Subchapter A. GENERAL

The Texas Department of Transportation (department) adopts the repeal of §§9.6 - 9.8 and simultaneously adopts new §§9.100 - 9.110, concerning contractor sanctions. The repeal of §§9.6 - 9.8 and new §§9.100 - 9.110 are adopted without changes to the proposed text as published in the April 12, 2002, issue of the Texas Register (27 TexReg 3033) and will not be republished.

EXPLANATION OF ADOPTED REPEALS AND NEW SECTIONS

The department's contractor sanction rules set forth the circumstances under which contractors may be sanctioned and the procedures that must be followed.

Section 9.6, governing debarment of contractors, was adopted in April 1982. Section 9.7, governing suspension of contractors, was adopted in August 1982. Section 9.8, governing supplemental procedures for debarment and suspension, was adopted in November 1982. Sections 29.21-29.26, governing the imposition of sanctions on maintenance contractors, were adopted in 1998. These various provisions, adopted at different times, contain provisions that overlap and duplicate each other unnecessarily. As a result, the existing rules are both long and confusing.

The repeals and new sections are adopted for several reasons. First, the revisions integrate rules that are now scattered in several chapters into a single set of rules applicable to all highway improvement contractors. Second, the rules are reorganized and rewritten to be clearer, shorter, and easier to understand. The proposed rules are almost half as long as the former rules. Third, the proposed rules permit contractors to be sanctioned if they fail to honor a bid guaranty or if the Texas Transportation Commission (commission) rejects bids twice in three years for contractor error; these provisions are intended to address recurring and potential problems for which there is now no adequate remedy.

Except as noted, the revisions are nonsubstantive in nature.

In §9.101(4) the concept of a business affiliate, now incorporated in the definition of contractor, is drawn primarily from the definition of affiliate in §29.22(1). It has been expanded with additional examples of facts that may be relevant in a particular case.

In §9.101(8) the definition of sanction is expanded to include the suspension of a contractor. This change is part of the effort to consolidate the rules into a single set of procedural requirements that will be easier for contractors to understand and for the department to administer.

Section 9.101(11) differentiates suspension from debarment. Former §9.6 and §9.7 contain identical definitions for the two concepts. The rules now clarify that suspension is temporary and immediate, while debarment may be for a longer period, but can only be imposed after a full hearing.

Section 9.102(b) now includes a sentence to make clear that if a contractor does not receive a copy of the sanction rules, that will not be a defense to an alleged violation of the rules.

Section 9.104(d) provides the commission with maximum flexibility in assessing sanctions to guard against unfairness. In every case the commission will have the authority to impose a sanction that is less severe in duration or kind than the maximum sanction authorized.

The former rules give contractors the right to petition the commission at any time for a reduction or modification of a sanction. This provision is eliminated to prevent a contractor from filing repetitive petitions.

The former rules provide for suspension if a contractor is indicted on a charge of a bidding crime or is named as a defendant in a state antitrust case. These provisions are eliminated to avoid imposing a sanction based solely on an allegation of wrongdoing by another entity.

Section 9.107 creates a new ground for debarment, the failure to execute a contract after a bid is awarded and to honor a bid guaranty. This violation is created to address the serious and recurring problem of bidders who repeatedly refuse to execute contracts after winning bids. No violation will be found if a bid guaranty is honored. In addition, under §9.104(b) all mitigating factors will be considered before a sanction is imposed. In particular, payments by the contractor or by any other entity to cover the department's costs will be considered in mitigation of any sanction. As with all sanctions, the commission may choose to impose a sanction that is less severe than the maximum permitted.

Section 9.108 creates a new ground for debarment, the repeated rejection of a contractor's bids because of contractor errors. This violation is created to ensure that contractors do not submit bids with significant errors that could and should have been discovered before the bid was submitted. Under §9.104(b) all mitigating factors will be considered before a sanction is imposed, and the commission may choose to impose a sanction that is less severe than the maximum permitted.

