Part 1.
TEXAS DEPARTMENT OF TRANSPORTATION
Chapter 5.
FINANCE
Subchapter E. PASS-THROUGH TOLLS
43 TAC §§5.51 - 5.59
The Texas Department of Transportation (department) adopts
new Subchapter E, §§5.51-5.59, concerning pass-through tolls. Sections
5.51, 5.53, 5.54, 5.57, 5.58, and 5.59 are adopted with changes to the proposed
text as published in the February 13, 2004, issue of the
Texas Register
(29 TexReg 1316). Sections 5.52, 5.55, and 5.56 are
adopted without changes to the proposed text as published in the February
13, 2004, issue of the
Texas Register
(29
TexReg 1316) and will not be republished.
EXPLANATION OF ADOPTED NEW SECTIONS
HB 3588, 78th Legislature, Regular Session, 2003, enacted Transportation
Code, §222.104. This section authorizes the department to enter into
an agreement with a public or private entity to provide for the payment of
pass-through tolls as reimbursement for the construction, maintenance, or
operation of a toll or non-toll facility on the state highway system by a
public or private entity. A pass-through toll is defined by the statute as
a per vehicle fee or a per vehicle-mile fee that is determined by the number
of vehicles using a facility.
This new program offers the department a new method of financing needed
highway projects. It also offers local interests an opportunity to expedite
the development of a highway that they desire, but that the department is
currently unable to fund. The developer of the project is responsible for
building the facility with its own funds, and has the assurance from the department
that the state will repay the developer through a payment based on the number
of vehicles using the facility or the vehicle miles traveled. If use of that
facility is high, typically as believed by the developer, then the developer
will be paid back at a quicker rate. If traffic is lower than projected, repayment
will occur over a longer period.
The rules prescribe the policies and procedures governing the department's
implementation of Transportation Code, §222.104.
Section 5.51 states the purpose of the subchapter, which is to implement
Transportation Code, §222.104(b).
Section 5.52 defines words and terms used in the subchapter.
Section 5.53 describes how a developer can submit a proposal to the department.
To allow the department and the Texas Transportation Commission (commission)
to properly consider the merits of a proposal and consider the criteria described
in §5.54, the proposal must include: a description of the project; a
statement of the benefits of the project; a proposed project development and
implementation schedule; a description of the qualifications and experience
of the developer; if available, a proposed pass-through toll payment schedule;
a statement indicating whether the proposer intends for the project to be
tolled, and if the proposer intends for a tolled project to be first opened
to traffic as a non-tolled highway, the approximate date on which the highway
will begin to be tolled; and a statement indicating whether the proposer intends
to enter into a comprehensive development agreement, if the proposer is a
private entity. The section authorizes the department and a private entity
to agree to develop a project under a comprehensive development agreement
(CDA) if authorized by law. Rules governing CDAs will governing the solicitation,
advertisement, negotiation, and execution of a CDA.
Section 5.54 lists the factors the commission will consider when deciding
whether to approve a proposal and authorize the department to negotiate an
agreement. To help ensure that a proposal is beneficial to the State of Texas,
the commission will consider the financial benefits of the proposal. Consistent
with the department's historical practices, the commission will consider local
support for the project. To help ensure that the project will benefit the
state's transportation system, the commission will consider whether the project
is in the department's Unified Transportation Program, the extent to which
the project will relieve congestion on the state highway system, and the compatibility
of the proposed project with existing and planned transportation facilities.
To help promote public health, and consistent with state policy, the commission
will consider potential benefits to regional air quality that may be derived
from the project. To help ensure that a private developer will deliver a quality
facility, the commission will consider the qualifications and experience of
the proposer to accomplish the work.
Section 5.55 provides a competitive process for proposals submitted by
private entities, if the proposal has been approved by the commission under §5.54.
The department will publish notice in the
Texas Register
and one or more newspapers for the purpose of soliciting competing
proposals. The section sets out a competitive selection process very similar
to the unsolicited proposal process the commission has prescribed for comprehensive
development agreements. This process ensures fair competition that will allow
the department to select the proposal with the best value to the state.
Section 5.56 provides that the department will submit a summary of the
final terms of a successfully negotiated pass-through toll agreement to the
commission. The commission may authorize the department to execute the agreement
if it finds that the agreement is in the best interest of the state, and that
the project is compatible with existing and planned transportation facilities
and furthers state, regional, and local transportation plans, programs, policies,
and goals. This section is intended to provide another level of oversight
to ensure that the result of the negotiations is positive for the state and
for transportation.
Section 5.57 describes the policies governing the payment of pass-through
tolls. The department will reimburse the developer, through the periodic payment
of pass-through tolls, an amount equal to the department's estimate. The department's
estimate will be developed or updated after receipt of the proposal. It is
an estimate of what it would cost the department to construct the project.
Payment of this amount will ensure that the developer is not overcompensated
for the work. The commission may direct the department to reimburse the developer
an amount less than the estimate if the project's estimated benefits to mobility
do not warrant full reimbursement or the construction will result in a significant
economic gain to the developer. This policy is intended to ensure that the
public's interest is safeguarded. The commission may also direct the department
to reimburse the developer an amount less than the estimate if the developer
proposes to share in the cost of the project. The commission may direct the
department to reimburse the developer an amount greater than the estimate
if the commission determines there will be a financial benefit to the state,
through the avoidance of inflation, as a result of the earlier completion
of the project. The department would pay this additional amount if the project
was developed using traditional methods. Accordingly, the increased payment
to the developer reflects what it would cost the department to construct the
project if a pass-through toll agreement was not used, and ensures that the
developer is not overcompensated for the work. The amount of reimbursement
above the estimate may not be more than the amount of the financial benefit
determined by the commission.
