Project Funding Options
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A hundred years ago, there wasn't much discussion about how best to finance the nation's surface transportation system. Most roads back then were local, and intercity roads, which were primarily the domain of private toll operators, couldn't keep up with the demand that vehicles were placing on them. States eventually took up the transportation issue with a little urging from the federal government, and helped build a system that better accommodated longer distance travel. But congestion found a home on these roadways as well, and states found themselves spending great sums of money on systems that couldn't keep pace with demand.
Motor fuel taxes eventually became the primary source of funding state transportation systems – Texas levied its first gas tax, at a penny a gallon, in 1923. For many years, state motor fuel taxes, bolstered by federal fuel taxes, supported the costs of building and maintaining the transportation system.
But states are discovering that this once proven method of financing is falling short of meeting the transportation mission, and they are forced to find other ways of making up the shortfall. Texas has a plan to do that. It involves seeking innovative solutions, private partners and empowering local communities to fill the gap.
Open for Business
While you might not readily associate the phrase "Open for Business" with the Texas Department of Transportation, it is now part of who we are. Transportation solutions will have to be developed cooperatively between TxDOT, local officials who know their areas' transportation wants and needs, and private investors who can provide much needed infrastructure capital.
In fact, TxDOT has already taken the first steps in seeking private investment. The Trans-Texas Corridor is a multi-use statewide network of transportation routes that would allow separate lanes for passenger vehicles and large trucks, as well as for freight railways, high-speed commuter rail and infrastructure for various utilities. With 45 percent of all Texans currently living within 50 miles of Interstate 35—a number expected to grow by the year 2030—TxDOT has begun plans to build a parallel toll corridor called the Trans-Texas Corridor 35. As envisioned, TTC-35 would be built as needed and when financially viable by the private sector.
The word is out that TxDOT is open for business, and the private sector is vying to participate in TxDOT's move to solve the transportation challenge. Interstate 69 is a planned national highway connecting Mexico, the United States and Canada. In Texas, the future I-69 is expected to be developed as part of the Trans-Texas Corridor and would extend from Northeast Texas to Mexico. Two private sector groups have already recognized the potential benefit to helping Texas build this important transportation artery.
Outside participation is crucial. With no significant federal or state funding set aside for the future interstate's construction, a public-private partnership will allow the multi-billion project to be developed as needed, as private sector resources are available and after environmental clearance has been obtained.
Funding Options
Comprehensive Development Agreements
Both TTC-35 and TTC-69 are expected to be built under a Comprehensive Development Agreement model. In Texas, we simply call that a "partnership." With 80,000 centerline miles and 49,000 bridges, and more miles of roadway needed to accommodate future Texans, partnerships between TxDOT, local areas and the private sector will be key to moving Texas into the next century.
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While the term may sound complicated, the concept isn't. CDAs are simply project delivery tools that TxDOT or a Regional Mobility Authority can use to design, finance, construct, rehabilitate, expand, improve, maintain or operate a needed transportation facility. It can take various forms, but the underlying theme is that private sector partners assist the state in getting needed transportation on the ground sooner, with less financial risk to Texans.
Regional Mobility Authorities
A Regional Mobility Authority, or RMA, is formed by one or more counties to manage and finance local transportation projects. An RMA can finance, design, construct, operate, maintain, acquire, expand or extend a project. By taking control of local transportation needs, an RMA can help a community loosen gridlock usually sooner than the state can.
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Pass-Through Financing
Pass-through financing is actually a new financing tool the state created to allow local communities to fund upfront costs for building a state highway project. The state then partially reimburses the community over time by paying a fee for each vehicle that drives on the new highway.
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Tolling
Toll roads provide new funding opportunities for each community. The dollars collected from drivers using the toll roads will go toward paying for the project. After that, the community can then choose to lower the toll and put the money toward maintaining the highway, or it can leave the toll the same and use the revenue for maintenance and construction of other needed transportation projects in the area.
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All this is done without raising taxes or sending locally generated funds out of a region to the state or federal governments.
Financial Incentives
When TxDOT needed to replace an outdated interchange that was struggling to handle the demands of half a million drivers, traditional methods would not fit the bill. Under conventional construction, a project of this size would have taken at least a decade to finance and build, while traffic in the busy commercial area steadily increased. The problem was how to stretch scarce state funding and keep traffic disruptions to a minimum. The answer was found in the proverbial financial carrot that prompted the contractor to build the project faster, within budget, and with as few interruptions for the traveling public aspossible. The Dallas High Five, a five-level interchange at the juncture of U.S. 75 and Interstate 635, was a TxDOT test case for a large-scale project. Using financial incentives that rewarded the contractor for early completion, and financial repercussions for closing needed travel lanes, the 12-story high interchange wasbuilt a year ahead of schedule, on budget, and without any major traffic headaches. Learn more (wmv 32.4 mg) about how TxDOT is moving motorists in the Metroplex.