Section 9.109 restates the former rule that a contractor must notify the commission if it is debarred elsewhere or convicted of a bidding crime. The former rule, however, did not have a sanction associated with a violation of this requirement. The sanction is set in §9.109(b) at a maximum debarment of 12 months. Because a sanction may be imposed for a violation of this provision, its coverage is limited to debarment by another state or by an agency of the federal government.

Section 9.110 governs performance defaults by contractors. The former rules apply this violation to maintenance contracts, but not to other highway improvement contracts. The adopted rule applies the same standards to all highway improvement contracts to address the recurring problem of major defaults by highway improvement contractors. As with all other violations, the commission will consider all relevant circumstances regarding mitigation before imposing any sanction and may impose a sanction that is less severe than the maximum provided by the rules.

The former maintenance rules provided that sanctions would not be imposed for a default that is beyond the control of the contractor. This provision, while expressing the intent of the department, might encourage litigation inappropriately. The question of fault is better considered along with all other mitigating circumstances.

COMMENTS

No comments were received on the proposed repeals and new sections.

Subchapter A. GENERAL

Subchapter B. HIGHWAY IMPROVEMENT CONTRACTS

Subchapter E. STATEWIDE TRANSPORTATION ENHANCEMENT PROGRAM

Subchapter I. SAFE ROUTES TO SCHOOL PROGRAM

The Texas Department of Transportation (department) adopts new Chapter 26, Regional Mobility Authorities, which includes §26.1 and §26.2, General Provisions; §§26.11 - 26.16, Creation of a Regional Mobility Authority; §§26.21 - 26.23, Revisions to Regional Mobility Authority--Additions, Withdrawals, and Dissolution; §§26.31 - 26.34, Powers and Administration of a Regional Mobility Authority; §§26.41 - 26.46 and §26.48, Development of a Turnpike Project; §§26.51 - 26.56, Maintenance and Operation of a Turnpike Project; §§26.61, 26.62, 26.64, and 26.65, Surplus Revenue; §§26.71 - 26.74, Conversion of Non-Tolled State Highway; §§26.81 - 26.84, Reports, Audits, and Records. Sections 26.11, 26.13 - 26.16, 26.21, 26.23, 26.32, 26.41, 26.43, 26.44, 26.48, 26.52, 26.55, 26.62, 26.64, 26.74, and 26.82 are adopted with changes to the proposed text as published in the February 15, 2002, issue of Texas Register (27 TexReg 1133). Sections 26.1, 26.2, 26.12, 26.22, 26.31, 26.33, 26.34, 26.42, 26.45, 26.46, 26.51, 26.53, 26.54, 26.56, 26.61, 26.65, 26.71 - 26.73, 26.81, 26.83, and 26.84 are adopted without changes and will not be republished. Sections 26.47 and 26.63 are withdrawn by separate action.

EXPLANATION OF ADOPTED NEW SECTIONS

Senate Bill 342, 77th Legislature, 2001, added Section 361.003 to the Transportation Code. Section 361.003 provides that the Texas Transportation Commission (commission) may authorize the creation of a regional mobility authority (RMA) for the purposes of constructing, maintaining, and operating a turnpike project in a region of the state. New Chapter 26 prescribes the policies and procedures under which a regional mobility authority may be created and may operate.

Commission philosophy.

Certain principles guided the department in the development of the rules. A primary purpose behind the creation of an RMA is to maximize local control in the development and operation of transportation facilities in a region. The commission believes that the creation of an RMA will allow local officials to exercise more responsibility, thus encouraging local innovation and better responses to the particular needs and desires of the local population.