Section 5.57 provides that the payment schedule will be based on the department's
traffic projections and a contract period to be negotiated between the department
and the developer. The payment schedule may include a maximum and minimum
annual amount. A guaranteed minimum will assist a developer in arranging financing
and help ensure that it gets reasonable compensation for delivering a needed
asset. A maximum payment will ensure that the department is not required to
expend an amount of funds in a way that could jeopardize funding for higher
priority projects.
Section 5.57 provides that the developer is responsible for cost overruns
unless the department agrees to share identified cost overruns. This policy
provides some flexibility for the parties to share certain identified risks
in order to prevent an unjust result, yet places the primary responsibility
on the developer. To provide an incentive for developers to participate in
the program and reward them for innovative construction, the section also
provides that the developer is not required to repay the department the difference
between the actual costs and the amount designated in the agreement.
Section 5.57 provides that if traffic volume exceeds projections, the department
will not be responsible for annual payments above the maximum amount designated
in the agreement. If traffic volume is less than projected, the department
will pay at least the minimum amount designated in the agreement. If traffic
volume exceeds projections, the department may agree to reduce the time period
in which the developer is reimbursed the amount designated in the agreement.
If traffic volume is less than projections, the term of the agreement will
be extended until the developer is reimbursed the amount designated in the
agreement. This policy places the burden on the developer to attract traffic,
complete construction of the facility, and keep the facility open by providing
quality construction. It also allows for minimum and maximum payments to provide
for the necessary flexibility discussed previously.
Section 5.58 describes the responsibilities of the developer in developing
and constructing a facility. An environmental review must be completed in
accordance with the commission's rules governing department transportation
projects. The facility must be designed and constructed in accordance with
department standards and criteria unless exceptions are approved by the executive
director.
Section 5.59 provides that a pass-through agreement may provide for a developer
to operate a highway. A developer may operate a highway that it has constructed.
A developer may also propose to operate an existing state highway. Except
as provided in the agreement, the developer is responsible for performing
all of the work required to operate the highway. In performing work, the developer
must meet or exceed the most current Texas Maintenance Assessment Program
minimum rating requirements for non-interstate state highways as established
by the commission. A developer may receive approval to use alternative maintenance
standards if the executive director determines that the alternative standards
are sufficient to protect the safety of the traveling public and protect the
integrity of the transportation system. This section ensures proper maintenance
and operation while providing some flexibility for the developer to be innovative.
COMMENTS
On February 24, 2004, a public hearing was held to receive comments, views,
or testimony concerning the proposed new sections. Several comments were received
from Terry Hughes, representing the City of Weatherford at this hearing. The
City of Weatherford and John Langmore Consulting (JLC) also submitted written
comments on the proposed new sections.
Section 5.52, Definitions
Comment: JLC argued that the rules should allow the option for a pass-through
toll project to be carried out under a comprehensive development agreement
(CDA). JLC suggested adding a definition of "agreement" to read: "A pass-through
toll agreement with an authorized entity, which may include a comprehensive
development agreement as defined in Section 361.302, Transportation Code and
which shall include those provisions set forth in Section 5.58(e) of these
rules."
Response: Under current law, the department may use a CDA with a private
entity to finance, design, construct, maintain, operate, or expand a department
turnpike or the Trans-Texas Corridor. So a private entity developer who is
developing a turnpike or a facility that is a part of the Trans-Texas Corridor
under a pass-through toll agreement may, if agreed to by the department, do
so under a CDA. The department agrees that the rules should be clarified to
acknowledge the possibility that a pass-through toll project may be developed
under a CDA under some circumstances. Instead of doing so through a new definition, §5.53
is revised to allow for proper notification to the commission of the developer's
intent and to provide some explanation to the public. Section 5.53(a) is revised
to require a private entity proposer to submit in its proposal a statement
indicating whether the proposer intends to enter into a CDA. Subsection (a)
is also revised by changing "developer" to "proposer" to be consistent in
terms. A new subsection (c) is added to state, "The private entity and the
department may agree to develop a project under a comprehensive development
agreement if authorized by other law. Notwithstanding any other provision
of this subchapter, Chapter 27, Subchapter A, of this title (relating to Policy,
Rules, and Procedures for Private Involvement in Department Turnpike Projects),
applies to the solicitation, advertisement, negotiation, and execution of
a comprehensive development agreement." This last sentence is added to clarify
that the department's CDA rules will govern a CDA executed as part of a pass-through
toll agreement.
Comment: JLC suggested adding a definition of: "entity" as any public or
private entity authorized to enter into a pass-through toll agreement; "agency"
as a public entity authorized to enter into a pass-through toll agreement;
and "developer" as a private entity that enters into a pass-through toll agreement.
JLC offers these definitions as a method to make the rules easier to follow,
particularly in light of various other JLC suggestions and for the following
reason. JLC argues that the pass-through toll statute, Section 222.104, contemplates
the use of pass-through tolls under two circumstances. Subsection (b) applies
to an agreement with a public or private entity for payment of pass-through
tolls as reimbursement for construction, maintenance, or operation of a state
highway. Subsection (c) applies to an agreement with a public or private entity
for payment of pass-through tolls as compensation for the costs of maintaining
a state highway converted to a toll facility. JLC argued that by defining
a "developer" as either a public or private entity, it becomes difficult to
use the term "developer" in those contexts that apply (or do not apply) solely
to private entities.
Response: The department disagrees with these suggestions. The rules are
intended to only implement subsection (b) of Transportation Code, §222.104.
Section 5.51, Purpose, is revised by adding subsection (b) to the legal cite
to clarify the scope of the rules.
Comment: The term "Department estimate" is defined as an "estimate of what
it would cost the department to complete the work proposed by the developer.
