETEA-LU. Like with design-build contracting, the feds had horribly onerous regulations involved with design-build contracting. Congress told them to rewrite those laws. Thanks to Congressman Burgess in North Texas, he put that into the legislation to streamline that effort and to let states use their own design-build award process.

The Federal Highway Administration will soon, if not already, start drafting rules and we want to be there, and we will be there when we do that. We've already talked to them. As a matter of fact, Mike Behrens was just up there this week, and that was on his list of things that he was talking about.

Private activity bonds. Sam Johnson, again from North Texas, was instrumental in getting this into the legislation to allow tax exempt status for bonds issued with private capital used for roadways and certain rail infrastructure -- I think intermodal facilities, if I remember correctly. You know, it's always been done for schools and airports and stadiums in some cases, and other places, but it's never been used for roads. This is going to be very important for Texas as we're building I-69 especially. I'm not exactly sure how it will fit in with the Trans-Texas Corridor 35 yet, but definitely I think it will be a big element of Trans-Texas Corridor 69.

Of course, there's expanded federal tolling authority. There's some pilot projects put in there and this is, in my professional opinion, the signs that Congress is understanding that the gas tax alone isn't doing it but states that are looking, like Texas, will have the ability to toll new facilities such as 69 or TTC-35. In the case of 69, there's a set number of projects that can be done, and we will be at the top of that list asking for one of those.

Transportation development credits, also known as toll credits, we just simply want to make sure on the federal level that that program is protected and that we can spend those transportation development credits in as many places as possible and they are as open to our local partners as possible.

And what a transportation development credit is and where the change occurred was at one point in years past, not too long ago -- and I hesitate to put a date on it because I can't remember, but it was in my lifetime -- the federal government wanted to encourage the states to build toll roads but they wanted them not to put a penny of federal money in it, and if you built a toll road and didn't put, literally, a penny of federal money in it, you could receive something at that time called a toll credit.

So if you built a $100 million toll road with no federal money, you got $100 million in toll credits, and it could be used as a local match to draw down other federal projects, largely in the state used for transit projects, but it could be used for road projects and other, as I say, important transportation projects.

MR. WILLIAMSON: What you mean is you could use that credit in place of the state gas tax to earn your way into a federal reimbursement.

MR. CHASE: Correct. You do not draw down more federal money but you don't have to put up your state or local money and you can use that and put it into other important transportation projects.

MR. WILLIAMSON: So let's take it down to something personal people can understand. Is it the Brazos Valley Transit Authority that services this area? If they wanted to build an intermodal station in Conroe and if it cost a million dollars and federal funds were available to the tune of $800,000, the state, if it had the $200,000 transportation development credit, could negotiate a deal with Brazos Valley to let them have access to that $200- where they could access the $800- to build the $1 million facility. Is that correct?

MR. CHASE: If there was $800,000 available on the federal level.<