Tempering this first principle of local control are public safety and accountability. First, the commission feels a responsibility to protect the taxpayer and the state's interests because the legislature charged the commission with the responsibility for approving the creation of an RMA. Second, the commission stresses the fact that an RMA turnpike project will be a part of the state highway system and takes note of the following legislative directives. Transportation Code, §201.103, requires the commission to plan and make policies for the location, construction, and maintenance of a comprehensive system of state highways and public roads. Transportation Code, §203.002, authorizes the commission to lay out, construct, maintain, and operate a modern state highway system. Moreover, since an RMA may require the use of federal highway funds, the commission acknowledges the following statutes. Transportation Code, §221.003, provides that an improvement of the state highway system with federal aid shall be made under the exclusive and direct control of the department. Transportation Code, §222.031, provides that money appropriated by the United States for public road construction in this state may be spent only by and under the supervision of the department.

The commission therefore believes that it has a responsibility to adopt rules that promote: (1) the proper and efficient operation of an RMA; (2) the construction, maintenance, and operation of safe and effective turnpikes; (3) the effective use of revenue that maximizes benefit to the traveling public; and (4) compliance with the spirit and intent of applicable state and federal laws, regulations, and policies.

Section by Section Analysis

SUBCHAPTER A. GENERAL PROVISIONS

Section 26.1 Purpose. This section states the purpose of the chapter, which is to prescribe the policies and procedures under which an RMA may be created and may operate.

Section 26.2. Definitions. This section defines certain words and terms used in the chapter. Some definitions require explanation. The term "executive director" is defined to include the department's executive director or the executive director's designee not below district engineer, division director, or office director. This definition allows the executive director to delegate some duties so that the rules may be efficiently implemented, yet it ensures proper accountability by limiting the delegations to officials of sufficient responsibility. "Fiscal year" is defined as the accounting period of 12 months that begins on September 1 of each year and ends on August 31 of the following calendar year. This period coincides with the state's fiscal year to streamline RMA reporting requirements. The definitions of "surplus revenue" and "turnpike project" are statutory (Transportation Code, Sections 361.001 and 361.003) and are provided for the reader's convenience.

SUBCHAPTER B. CREATION OF A REGIONAL MOBILITY AUTHORITY

Section 26.11. Petition. One or more counties may petition the commission to create an RMA. While the statute is not explicit on this point, the commission believes that the legislature intended counties to initiate the process.

The department has received various questions concerning possible limits on the size and geography of an RMA. To provide maximum flexibility that will enable the commission and local governments to adapt to different circumstances, the commission has chosen not to place limits on the geographic makeup of an RMA. For instance, member counties do not have to be adjacent, the geographic area of RMAs may overlap, and there is no limit on the number of counties in an RMA. Thus, there could be a Bexar County RMA and a separate RMA consisting of several counties in the San Antonio region, including Bexar County.

The petition must include various items. The commission's intent is to make it as easy as possible for counties to create an RMA. The petition must include a resolution from the commissioners court of each county indicating its approval of the creation of the RMA and a description of how the RMA would improve mobility in the region. For the commission to make an informed decision about the creation of the RMA, the commission believes that counties must identify an initial turnpike projects that the RMA would develop. The rule, therefore, requires minimal information on a proposed project. The commission understands that a project may be in the conceptual stage and does not want the counties to expend significant resources on the development of the project at this stage. To this end, the information required on each petition is intended to be minimal and brief. It must be submitted in a form that will allow the commission to decide if the project merits further development and study by an RMA.

The petition must include an explanation of how the initial project will be consistent with the relevant policies, strategies, and actions of the Texas Transportation Plan and, if appropriate, with the metropolitan transportation plan developed by the metropolitan planning organization. Under 23 C.F.R. §450.216 and §450.324, in order for a project to receive federal highway funding it must be included in a federally approved Statewide Transportation Improvement Program (STIP) and financially constrained transportation improvement program (TIP). Moreover, regionally significant transportation projects for which Federal Highway Administration (FHWA) or Federal Transit Administration (FTA) approval is required must be included in the STIP and TIP whether the project is funded with federal, state, local, or private funding. Projects included in the STIP must be derived from the Texas Transportation Plan (statewide transportation plan). Similarly, projects included in a metropolitan TIP developed by the metropolitan planning organization must be derived from a metropolitan transportation plan. Projects included in a rural TIP must be consistent with the statewide transportation plan.