The estimate is developed or updated by the department after receipt of a
developer's request and prior to the time the department executes an agreement
with the developer." JLC argues that parts of the definition are not consistent
with the statute in that the term "estimate" is only referenced in subsection
(c) of the state law. JLC further argues that the definition does not state
by which method the department's cost of construction would be determined.
For instance, an estimate using a CDA may be lower than an estimate using
design-bid-build. JLC suggests revising the term so that it only applies to
the maintenance of an existing facility by a public entity.
Response: The department disagrees with this comment. The statute provides
for the department to "reimburse" the developer. The statute further grants
the commission rulemaking power to implement the program. The department was
obligated to develop a method by which it would determine the amount of reimbursement.
The commission, by rule, chose the department's estimate. This method not
only helps ensure that the department receives fair value and protects the
taxpayer, but it also appropriately places the risk on the developer to design
and build the project efficiently and innovatively. The department does not
agree that it would be practical or beneficial to either the department or
the developer to attempt to describe, by rule, a method by which the cost
of construction will be determined.
Comment: JLC suggested amending the definition of "Pass-through Toll" to
add, "The per vehicle fee may vary by agreement within different bands of
traffic volume and by type of vehicle using the facility."
Response: The department agrees with this comment. This addition will help
to further inform the public and potential proposers of the alternative methods
by which the department may reimburse the developer. The department, however,
does not agree that this revision belongs in a definition. The following language
has been added to §5.57, Payment of Pass-through tolls, under subsection
(b): "Variable payments. The per vehicle fee may vary within different levels
of traffic volume and by type of vehicle using the facility." The department
believes that the term "levels" is more informative than the term "bands."
It is not necessary to say, "by agreement" since the payment schedule and
method is already required to be mutually agreed upon.
Section 5.53, Proposal
Comment: JLC asserts that developers may want to propose a series of projects
in one pass-through toll proposal. The section requests proposers to submit
information on one project. JLC suggests revising the section to allow the
submittal of multiple projects.
Response: The department agrees with this suggestion. This concept may
help expedite the development of multiple projects. Subsection (a) is revised
to allow a proposer to submit a project or a series or projects.
Comment: Subsection (b) provides that, if requested, and unless prohibited
by law, the department will release to the public a proposal submitted under
this section. JLC argues that some pass-through toll facilities may be proposed
as candidates for comprehensive development agreements (CDAs), and that this
provision appears to contradict legislative intent set forth in Transportation
Code, Section 361.3023.
Response: The department disagrees with this comment. The rule provides
"unless prohibited by law" to ensure that the department does not violate
a statute applicable to a particular situation.
Section 5.54, Commission Approval to Negotiate
Paragraphs (4), (6), (7), and (8) were revised to correct non-substantive
grammatical errors.
Section 5.55, Proposals from Private Entities
Comment: Subsection (e) provides that the original proposer may submit
a revised proposal in response to a notice requesting competing proposals.
JLC stated that if a fee is required for the original proposal submitted as
a CDA, it should be clarified that the original proposer is not required to
submit an additional fee.
Response: The department's CDA rules will govern this circumstance. Those
rules only require the proposer to provide a proposal review fee with the
original unsolicited proposal. No change is needed to this section.
Comment: Subsection (h) provides that if an agreement satisfactory to the
department cannot be negotiated with the proposer, the department will formally
end negotiations with that proposer. JLC suggests revising the subsection
to state that the department cannot end negotiations until the department
"has provided clear information in writing to the proposer identifying any
concerns the department may have with the negotiations and granted the proposer
sufficient time to resolve such issues." JLC argues that, "since no pass-through
toll agreements have been negotiated in Texas, it may be difficult for the
parties to assess the other's negotiating position. Given the high costs that
a proposer will incur in submitting a proposal, the department should provide
clear information explaining its concerns and its approach to mitigating such
concerns in sufficient time for the parties to attempt in good-faith to resolve
such issues"
Response: The department disagrees with this comment. While the department
will negotiate in good faith and intends to end negotiations only if necessary,
the suggested language gives a private proposer more rights than a public
proposer has under these rules or a proposer has under the department's current
CDA rules. The language, codified as a rule, could be interpreted to give
a proposer legal rights that could work contrary to the public interest and
lead to litigation. The department must have the ability to end negotiation
at any time at its discretion.
Comment: The City of Weatherford (city) commented that §5.55 addresses
the requirement for a 45-day time frame allowing submission of competing proposals.
The city believes that the section is written such that the provision applies
only to private proposals. However, the city suggested that this section be
clarified that proposals brought by public entities, such as city governments,
are not subject to the competing proposal clause.
Response: The department does not agree that the section needs clarification.
The section is titled, "Proposals from Private Entities." The section further
states that, "If the commission approves the further evaluation of a proposal
of a private entity under §5.54 of this subchapter, the department will
publish notice of that decision and provide an opportunity for the submission
of competing proposals." The rules, therefore, do not subject proposals brought
by public entities to the competition requirements of §5.55.
Section 5.57, Payment of Pass-Through Tolls
Comment: The city commented that §5.57, which addresses payment of
pass-through tolls, needs clarification. The city stated that it would be
helpful for an entity, either public or private, to understand the source
of funds that will be used for the payment. In order for an entity to enter
into an agreement, particularly a public entity, substantial assurance that
the funds will be available for payment beyond the current appropriations
period is necessary. In addition, assurances that the agreements entered into
under the current administration will not be subject to termination should
administration change occur in future years is desirable. The city requested
that agreements entered into with any public or private entity be written
into the appropriations as an obligation of the commission, and that such
obligation cannot be removed until such time as the terms of the agreement
are met.
Response: The department disagrees with these comments. The rules have
been drafted to allow for maximum latitude in using legally available funds.
