Legislative Interim Report: Eliminate Threats to

Crucial Prop 1 and Prop 7 Highway Funding


The Texas House Transportation Committee is recommending that colleagues pass legislation to eliminate provisions which will lead to the termination of critically important Prop 1 and Prop 7 transportation funding approved by voters.


In an Interim Report to the 2019 Legislature, the House committee makes recommendations on nine charges ranging from the efficacy of existing transportation finance mechanisms to the impact of energy sector activity on state and county roads.


Proposition 1 allocates a portion of the state’s oil and natural gas production tax to the State Highway Fund.  However, this distribution will automatically terminate at the end of 2024 unless extended by a vote of the Legislature.  Proposition 7 annually allocates $2.5 billion of general sales tax to transportation but will automatically terminate in 2032.  A second provision of Prop 7 dedicates a portion of vehicle sales tax revenue starting in September 2019.  It is set to expire in 2029 unless extended.


House committee members are recommending that the termination provisions be removed completely, a position strongly supported by members of the Transportation Advocates of Texas.


The committee makes strong recommendations in support of certain toll roads and toll lanes.  The first is that TxDOT, regional mobility authorities, and local toll authorities should be able to enter into comprehensive development agreements (CDAs) for projects which are not included in TxDOT’s Uniform Transportation Program and which have been approved by a vote of the designated elected local governmental entity or entities, or by a local referendum in the areas through which the highway will be built or expanded.  The 2017 Legislature failed to extend authority to use CDAs to finance and build certain specified large projects.


The second recommendation would add a new layer of approval for toll road or tolled lane projects.  TxDOT and toll authorities would be limited to developing toll projects “which have been approved by a vote of the designated elected local governmental entity or entities, or by a local referendum in the area(s) through which the highway will be built or expanded.”


Many toll operators have implemented system financing which allows the revenues from one toll project to be applied to other projects in the designated system.  The committee recommends that unless local elected officials vote to allow this practice that revenues produced on a project should only be used “to repay the cost of the infrastructure, financing, maintenance and operation until the initial costs have been fully repaid at which time the entity responsible for the toll road should determine the necessary revenue to operate and maintain the roadway and set toll charges at the level necessary to cover those costs only.”


The House committee recommends that a Constitutional Amendment be proposed to allow counties to create Transportation Reinvestment Zones, secure debt financing and use the proceeds as necessary for participating in the cost of highway or local road projects.  TRZs allow incremental growth in property and sales tax revenues to be captured and applied to transportation projects in the zone.

The use of TRZs has been limited in part because counties may face constitutional challenges if they use TRZ revenue to secure bond debt.  The proposed amendment would remove this hurdle.


A conceptual federal infrastructure program developed in 2017 placed strong emphasis on using public/private partnerships to leverage public funds.  In the event such a program becomes a reality, the House committee recommends that TxDOT, Regional Mobility Authorities, and county and regional toll authorities be authorized to enter into comprehensive development agreements, subject to Texas Transportation Commission approval, for projects which are able to attract new federal funding made available through federal legislation and which require public/private partnerships.


The committee recommends that the Legislature designate a reliable funding source to provide road funding to counties impacted by damaging energy sector truck traffic.  A recent study found that in the Barnett Shale, Eagle Ford Shale and Permian Basin between 988 and 1,700 truck loads to develop a new oil or gas well and that hundreds of more trips happen during the life of the well.  Most of this development takes place in locations that are accessible only via county roads.


The committee urges that lawmakers direct the Department of Motor Vehicles to study the most effective mechanism for collecting appropriate road use fees from owners of electric vehicles and the appropriate amount of those fees.


The report points out that there are a number of options for implementing an electric vehicle fee including a gas tax recovery fee which seeks to generate a comparable amount of funds per vehicle as is obtained from the gas tax; a tiered structure of fully electric, hybrid and alternative fuel vehicles; or a road usage recovery fee which estimates the damage caused by the vehicle and applies a relative fee. Each of these could also include an indexing option tied to the consumer price index or other related index to ensure that the value of the fee remains constant in relative terms.


The Senate Transportation Committee has issued an interim report which deals with topics such as funding Texas seaports, highway project acceleration and toll road billing penalties.

The committee concluded that revised budget strategies could accelerate highway project development and delivery.  By law TxDOT must receive prior approval from the Legislative Budget Board to transfer funding among project-related activities such as engineering, right of way, construction contracts, maintenance contracts and construction grants.  The same spending restrictions apply to funding from Proposition 1 and Proposition 7.  The committee recommends revisions to speed up this process.


The committee was asked to make recommendations regarding the possibility of segregating state and federal transportation funding to accelerate project delivery.  The committee found that federal funds do not create project delivery delays.


Both the House and Senate committees looked at the impact of Hurricane Harvey on the state’s transportation infrastructure and rebuilding efforts.  The Senate committee recommends reducing flood risks through improved storm water detention, reservoir management and revised standards to encourage open space preservation that would decrease runoff.  The committee recommends raising the elevation of some high-risk roadway segments and bridge approaches where adjacent land uses and access can be maintained or acquired at reasonable cost.


DOWNLOAD: House Committee Report PDF (2.4 MB)

DOWNLOAD: Senate Committee Report PDF (1.5 MB)

December 19, 2018