The petition must include a brief description of any known environmental, social, economic, or cultural resource issues. These may include, for example, effects on parks, neighborhoods, businesses, historic buildings, bridges, wetlands and other water resources, endangered species, or archeological sites. The petitioner must also identify any known opponents to the project and describe any known controversies. The commission does not wish to require the petitioner to conduct new studies to comply with these requirements. The descriptions need only be brief and need only include "known" information. The original purpose of an RMA is to develop this initial project. Before the department and the petitioners expend significant resources in forming the RMA and developing the project, the commission feels that it must consider these critical issues and be aware of any controversies associated with the project. If significant impacts are known, the commission may not wish to pursue creation of an RMA.

The petitioner must submit a preliminary financing plan for the project that will enable the commission to understand the financial scope of the project. This plan will also give the commission an idea of the potential financial commitment to be required of the department.

To maintain consistency with the department's vision for environmentally sensitive transportation systems and to ensure compliance with state and federal requirements, the petitioner must commit to obtaining all required environmental permits and other environmental approvals.

To allow the commission to consider the long-term plans of a petitioner, the petitioner must describe any other projects the petitioner is considering to be developed by the RMA.

To help ensure fair representation of affected political subdivisions, if the petitioner desires to add directors to the board in addition to those expressly required by law, the petitioner must submit a list of the political subdivisions that will be represented by those members and a description of how they are to be appointed.

Section 26.12. Public Hearing. If the department finds that the petition is sufficient, it will conduct one or more public hearings to receive comment on the proposed RMA. The department will hold one or more hearings in one or more of the counties of the petitioner. The petitioner will advertise each hearing in accordance with an outreach plan developed in consultation with the department. The commission believes that this public involvement is necessary for the commission to determine the views of the public at large and is sufficiently flexible to adapt to the particular circumstances of each petition.

Section 26.13. Approval. This section sets out the conditions under which the commission will approve the creation of an RMA. First, since an RMA's success hinges on sufficient public support, the commission will consider both public comments received at the public hearings and the views of the local metropolitan planning organization (MPO). The commission considers the views of the MPO to be especially important because an MPO typically represents many of the local governments in the region. To approve the creation of the RMA, the commission must also find that the creation of the RMA will result in direct benefits to the state, local governments, and the traveling public and will improve the efficiency of the state's transportation systems. In light of the RMA's vital importance to the transportation in the region, the commission wants to ensure that the RMA will benefit all affected parties. To ensure compliance with federal law, the commission must find that each project comes from a conforming transportation plan and transportation improvement program if the project is located in a nonattainment area. Finally, to ensure fair representation of affected political subdivisions within the geographic area of an RMA, the commission must find that the composition of the board as described in the petition or an amended petition will adequately represent affected political subdivisions.

Section 26.14. Commission Action. If the commission approves the creation of an RMA, it will adopt an order. The order will designate the geographic area in which the RMA may operate, which will be along county lines. Setting RMA boundaries at county lines maximizes the ability of the RMA to address transportation issues within the region while establishing a readily identifiable border. The order will describe the initial turnpike project(s) to be developed by the RMA and will identify any mutually agreed upon restrictions the commission deems necessary for the protection of the public safety and the natural environment. Since the projects will be a part of the state highway system, the commission feels it must retain the opportunity to guide the development, maintenance, and operation of the project as it deems necessary. The order will also describe any other mutually agreed upon limits on the operation of the RMA. Again, since the commission is approving the creation of an important new governmental entity and that entity is developing new segments of the state highway system, the commission wishes to retain the opportunity to regulate the operations of the RMA depending on the circumstances. Finally, the order will establish the initial size of the RMA's board of directors and designate the political subdivisions that, by the request of the petitioner, will be represented on the board.