It is anticipated that all agreements under these rules will be negotiated
so as to be mutually beneficial, and it is the department's intent to include
termination provisions that are fair to both parties. Constitutional restraints
make it impossible to provide any assurance that future legislatures will
appropriate the necessary funding. Article 8, Section 6, of the Texas Constitution
provides that no appropriation may be made for a period longer than two years.
The state may enter into a long-term binding agreement to pay out appropriated
funds only if payment is conditioned on the availability of appropriated funds.
Because appropriations are made by the legislature and not by individual agencies,
the rulemaking process is not the forum in which to request specific appropriations.
Comment: Subsection (a)(1) provides, "Except as provided in paragraph (2)
of this subsection, the department will reimburse the developer, through the
annual payment of pass-through tolls, an amount equal to the department estimate."
JLC argued that the requirement of "annual" payments limits flexibility in
negotiating agreements.
Response: The department agrees with this comment. To provide greater flexibility,
the word "annual" is revised to "periodic."
Comment: Concerning this same subsection, JLC argued against using the
estimate as the basis for compensation. JLC asserted that this could significantly
impair investors' and lenders' interest in the development of projects. Their
ability to recover their costs and earn a reasonable return on their investment
would be governed not by actual costs, but by estimates prepared by the department.
JLC further asserted that the concern about the developer being overcompensated
for the work is addressed appropriately by the department requiring competitive
bids, and that the lowest cost offered by a fully competitive marketplace
should drive the developer's compensation, not an estimate of what it should
cost.
Response: The department disagrees with this comment. The commenter paraphrased
the statute in an earlier comment as authorizing agreements that provide for
the payment of pass-through tolls to the public or private entity as "compensation."
The statute actually says "reimbursement." To reimburse "actual" costs would
be impractical for both the department and the developer, and would require
tremendous department oversight. The department continues to be of the opinion
that reimbursing the developer an amount equal to the department's cost to
do the work is the most fair, practical, and effective method to implement
the program. This method not only helps ensure that the department receives
fair value and protects the taxpayer, but it also appropriately places the
risk on the developer to design and build the project efficiently and innovatively.
Comment: The section provides that the commission may direct the department
to provide for reimbursement in an amount less than the department estimate
under certain circumstances. JLC argues that it would be very difficult for
both the private and public sector to obtain financing for a pass-through
toll project if the department has the ability to unilaterally reduce the
amount of reimbursement after the agreement has been executed.
Response: The department disagrees with this comment. The rule does not
allow the commission to unilaterally direct the department to reimburse the
developer an amount less than the department. The developer has the ability
to not accept the department's offer and not execute a pass-through toll agreement.
The agreement will set the amount of reimbursement and that amount can only
be revised by agreement of the parties.
Comment: The section authorizes the commission to direct the department
to provide for reimbursement in an amount less than the department estimate
if: it determines that the project's estimated benefits to mobility do not
warrant full reimbursement; it determines that the construction of the project
will result in a significant economic gain to the developer; or the developer
agrees to share in the cost of the project. JLC commented that it is unclear
who is making the determinations and suggest changing "it" to "department"
in the first two issues, argues that the first two issues are subjective standards,
and suggests changing "developer" to "public entity" in the third issue.
Response: The department disagrees with these comments. In the first two
issues, the rule is speaking of the commission. The commission must make those
determinations. The department believes that the context is clear. In regard
to the assertion that the first two issues are subjective standards, the department
believes that they are necessary to give the commission the necessary discretion
to consider pertinent issues and properly notify the public and proposers
of the issues that the commission will consider. The third issue merely recognizes
that a developer, public or private, may choose to participate financially
in the project.
Comment: The section provides that the commission may direct the department
to provide for reimbursement in an amount more than the department estimate
if the commission determines that there will be a financial benefit to the
state, through the avoidance of inflation, as a result of building the project
sooner. JLC argued that any reimbursement of a developer should be made pursuant
to the agreement only and should not be governed by the rules or benchmarked
off the department estimate. JLC further argues that there is no guidance
as to how inflation is determined.
Response: The department disagrees with these comments. JLC misinterpreted
this provision. Reimbursement of a developer can only be determined by the
agreement. The department does not believe it is appropriate to attempt to
lock both sides, by rule, into a method of how to determine inflation.
Comment: The section provides that the schedule of pass-through toll payments
will be calculated based on traffic projections for the highway and a contract
period to be negotiated. JLC suggested revising the language to provide for
"mutually agreed to traffic projections."
Response: The department disagrees with this suggestion. The department
desires to use its own traffic projections to avoid debate over whose numbers
would be used, and to help ensure the reliability of the projections.
Comment: The section provides that if actual costs are below the department
estimate, the developer is not required to repay the department the difference
between the actual costs and the amount designated in the agreement. JLC suggested
adding before this language, "Unless otherwise specified in the agreement."
Response: The department disagrees with this comment. Committing to the
developer that the department will reimburse the developer the amount of the
estimate is a fundamental provision of the program that will assist the developer
in obtaining financing and will encourage innovation.
Comment: The section provides that if traffic volume exceeds projections,
the department will not be responsible for annual payments above the highest
amount designated in the agreement. If traffic volume is less than projected,
the department will pay at least the lowest amount designated in the agreement.
JLC suggested adding before this language, "Unless otherwise specified in
the agreement."
Response: The department disagrees with this comment. The department believes
it is important to state by rule that the department cannot be liable for
payments above those designated in the agreement. Otherwise, the department
could lose control of its financial and transportation planning process, and
a pass-through toll agreement would have the potential to inappropriately
re-prioritize the department's project programming for a region.
Comment: The section provides that "if traffic volume exceeds projections,
the department may agree to reduce the time period in which the developer
is reimbursed the amount designated in the agreement. If traffic volume is
less than projected, the term of the agreement will be extended until the
developer is reimbursed the amount designated in the agreement." JLC argued
that if traffic exceeds projections, a reduced repayment period will occur
naturally through the payment of pass-through tolls at a faster rate than
anticipated. The same occurs in the opposite direction if traffic volume is
less than projected. JLC further argues that it should not be made subject
to department discretion to reduce or extend the payback period. JLC, therefore,
suggests repealing the quoted language.
