DALLAS – Unless Texas lawmakers tap the brakes in 2017, the Texas Department of Transportation appears ready to accelerate a host of major transportation projects backed by record funding levels.
Under the Texas Transportation Commission's 2017 Unified Transportation Program, $70 billion of projects are in development or planned over the next decade. The TTC, a five-member supervisory board for the Texas Department of Transportation appointed by the governor, is the state's largest issuer of bonds, accounting for more than $24 billion since 2005.
Gov. Greg Abbott, who declared transportation funding one of five emergency measures in 2015, said the 2017 transportation plan "will allow Texas roads to keep pace with our population growth, provide much-needed congestion relief for working Texans and put the Lone Star State well on its way towards having a first-in-class highway system for decades to come."
While some state agencies may have to trim spending amid tighter state revenues this year, TxDOT will see an unprecedented level of funding, even as it defends its right to exist in this year's Sunset Review process.
Over the next two fiscal years, revenues for the transportation system are expected to exceed $25 billion, according to state Comptroller Glenn Hegar's recent estimate for the upcoming budget. That represents a doubling of dedicated revenues in a decade.
TxDOT can thank lawmakers who served in the 2015 session for the vote of confidence.
For the first time in the state's history, the 2015 Legislature authorized diversion of sales tax revenue to transportation projects under a measure known as Proposition 7 that received statewide voter approval. After receiving state voters' okay, TxDOT is authorized to receive up to $5 billion over the next two years from sales tax revenue.
For other agencies of the state, the diversion means a reduction in available revenues. Hegar said that a 2.7% reduction in revenue to $104.9 billion is due in part to Proposition 7.
"If not for the new constitutional provision dedicating up to $5 billion in biennial sales tax revenue to the State Highway Fund starting in fiscal 2018-19, projected funds available for general-purpose spending for 2018-19 would be $109.6 billion, 1.7% greater than in 2016-17," Hegar wrote in his revenue report.
Proposition 7 came a year after voters approved Proposition 1, which diverted some of the state's rainy-day fund toward highways. That fund, derived primarily from oil and gas revenues, is expected to generate about $1.2 billion per year for transportation construction.
Annual bond issuance from the TTC, which hit a record $5.5 billion in 2014, tapered to $3.3 billion the following year and $1.89 billion in 2016, according to data from Thomson Reuters.
In the 2015 session, the Texas Legislature authorized the TTC to issue $1.35 billion of general obligation bonds under a measure known as Proposition 12. Prop 12 bonds, authorized by voters in 2007, are backed by general revenue rather than fuel tax revenue.
The recent infusion of voter-approved cash was a relief for an agency whose funding has been traditionally tied to a state fuel tax that has not risen from 20 cents per gallon since 1991. For Republicans who signed pledges to never raise taxes, even increasing the fuel tax remains a taboo in Texas.
In fiscal year 2016, Texas gasoline tax collections were $2.68 billion, an increase of 3.9% from $2.58 billion in 2015. The main factors for rising gasoline demand were the state's growing driving-age population and the significant decline in retail gasoline prices, according to Hegar.
Among the 10 most populous states in the U.S., Texas ranks in the middle in terms of both its gasoline and diesel tax rates. Florida has the lowest rates, while Pennsylvania has the highest.
In a curious twist, diesel fuel tax collections in Texas in fiscal 2016 of $828 million were 3.8% lower than 2015 collections of $861 million.
Hegar's analysts attribute the diesel decline to the slowing state and national economies in 2016. Lower oil and natural gas prices constrained the operations of oil and gas service companies that use large amounts of diesel fuel in both production and transportation, Hegar's report said.
After deducting for allocations to the State Highway Fund, motor fuel tax revenues available for general-purpose spending in the 2016-17 biennium are expected to rise by 3.7% to $1.89 billion from 2014-15, then increase by 3% to $1.94 billion in 2018-19.
In boosting transportation funding, lawmakers added momentum to a major component of the Texas economy, according to Hegar's report.
The combined industries of trade, transportation and utilities accounted for 20% of nonfarm employment in the state in 2016, representing it the largest share.
President-elect Donald Trump's vow to renegotiate the North American Free Trade Agreement could put a damper on Texas trade volume, but the state is charging ahead with plans to further develop trade corridors.
Among the bills the Texas Legislature may consider in this session is House Bill House Bill 869 by Rep. Dustin Burrows, R-Lubbock, which would direct TxDOT to conduct a feasibility study for extending Interstate 27 from Lubbock to Laredo, the state's largest cross-border port of entry.
The bill is backed by the Ports-to-Plains Alliance, a Lubbock-based organization aiming to turn the trade corridor into interstate-grade highway.
Interstate 27's southern end does not link to another interstate highway. At Laredo, I-27 could connect to Interstate 35, the most heavily traveled highway bearing NAFTA traffic.
Burrows told the Midland Reporter-Telegram that Trump's campaign pledge to support major infrastructure spending makes the timing of his bill opportune.
"Ideally, once we have a new president, who called for a large infrastructure package to be delivered from the federal government, I want Texas to be in the best place to potentially highlight this project as one of the opportunities to do infrastructure expansion," Burrows said.
The I-27 proposal comes as another trade corridor, Interstate 69, is advancing from the Rio Grande Valley and stretching across the state's Gulf Coast ports before heading north to Texarkana and beyond. One section of I-69 in Houston is among TxDOT's $1.3 billion of projects that were announced for development a year ago.
Others included expansion and improvements to I-35 in Austin and Dallas, Interstate 820 in Fort Worth and U.S. 281 in San Antonio.
In November, TxDOT was awarded a $285 million federal Transportation Infrastructure Finance and Innovation Act loan to finance a section of I-35E known as the 35Express project from Denton to Dallas. The major artery that traverses nine cities and two counties is a primary commuter link to the University of North Texas and Texas Woman's University in Denton.
"Receiving this TIFIA loan from the federal government is great news for the region and the state," said Texas Transportation Commissioner Jeff Austin III. "The construction cost index—a measure of inflation—is typically much higher than the interest rate on these type of loans, so again Texas is demonstrating that TIFIA is a great tool to deliver necessary road projects now that would cost a great deal more to deliver in the future."