Section 26.15. Creation. This section provides a mechanism under which the counties will formally create the RMA. Each county must adopt a resolution appointing that county's directors.

Section 26.16. Board of Directors. Subsection (a) provides that the board will administer and operate the RMA.

Subsection (b) provides for county appointees, as required by Transportation Code, §361.003.

Subsection (c) provides that the governor shall appoint one director to serve as the presiding officer, as required by Transportation Code, §361.003.

Subsection (d) provides that the petitioner shall provide for the appointment of additional directors described in its petition. This provisions allows for the possible appointment of additional board members to represent affected political subdivisions. The commission believes for two reasons that it is important to allow for political subdivisions other than counties to be represented on the board. First, Transportation Code, §361.003, provides that the "governing body of a regional mobility authority is a board of directors consisting of representatives of political subdivisions in each county in which a turnpike project is proposed to be located." The statute goes on to describe how counties appoint members. The commission believes that the quoted provision indicates a clear legislative intent to allow for the inclusion of representatives of political subdivisions on the board, in addition to representatives of the counties. Second, the commission believes that it is critical to the ultimate success of an RMA that the board adequately represent the region.

Subsection (e) provides that directors will be appointed to terms of two years. Directors may be reappointed at the discretion of the appointing entity.

Subsection (f) provides that directors serve without compensation, but are entitled to reimbursement for expenses.

Subsection (g) provides that a director may be removed by the appointing entity for any reason.

Subsection (h) provides eligibility requirements for members of the board. In order to promote the public's confidence in the integrity and impartiality of RMAs, certain individuals whose circumstances create either an actual conflict of interest or the appearance of a conflict of interest are ineligible to be board members.

SUBCHAPTER C. REVISIONS TO RMA--ADDITIONS, WITHDRAWALS, DISSOLUTION

Section 26.21. Addition of Counties. This section allows counties, with the consent of the commission, to join an existing RMA. The commission will approve the addition if the RMA agrees, the commission finds that the addition will benefit the mobility of the region, and the commission finds that affected political subdivisions within the new counties will be adequately represented on the board. This section provides flexibility for the growth of an RMA, but the commission desires to reserve the right to ensure that the addition is beneficial to the region.

Section 26.22. Withdrawal of Counties. To provide further flexibility for local governments, this section allows a county to withdraw from an RMA. The commission must consent to the withdrawal and will do so if it finds that the withdrawal will not have an adverse impact on the mobility of the region and if the RMA has no bonded indebtedness. This last provision is necessary to protect the financial viability of an RMA's projects by ensuring that project financing plans involving the county seeking to withdraw from the RMA are not adversely affected. If the RMA has no debt other than bonded indebtedness, the petitioning county must also obtain the approval of the RMA's board. This provision is intended to protect the RMA, its contractors, and its creditors.

Section 26.23. Dissolution of an RMA.

Subsection (a), voluntary dissolution. This subsection allows an RMA to dissolve if approved by the commission. The commission will approve the dissolution if the RMA has discharged or provided for all debts, obligations, and liabilities, including pending lawsuits. Additionally, the RMA projects must be in proper condition. These conditions are necessary to protect the financial viability of projects by ensuring that project financing plans are not adversely affected and to protect the rights of contractors and creditors, the traveling public, and taxpayers.

Subsection (b), involuntary dissolution. To ensure compliance with these rules and all applicable agreements, to provide for accountability to the commission and the public, and to encourage the expeditious development of the RMA's turnpike projects, this subsection allows the commission to dissolve an RMA. Involuntary dissolution may be imposed for substantial noncompliance with the rules or with agreements required by the rules or if the RMA fails to pursue development of a project expeditiously. The commission will not require dissolution unless the commission or the RMA has discharged or provided for all debts, obligations, and liabilities, including pending lawsuits, in order to ensure that project financing plans are not adversely affected. The subsection allows the RMA an opportunity to speak to the commission before the commission takes action.