Response: The department disagrees with the comment. The rule does not
allow the department to reduce or extend the payback period unilaterally.
The department and the developer must agree to repayment terms. The department
does not agree that a reduced repayment will occur naturally. Under the rules,
the amount of the pass-through toll, along with the repayment period negotiated
by the parties, is used to determine the amount of the periodic payment made
under the agreement, but does not otherwise affect the payment amount. The
language is also necessary to notify the public of how the process will work.
Section 5.58, Project Development
Comment: Regarding §5.58(a)(2), which requires the commission to approve
each environmental review, the city commented that it is their understanding
that the environmental review process is generally handled by resource agencies
such as the department's Environmental Affairs Division and the Texas Commission
on Environmental Quality. Therefore, §5.58(a)(2) appears to add significant
effort for the commission itself and adds additional time to the overall process.
Response: The department disagrees with this comment. Section 5.58(a)(2)
does not alter the environmental review process. It merely requires the commission
to adopt an order approving the process. The department does not anticipate
that this requirement will add any time to the project development process
or add significant effort on the part of the commission.
Comment: The section provides that the developer is fully responsible for
the design, construction, and operation, as applicable, of each project it
undertakes. This responsibility includes ensuring that all environmental permits,
issues, and commitments (EPIC) are addressed in project design and carried
out during project construction and operation. JLC suggests revising the language
to state, "The developer is responsible for the design, construction, maintenance,
and operation, as applicable, of each project it undertakes consistent with
other law governing these services provided to the department. If set forth
in the agreement, this responsibility includes ensuring that all EPIC are
addressed in project design and carried out during project construction and
operation. Any project done as a comprehensive development agreement shall
be governed by the terms of 361.302, Transportation Code." JLC argues that:
this language "should be consistent with other provisions of existing law
governing the design, construction and operation of facilities;" CDAs should
be governed by Section 361.302, Transportation Code; and "fully responsible"
is a subjective term for defining a developer's responsibility for design,
construction, and operation.
Response: The department disagrees with these comments. Adding the term
"maintenance" is not necessary since the term "operation" is defined in §5.52
to include maintenance. The department does not believe that the language
is in any way inconsistent with other provisions of law. The department has
responded to comments concerning CDAs with the previously described revisions
to §5.53. The department does not believe that the term "fully responsible"
will be problematic. It puts the public and the developer on notice that the
developer is the responsible party. More specific terms may be described within
the agreement.
Comment: The section prescribes design standards for the developer to follow
in designing a project. JLC suggested allowing for exceptions to be consistent
with provisions governing CDAs.
Response: The department disagrees with this comment. Section 5.53 was
amended to recognize laws and regulations governing CDAs.
Comment: The section provides that "access to the facility shall be in
compliance with the department's access management policy." JLC suggests adding
to the beginning of this language, "Unless otherwise set forth in the agreement."
Response: The department disagrees with this comment. A facility constructed
under this subchapter is a state highway. There would be no justification
for the facility to not comply with the department's access management policy.
Comment: The section requires the developer to send preliminary design
information to the department for approval when the design is approximately
30% complete. JLC suggests adding language to allow exceptions.
Response: The department agrees with this comment. There may be circumstances
justifying exceptions. Section 5.58(b)(4) is revised to read, "When design
is approximately 30% complete (or as otherwise provided in an agreement),
the developer shall..."
Comment: The section requires a developer to construct a facility in accordance
with the department's Standard Specifications for Construction and Maintenance
of Highways, Streets, and Bridges. JLC suggested allowing an agreement to
provide otherwise. JLC argued that these provisions should be consistent with
those governing CDAs.
Response: The department disagrees with this comment. Revisions made to §5.53
recognize law and rules governing CDAs. This section of the rules establishes
a procedure allowing for exceptions to the department's specifications.
Comment: The section provides that "when final plans are complete, the
developer shall send" various information to the department for review and
approval. JLC suggested adding at the beginning of the quoted language, "Unless
otherwise set forth in an agreement."
Response: The department disagrees with this comment. The developer is
designing a state highway. That highway is owned by the state and the state
is responsible to the public for its safe operation. It is important that
the department receive in a timely manner the final plans for the facility.
Comment: The section sets out various requirements and procedures governing
construction field changes. JLC suggested adding language allowing for exceptions
to these requirements.
Response: The department disagrees with this comment. The section provides
sufficient flexibility yet ensures proper department oversight of the construction
of a state highway.
Comment: The section requires the developer to provide the department all
materials used in the development of the project. JLC suggests limiting the
provision to require the developer to provide "copies of all applicable non-proprietary
engineering materials . . ." JLC argued that some of the developer's data
may be unique or confidential.
Response: The department disagrees with this comment. The developer designed
and built a state highway. That highway is owned by the department and is
the responsibility of the department. The developer designed and built the
highway on behalf of the department. It is imperative, for the future maintenance,
operation, and reconstruction of the highway, that the department retain all
materials relating to the development of its highway.
Comment: The section requires the developer to "comply with all federal
and state law and regulations applicable to the project and the state highway
system." JLC suggested adding at the end of this language, "consistent with
Transportation Code, Section 222.104."
Response: The department disagrees with this comment. The existing language
already requires compliance with §222.104.
Section 5.59, Operation
Comment: Subsection (a) provides that a pass-through toll agreement may
provide for a developer to operate a highway. JLC suggested adding the term
"maintain" to recognize that a developer may also maintain a highway.
Response: The department disagrees with this comment. Subsection (b) makes
it clear that the term "operate" includes maintenance.
