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Did The 85th Legislature Go Backward on Infrastructure Funding?

Posted By ACEC Texas, Monday, August 21, 2017

One of the major issues that the Texas business community has focused attention on over the past five years has been infrastructure. What can we do to ensure that a growing state is building the necessary highway projects and water supplies, and how do we put in place the necessary management strategies to meet the demands of growth?

As we stand between the completion of a regular session and the beginning of a special session that is focused largely on social issues, it is worth asking the question: How well did the 85th legislature and the statewide leadership keep the promise on water and transportation?

Unfortunately, the answer is somewhat lukewarm, but there were some positive developments, including the creation of heavy-haul corridors around some of the state’s ports to facilitate the movement of goods, together with the TxDOT Sunset bill, which reinforced the need for outcome-based planning and performance metrics.

On the other hand, several bills that would have improved state water-management strategies were either caught up in political maneuvering between the house and senate, or were vetoed by the governor. These bills included studies on aquifer storage-and-recovery opportunities; the establishment of a regulatory structure for utilization of brackish ground- water; and incentives for seawater desalination.

In the area of mobility and highways, the 85th legislature took at least a pause, if not several small steps backward, on the issues.

In 2010, a group of citizens called the 2030 Committee convened to look at the state’s 20-year transportation needs. The work suggested that the funding gap was approximately $5 billion per year in constant (2010) dollars, coupled with continued reliance on toll strategies to fill part of the gap in metropolitan areas. It is important to note that this estimate was what it would take to keep congestion and road and bridge conditions at a 2010 level not improve them.

So where are we in meeting this goal seven years later? To its credit, the legislature has ceased diverting highway funds for non-transportation needs, allocating approximately $650 million more per year into road projects. Proposition 1 in 2015 allocated a portion of oil-and-gas severance taxes to the State Highway Fund. However, because of the decline in production and prices, what started at about $1.7 billion per year has declined to less than $500 million per year.

Under Proposition 7, passed in 2016, a portionup to $2.5 billion each year of the state’s general sales taxes will go to improving mobility. Interestingly the Legislature chose to put $300 million of those revenues into paying the debt service on existing bonds, rather than putting the funds into new projects.

Finally, the legislature chose to take several toll-road strategies off the table. A proposal was voted down to authorize work on several public-private partnerships, which typically leverage public dollars with significant private investment. Lawmakers also limited Toll Equity Grants, under which state funds are put in to pay part of the cost of a toll facility, expanding the scope of what can be built, leveraging public dollars. It is difficult to put an exact number on the leveraging effect of toll equity and compre- hensive development agreements (CDAs), but a conservative estimate would be that more than $1 billion per year in Texas projects might be foregone that might otherwise have been developed.

So a close look at the progress toward the goal of $5 billion per year, counting forward and backward steps, would be that instead of $5 billion in new revenues (in 2010 dollars), plus continued use of tolling, the current status is around $2.7 billion to $3.2 billion (in 2010 dollars), plus significant limitations on toll projects.

This analysis is not intended to diminish the effort of legislative and statewide leaders to fund infrastructure for the 2013-17 period; however, it should generate skepticism about the idea that this box has been checked. To state that “we put $5 billion into roads and set up a water trust fund, so now these problems are addressed” is plainly and simply not the case.

This effort is not done (and may never be done) as long as our population in Texas grows by approximately 1,000 people per day, and a critical drought may be just around the corner.

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