SUBCHAPTER D. POWERS AND ADMINISTRATION OF AN RMA

Section 26.31. General Powers. This section provides that an RMA has the same powers as the Texas Turnpike Authority division (TTA) of the department under Transportation Code, Chapter 361, to the extent authorized by law and subject to any restrictions or limitations provided by law, rule, or commission order. The commission construes Transportation Code, §361.003, as implicitly granting RMAs the same powers as the TTA and finds that such a grant is necessary for an RMA to accomplish the goals established by the legislature.

Section 26.32. Administrative Expenses. This section requires the political subdivisions represented on the board to be responsible for the RMA's administrative expenses. The commission does not consider it appropriate that the taxpayers of the state pay for an RMA's administrative expenses.

Section 26.33. Conflict of Interest. In order to promote public confidence in the integrity and impartiality of RMA's, subsection (a) establishes standards of conduct for RMA directors and employees, and subsection (b) sets forth eligibility requirements for RMA directors and chief administrative officers. The requirements in subsection (a) include the same standards of conduct that Government Code, §572.051 imposes on state officers and employees, as well as the common law prohibition against conflicts of interest in contracting. Because the responsibilities of RMA officers are similar to the responsibilities of the commission, the same eligibility requirements for members on the commission, provided for in Transportation Code, §201.051, are included in subsection (b).

Section 26.34. Donations. To further ensure proper accountability and compliance with law, this section authorizes an RMA to accept donations only if the donation will further the performance of its duties as authorized by the commission, and is used for specific purposes legally supported and authorized by the donor.

SUBCHAPTER E. DEVELOPMENT OF A TURNPIKE PROJECT

Section 26.41. Social and Environmental Impact. Subsection (a) requires an RMA to develop a project in accordance with Transportation Code, §361.103, and in a manner that is consistent with the spirit and intent of the National Environmental Policy Act (NEPA) by conducting a study of the social and environmental impact of the project. Section 361.103 sets out the minimum statutory requirements for the environmental review of a turnpike project. In accordance with the department's vision for environmentally sensitive transportation projects, the commission feels that a study must be conducted consistently with the spirit and intent of NEPA.

Subsection (b). This subsection provides that if federal funds are requested or if federal approval or another federal action is required with respect to a project, the environmental review must also be conducted in compliance with Federal Highway Administration regulations.

Subsection (c). To ensure compliance with Transportation Code, §361.103(c), this subsection requires commission approval of an RMA's environmental review before construction of the project begins.

Section 26.42. Public Involvement. This section requires an RMA to comply with the department's public involvement rules and with Transportation Code, §361.103. This provision will ensure that the RMA's public involvement process will always comply with minimum state and federal requirements and will sufficiently include the public in the decision-making process.

Section 26.43. Project Approval. Transportation Code, §361.101, requires commission approval of the location of a turnpike project. Transportation Code, §362.051, requires a governmental entity, such as an RMA, to obtain the commission's approval of a toll project that is to be a part of the state highway system. Section 26.43 is intended to ensure that an RMA complies with these two statutory requirements.

The section requires the RMA to submit an updated financing plan and a report identifying relocations or reconstruction to the state highway system anticipated in connection with the proposed project. This information is needed by the commission to evaluate possible effects on the state highway system.

In making its decision, the commission will consider whether the project will be effectively integrated into the state highway system and whether the department is able to construct any connecting roads necessary for the project to generate sufficient revenue to pay the debt incurred for its construction. Transportation Code, Section 362.051, requires that the commission consider these items.

Section 26.44. Design and Construction. This section establishes the requirements for the design and construction of projects undertaken by an RMA. As previously described, the legislature has delegated certain powers and responsibilities relating to the state highway system to the commission. Since projects developed by an RMA are a part of the state highway system, the commission must maintain a degree of oversight of these projects.

Subsection (a). To clarify responsibility for RMA projects, this subsection states that the RMA is fully responsible for each project it undertakes.