Comment: Subsection (b) provides, "To the extent provided in the agreement,
a developer shall perform or cause to be performed all work required to operate
the highway. This work includes all maintenance and repair required to ensure
that the highway is kept in its designed and constructed or updated condition,
and the highway functions as intended." JLC suggested deleting this language
and argued that these provisions should be governed in their entirety through
an agreement between a developing entity and the department.
Response: The department disagrees with this comment. The existing language
provides sufficient flexibility yet helps ensure that the facility will be
properly maintained.
Comment: Concerning subsection (b), which states that the roadway will
be maintained in its designed and constructed or updated condition, the city
commented that payments are generally designed for an initial serviceability
index of 4.7 to 4.5 with repairs and overlays generally warranted when the
serviceability index decreased to approximately 2.5. It is the city's understanding
that this generally occurs after 7 to 10 years of use. The city stated that
expectations that a public or private entity can maintain a serviceability
index of 4.7 to 4.5 at all times during the life of the agreement does not
appear to be a reasonable standard for maintenance.
Response: The department agrees that it is not reasonable to expect a highway
to function like new during its entire life. The department maintains and
rehabilitates the roadway to keep the highway at reasonably high standards.
The subsection is revised to state, "This work includes all maintenance and
repair required to ensure that the highway functions as intended and meets
the performance standards established for maintenance under subsection (c)
of this section."
Comment: Regarding, §5.59(c), which states that the developer shall
meet or exceed the most current Texas maintenance assessment program minimum
rating for interstate highways, the city commented that many of the roads
that may be constructed under pass-through toll agreements are considered
arterials or multi-lane rural highways. The city stated that maintenance of
a local roadway to interstate highway standards does not appear to be consistent
with the intent of the rules. In addition, the city requested clarification
that the terms of maintenance by a public or private entity not exceed the
term of the agreement.
Response: The department agrees with the city's concern about requiring
the equivalent of local roads to be maintained to interstate standards. Interstate
standards should be required only for toll facilities. The subsection is revised
as follows: "In performing work under this section, the developer shall meet
or exceed the most current "Texas Maintenance Assessment Program" minimum
rating requirements for non-interstate state highways as established by the
commission in its implementation of Government Accounting Standards Board
Statement No. 34. If the highway will be tolled, the developer shall meet
or exceed the minimum rating requirements for interstate highways." The terms
of maintenance by a public or private entity may not exceed the term of the
agreement.
Comment: JLC suggested revising subsection (c) to allow the agreement to
alter the terms of the subsection.
Response: The department disagrees with this comment. Paragraph (2) of
the subsection allows for the approval of alternative maintenance standards.
Amending paragraph (1) to essentially allow the parties to waive the subsection
nullifies its provisions and provides no comfort to the public that the facility
will be properly maintained.
STATUTORY AUTHORITY
The new sections are adopted under Transportation Code, §201.101,
which provides the commission with the authority to establish rules for the
conduct of the work of the department, and more specifically, Transportation
Code, §222.104, which authorizes the commission to adopt rules necessary
to implement that section relating to pass-through tolls.
CROSS REFERENCE TO STATUTE: Transportation Code, §222.104.
§5.51.Purpose.
Transportation Code, §222.104(b) authorizes the Texas Department
of Transportation to enter into an agreement with a public or private entity
that provides for the payment of pass-through tolls to the public or private
entity as reimbursement for the construction, maintenance, or operation of
a toll or non-toll facility on the state highway system by the public or private
entity. This subchapter prescribes the policies and procedures governing the
department's implementation of Transportation Code, §222.104(b).
§5.53.Proposal.
(a)
A governmental entity authorized to finance, construct,
maintain, or operate a state highway or a private entity may submit in writing
to the department a proposal for a project, or a series of projects, to be
developed under a pass-through toll agreement. The proposal must include:
(1)
a description of the project, including the project limits,
connections with other transportation facilities, and a description of the
services to be provided by the developer;
(2)
a statement of the benefits anticipated to result from
completion of the project;
(3)
a description of the local public support for the project
and any local public opposition;
(4)
a proposed project development and implementation schedule;
(5)
a description of the entity's experience in developing
highway projects, if the proposer is a public entity;
(6)
complete information concerning the experience, expertise,
technical competence, and qualifications of the proposer and of each member
of the proposer's management team and of other key employees or consultants,
including the name, address, and professional designation of each member of
the proposer's management team and of other key employees or consultants,
and the capability of the proposer to develop the proposed projects, if the
proposer is a private entity;
(7)
if available, a proposed pass-through toll payment schedule;
(8)
a statement indicating whether the proposer intends for
the project to be tolled and, if the proposer intends for a tolled project
to be first opened to traffic as a non-tolled highway, the approximate date
on which the highway will begin to be tolled; and
(9)
a statement indicating whether the proposer intends to
enter into a comprehensive development agreement, if the proposer is a private
entity.
(b)
If requested, and unless prohibited by law, the department
will release to the public a proposal submitted under this section.
(c)
The private entity and the department may agree to develop
a project under a comprehensive development agreement if authorized by other
law. Notwithstanding any other provision of this subchapter, Chapter 27, Subchapter
A, of this title (relating to Policy, Rules, and Procedures for Private Involvement
in Department Turnpike Projects), applies to the solicitation, advertisement,
negotiation, and execution of a comprehensive development agreement.
§5.54.Commission Approval to Negotiate.
The commission may authorize the executive director to negotiate an
agreement under this subchapter or, if the proposer is a private entity, authorize
the department to solicit competitive proposals under §5.55 of this subchapter,
after considering the:
(1)
financial benefits to the state;
(2)
local public support for the project;
(3)
whether the project is in the department's Unified Transportation
Program;
(4)
extent to which the project will relieve congestion on
the state highway system;
(5)
potential benefits to regional air quality that may be
derived from the project;
(6)
compatibility of the proposed project with existing and
planned transportation facilities;
(7)
entity's experience in developing highway projects, if
the proposer is a public entity; and
(8)
qualifications of the proposer to accomplish the proposed
work, if the proposer is a private entity.
