By Ben Wear
The problem is that the Texas Department of Transportation, as you might know or guess, gets its money in a variety of ways — taxes, vehicle registration fees, toll and ferry revenue, borrowed money, reimbursements from the federal government, money transferred from the state general fund or the rainy day fund — and most of that can be rationally attached to the year it is expected to come in. But it spends money on projects over a span of years, after contracting for the full amount in year one, and it pays off those borrowed funds over various time periods ranging from a year to 30 years.
So even after a dozen years of following this stuff, it can be hard to understand certain aspects of TxDOT finance, much less explain them to you good people. But here’s the bottom line with a proposed constitutional amendment, now called Proposition 7, that will come before voters in November and would provide TxDOT with $2.5 billion a year (and rising) of state sales taxes.
Pass the amendment and TxDOT in 2017-18 (the fiscal year in which the amendment would take effect) will be able to award a total of $6.1 billion in construction contracts for new or expanded roads statewide, rising to just over $7.1 billion by 2025-26. Say no, and the agency’s “letting” capacity falls to $4.1 billion in 2017-18 and about $4.4 billion in 2025-26.
The distinction between those two scenarios: about $19 billion over eight years. And the yearly difference, by 2025-26 up to $2.5 billion and still expanding, would continue after that as well.
To refresh your memory, Texas voters last year gave TxDOT’s finances a substantial boost, approving what was called Proposition 1 on the ballot. That constitutional amendment dedicated to TxDOT half of the oil and gas production taxes that otherwise would have gone to the state rainy day fund. In year one — this year, based on 2013-14 tax revenue — that resulted in TxDOT getting an extra $1.74 billion.
Because both oil and gas production and prices have fallen this fiscal year, the prediction is that TxDOT will get a still substantial $1.2 billion in both fiscal 2016 and fiscal 2017 through the amendment. The Legislature this spring also decided to stop using state highway fund money (basically from gasoline taxes and vehicle registration fees) to pay for Texas Department of Public Safety expenses. That will give TxDOT another $650 million a year to spend.
Sounds like TxDOT is suddenly the rich uncle, right? And adding something like $1.9 billion in dependable funding between those measures is not nothing. But that money will substitute, to a great degree, for spending subsidized by TxDOT borrowing over the past few years under three programs approved by voters last decade in other constitutional amendments. The almost $19 billion of spending from those three funds is now basically tapped out.
So, in the session that just ended, the Legislature (with just one dissenting vote in the House and none in the Senate) approved Senate Joint Resolution 5. That proposed amendment, which the Secretary of State recently decided will appear on the November ballot this year as Prop. 7, would give TxDOT $2.5 billion in state sales tax revenue beginning in the 2017-18 fiscal year. Then, starting two years after that, the department would also begin to get a slice of the state sales tax on vehicle sales. That figure likely will grow through the years as car and truck prices rise, and the state’s population (and number of car owners) rises.
The amendment stipulates that the money could be spent only on non-toll highway projects and to make debt payments on $5 billion in TxDOT debt currently backed by the state’s general fund.
That money, if voters approve it, would make a meaningful and lasting difference. TxDOT finance chief James Bass, in a briefing to the Texas Transportation Commission last week, gave them a sort of graphical before-and-perhaps-after of Prop. 7. He showed them a graph of what TxDOT “lettings” (awards of contracts for major reconstruction of roads and for highway expansions) would look like “if you look out the window right now.”
Then, by way of comparison, he showed them what those spending bars would be “if you look out the window in November.” That is, if and when Proposition 7 passes.
The spending, while it wouldn’t set a record (this year, at about $9.6 billion will be the high-water mark of TxDOT contracts), would be consistently high starting in 2017 and gently rise year after year from then on.
Voters in November will decide if that’s what they want to see through their windshields.