Subsection (b). This subsection describes the design criteria required for project development. Since these projects are an integral part of the state highway system and to ensure consistent design of all facilities on the state system, these projects must be developed in compliance with the department's established manuals, which provide the appropriate design criteria for various facility types. Recognizing that there may be situations when the use of alternative accepted criteria would be beneficial to the project, provisions are included to identify when the department may approve the use of alternative criteria. This approval would only be granted when the department finds that the use of alternative criteria would adequately protect the safety of the traveling public and the integrity of the transportation system.

In recognition that it is not always possible to comply with design criteria, provisions are also included so an RMA may request approval to deviate from established criteria for a particular design element on a case-by-case basis. Based on the engineering justification for the exception, the executive director may approve an exception after determining that the particular criteria could not reasonably be met because of physical, environmental, other relevant factors and that the proposed design is a prudent engineering solution. This process is similar to that used by the department and other states to minimize the risk of tort liability and to ensure that deviations from design criteria are well documented and are not made arbitrarily.

Subsection (c). This subsection describes the access requirements for RMA projects. Since these projects are an integral part of the state highway system and may revert to the department in the future, it is necessary and prudent to ensure that the facility will serve its intended function to carry traffic for as long as possible. Toward that end, the RMA will be required to adhere to the department's policy regarding access management so that excessive development along frontage roads will not degrade the operation of the RMA facility.

Pursuant to Title 23, United States Code, §111, the state may not add any points of access to or exit from an interstate highway without the prior approval of the Federal Highway Administration (FHWA). Therefore, §26.44(c)(2) requires that the RMA submit all materials required to seek FHWA approval of any proposal to revise access to an interstate highway.

Subsection (d). This subsection describes the requirement for the RMA to submit preliminary designs to the department for review and approval. As part of the department's oversight of projects developed by an RMA, the department must ensure that any state highway improvement project is developed in accordance with all applicable federal and state laws and regulations and that the appropriate design criteria are being properly utilized. Determining potential areas of non-compliance as early in project development as possible will benefit all parties by minimizing unnecessary costs and delays through early agreements on required design changes. If these issues are not discovered until all detailed design work has been completed, then changes will delay the project. The 30% phase of design development is commonly regarded as the point at which schematic design is complete. At this point the basic geometry of the facility will have been determined and the items listed for submission to the department should be available for review.

The Design Summary Report form is used by the department at the beginning of project development to facilitate agreement among all parties on the design standards and some basic values to be used for the design of the project. Submission of this form will enable the department to verify that the basic design parameters used for the project are appropriate. A design schematic depicting plan, profile, and superelevation is needed for the department to verify that the curvature and pavement cross slope provided are appropriate for the design speed and class of highway. Typical sections are required to enable department review of the facility's proposed cross section for the entire right of way width.

Structural (bridge, retaining, and sound wall) layouts are required for the department to ensure the provision of adequate foundations, crashworthy railing, and necessary horizontal and vertical clearances to adjacent features. Structural capacity information is also required to ensure that the proposed structures will safely handle the loadings that can be anticipated on the state highway system. Hydraulic studies and drainage area maps will enable department review of drainage throughout the project.

An RMA must explain its anticipated methods of handling traffic during construction to safeguard the safety of the traveling public through provision of appropriate traffic-carrying capacity and detours. A discussion of how U. S. Army Corps of Engineers and water quality certification requirements are to be met will ensure that these important legal requirements are addressed early in project design and will provide an opportunity for the RMA to benefit from the department's experience in this area. Submission of a signing schematic will ensure that the project design is compatible with the appropriate placement of guide signs that comply with the Texas Manual on Uniform Traffic Control Devices.