§5.57.Payment of Pass-Through Tolls.
(a)
Amount to be reimbursed.
(1)
General. Except as provided in paragraph (2) of this subsection,
the department will reimburse the developer, through the periodic payment
of pass-through tolls, an amount equal to the department estimate.
(2)
Exception.
(A)
The commission may direct the department to provide for
reimbursement in an amount less than the department estimate if:
(i)
it determines that the project's estimated benefits to
mobility do not warrant full reimbursement;
(ii)
it determines that the construction of the project will
result in a significant economic gain to the developer; or
(iii)
the developer proposes to share in the cost of the project.
(B)
The commission may direct the department to provide for
reimbursement in an amount more than the department estimate if the commission
determines that there will be a financial benefit to the state, through the
avoidance of inflation, as a result of building the project sooner. The additional
amount authorized by the commission may not be more than the amount of the
financial benefit determined by the commission.
(C)
The commission may establish the precise amount to be reimbursed
or may establish parameters within which the executive director may negotiate.
(b)
Payment schedule and method.
(1)
Payment schedule. The schedule of pass-through toll payments
will be calculated based on the department's traffic projections for the highway
and a contract period to be negotiated between the department and the developer.
The payment schedule may include a maximum and a minimum annual amount to
be paid. Payments will be made in accordance with subsection (c)(2) of this
section.
(2)
Variable payments. The per vehicle fee may vary within
different levels of traffic volume and by type of vehicle using the facility.
(c)
Allocation of risk.
(1)
Construction and operation costs.
(A)
Cost overruns. Unless otherwise specified in the agreement,
the developer is responsible for cost overruns caused by any reason. The department
may agree to share identified cost overruns if it deems such action to be
in the state's interest. The department may agree to alter the payment schedule
based upon cost overruns provided that the agreement establishes a maximum
amount or rate by which the department will do so.
(B)
Cost underruns. If actual costs are below the department
estimate, the developer is not required to repay the department the difference
between the actual costs and the amount designated in the agreement.
(2)
Traffic volume.
(A)
If traffic volume exceeds projections, the department will
not be responsible for annual payments above the highest amount designated
in the agreement. If traffic volume is less than projected, the department
will pay at least the lowest amount designated in the agreement.
(B)
If traffic volume exceeds projections, the department may
agree to reduce the time period in which the developer is reimbursed the amount
designated in the agreement. If traffic volume is less than projected, the
term of the agreement will be extended until the developer is reimbursed the
amount designated in the agreement.
§5.58.Project Development.
(a)
Social and environmental impact.
(1)
General. A developer that is responsible for the construction
of a project shall conduct the environmental review and public involvement
for the project in the manner prescribed by Chapter 2, Subchapter C of this
title (relating to Environmental Review and Public Involvement for Transportation
Projects). The department may choose to conduct the environmental review and
public involvement.
(2)
Commission approval. The commission must approve each environmental
review under this section before construction of the project begins.
(b)
Design and construction.
(1)
Responsibility. The developer is fully responsible for
the design, construction, and, operation, as applicable, of each project it
undertakes. This responsibility includes ensuring that all EPIC are addressed
in project design and carried out during project construction and operation.
(2)
Design criteria.
(A)
State criteria. All designs developed by or on behalf of
the developer shall comply with the latest version of the department's manuals,
including, but not limited to, the Roadway Design Manual, Pavement Design
Manual, Hydraulic Design Manual, the Texas Manual on Uniform Traffic Control
Devices, and Bridge Design Manual, and the Texas Accessibility Standards.
(B)
Alternative criteria. A developer may request approval
to use different accepted criteria for a particular item of work. Alternative
criteria may include, but are not limited to, the latest version of the AASHTO
Policy on Geometric Design of Highways and Streets, the AASHTO Pavement Design
Guide, and the AASHTO Bridge Design Specifications. The use of alternative
criteria is subject to the approval of the Federal Highway Administration
for those projects involving federal funds. The executive director may approve
the use of alternative criteria if the alternative criteria are determined
to be sufficient to protect the safety of the traveling public and protect
the integrity of the transportation system.
(C)
Exceptions to design criteria. A developer may request
approval to deviate from the state or alternative criteria for a particular
design element on a case by case basis. The request for approval shall state
the criteria for which an exception is being requested and must include a
comprehensive description of the circumstances and engineering analysis supporting
the request. The executive director may approve an exception after determining
that the particular criteria could not reasonably be met due to physical,
environmental, or other relevant factors and that the proposed design is a
prudent engineering solution.
(3)
Access.
(A)
Access management. Access to the facility shall be in compliance
with the department's access management policy.
(B)
Interstate access. For proposed projects that will change
the access control line to an interstate highway, the developer shall submit
to the department all data necessary for the department to request Federal
Highway Administration approval.
(4)
Preliminary design submission and approval. When design
is approximately 30% complete (or as otherwise provided in an agreement),
the developer shall send the following preliminary design information to the
department for review and approval in accordance with the procedures and timeline
established in the project development agreement described in subsection (d)
of this section:
(A)
a completed Design Summary Report form as contained in
the department's Project Development Process Manual;
(B)
a design schematic depicting plan, profile, and superelevation
information for each roadway;
(C)
typical sections showing existing and proposed horizontal
dimensions, cross slopes, location of profile grade line, pavement layer thickness
and composition, earthen slopes, and right of way lines;
(D)
bridge, retaining wall, and sound wall layouts;
(E)
hydraulic studies and drainage area maps showing the drainage
of waterways entering the project and local project drainage;
(F)
an explanation of the anticipated handling of existing
traffic during construction;
(G)
when structures meeting the definition of a bridge as defined
by the National Bridge Inspection Standards are proposed, an indication of
structural capacity in terms of design loading;
(H)
an explanation of how the U.S. Army Corps of Engineers
permit requirements, including associated certification requirements of the
Texas Commission on Environmental Quality, will be satisfied if the project
involves discharges into waters of the United States; and
(I)
the location and text of proposed mainlane guide signs
shown on a schematic that includes lane lines or arrows indicating the number
of lanes.
(5)
Construction specifications.
(A)
All plans, specifications, and estimates developed by or
on behalf of the developer shall conform to the latest version of the department's
Standard Specifications for Construction and Maintenance of Highways, Streets,
and Bridges, and shall conform to department-required special specifications
and special provisions.
(B)
The executive director may approve the use of an alternative
specification if the proposed alternative specification is determined to be
sufficient to ensure the quality and durability of the finished product for
the intended use and the safety of the traveling public.
(6)
Submission and approval of final design plans and contract
administration procedures. When final plans are complete, the developer shall
send the following information to the executive director for review and approval
in accordance with the procedures and timelines established in the project
development agreement described in subsection (e) of this section:
(A)
seven copies of the final set of plans, specifications,
and engineer's estimate (PS&E) that have been signed and sealed by the
responsible engineer;
(B)
revisions to the preliminary design submission previously
approved by the department in a format that is summarized or highlighted for
the department;
(C)
a proposal for awarding the construction contract in compliance
with applicable state and federal requirements;
(D)
contract administration procedures for the construction
contract with criteria that comply with the applicable national or state administration
criteria and manuals; and
(E)
the location and description of all EPIC addressed in construction.
(7)
Construction inspection and oversight.
(A)
Unless the department agrees in writing to assume responsibility
for some or all of the following items, the developer is responsible for:
(i)
overseeing all construction operations, including the oversight
and follow through with all EPIC;
(ii)
assessing contract revisions for potential environmental
impacts; and
(iii)
obtaining any necessary EPIC required for contract revisions.
(B)
The department may inspect the construction of the project
at times and in a manner it deems necessary to ensure compliance with this
section.
(8)
Contract revisions. All revisions to the construction contract
shall comply with the latest version of the applicable national or state administration
criteria and manuals, and must be submitted to the department for its records.
Any revision that affects prior environmental approvals or significantly revises
project scope or the geometric design must be submitted to the executive director
for approval prior to beginning the revised construction work. Procedures
governing the executive director's approval, including time limits for department
review, shall be included in the project agreement described in subsection
(e) of this section.
(9)
As-built plans. Within six months after final completion
of the construction project, the developer shall file with the department
a set of the as-built plans incorporating any contract revisions. These plans
shall be signed, sealed, and dated by a professional engineer licensed in
Texas certifying that the project was constructed in accordance with the plans
and specifications.
(10)
Document and information exchange. The developer agrees
to deliver to the department all materials used in the development of the
project including, but not limited to, aerial photography, computer files,
surveying information, engineering reports, environmental documentation, general
notes, specifications, and contract provision requirements.
(11)
State and federal law. The developer shall comply with
all federal and state laws and regulations applicable to the project and the
state highway system, and shall provide or obtain all applicable permits,
plans, and other documentation required by a federal or state entity.
(c)
Contracts. All contracts for the development, construction,
or operation of a project shall be awarded in compliance with applicable law.
(d)
Federal law. If any federal funds are used in the development
or construction of a project under this subchapter, or if the department intends
to fund pass-through toll payments with federal funds, the development and
construction of the project shall be accomplished in compliance with all applicable
federal requirements.
(e)
Project development agreement. The developer and the department
shall enter into an agreement governing the development of a project under
this subchapter. The agreement shall, at a minimum, include:
(1)
the responsibilities of each party concerning the design
and construction of the project;
(2)
procedures governing the submittal of information required
by this subchapter;
(3)
timelines governing approvals of the executive director
under this subchapter; and
(4)
other terms or conditions mutually agreed upon by the parties.
§5.59.Operation.
(a)
Agreement. A pass-through toll agreement may provide for
a developer to operate a highway.
(b)
Responsibility. To the extent provided in the agreement,
a developer shall perform or cause to be performed all work required to operate
the highway. This work includes all maintenance and repair required to ensure
that the highway functions as intended and meets the performance standards
established for maintenance under subsection (c) of this section.
(c)
Maintenance.
(1)
Department standards. In performing work under this section,
the developer shall meet or exceed the most current "Texas Maintenance Assessment
Program" minimum rating requirements for non-interstate state highways as
established by the commission in its implementation of Government Accounting
Standards Boards Statement No. 34. If the highway will be tolled, the developer
shall meet or exceed the minimum rating requirements for interstate highways.
(2)
Alternative standards. A developer may request approval
to use alternative maintenance standards. The executive director may approve
the use of alternative maintenance standards if the director determines that
the alternative standards are sufficient to protect the safety of the traveling
public and protect the integrity of the transportation system.
This agency hereby certifies that the adoption has been
reviewed by legal counsel and found to be a valid exercise of the agency's
legal authority.
Filed with the Office of
the Secretary of State on March 26, 2004.
TRD-200402132
Richard D. Monroe
General Counsel
Texas Department of Transportation
Effective date: April 15, 2004
Proposal publication date: February 13, 2004
For further information, please call: (512) 463-8630
Subchapter N. STATE HIGHWAY PROJECTS FINANCED THROUGH THE ISSUANCE OF BONDS AND OTHER PUBLIC SECURITIES
Chapter 15.
TRANSPORTATION PLANNING AND PROGRAMMING