Subsection (e). This subsection describes the requirements pertaining to construction specifications applicable to an RMA project. To provide a quality project and to ensure compatibility with the rest of the state highway system, RMAs are required to use the department's specifications on projects. These specifications have been proven over time to provide high quality and durable facilities. In addition, highway construction contractors across the state are familiar with department specifications; therefore, the use of these specifications should result in economic savings to the RMA. However, if the RMA asks to use an alternative specification for a particular item of work, the executive director may approve the request if the proposed specification ensures the quality and durability of the finished product while protecting the safety of the traveling public.

Subsection (f). This subsection describes the requirements for department approval of the final plans and contract administration procedures. As part of the department's oversight of projects developed by an RMA, the department must ensure that any state highway improvement project is developed in accordance with all applicable federal and state laws and regulations and that the appropriate design criteria are being properly utilized. The RMA is required to submit the final plans, specifications, and engineer's estimate (PS&E) so the department can verify that the PS&E comply with applicable state and federal regulations and that the appropriate design criteria have been met. The RMA is required to summarize any design changes made since approval of the preliminary design so the department can readily determine that the alterations comply with the established design criteria for the project. The department will also review the bidding proposal and contract administration procedures submitted by the RMA to ensure compliance with applicable state and federal requirements. In addition, the department will consider whether the PS&E have addressed all environmental permits, issues, commitments, or mitigation required by the approved environmental document.

Subsection (g). To ensure that an RMA does not rely on insufficient design criteria or inadequate traffic control, this subsection requires the PS&E to be approved by the department before the project is advertised for bids. If state or federal funds are used on the project, the department will ensure that RMA procedures related to bidder qualification, bidding, award, and execution of a contract are in compliance with state requirements.

Subsection (h). This subsection describes the parties' responsibilities for construction inspection and oversight. Unless otherwise agreed by the department, the RMA will be responsible for overseeing the construction of the project and ensuring that construction is performed in compliance with state and federal requirements.

Subsection (i). This subsection ensures that contract revisions will comply with applicable design criteria and requires the RMA to submit contract revisions to the department. Any revision that affects prior environmental approvals or significantly revises project scope or the geometric design must be approved by the executive director. This requirement will protect the safety of the traveling public by ensuring that a non-conforming design change is not implemented as a contract revision.

Subsection (j). This subsection requires the RMA to provide the department with a final set of as-built plans, signed, sealed, and dated by a professional engineer certifying that the project was constructed in accordance with the plans. This submission is necessary for the department to have a final record of as-built plans for all projects on the state highway system. These plans are often needed by the department for future reference for a variety of purposes.

Subsection (k). This subsection describes the requirements for the RMA to provide the department with copies of available electronic documents developed by the RMA. Since these facilities may revert to the department in the future, the department needs this information for possible future use in plan production work on facilities constructed by an RMA.

Subsection (l). This subsection affirms the responsibility of the RMA to comply with all applicable laws with regard to its projects.

Subsection (m). To protect the safety of the traveling public, this subsection requires the RMA to obtain express written agreement from the department before performing any work within the limits of state-owned right of way.

Section 26.45. Contracts. This section provides that all contracts for the development, maintenance, or operation of a turnpike project must be awarded in compliance with applicable law and that an RMA must adopt written procedures governing its procurement of goods and services. These provisions are intended to ensure that the RMA engages in good contracting practices.

Section 26.46. Funding. To assist an RMA in the development of worthwhile transportation projects, this section provides that an RMA may seek a loan or grant of funds from the department. This section also provides that the provisions of this chapter apply in the event of a conflict with a provision of rules governing toll financing. The proposed toll financing rules (§§27.50 - 27.58 of this title) govern the loan or grant of funds for toll facilities not under the jurisdiction of the department. The requirements of the two rules vary to some degree, primarily because an RMA project is part of the state highway system.

Section 26.48. Project Development Agreement. This section requires the RMA and the department to enter into an agreement governing the development of a turnpike project. The agreement is intended to help ensure proper communication between the two parties, to encourage compliance with the commission's rules, and to provide a mechanism for the parties to address issues not resolved by the rules. To help ensure the expeditious development of a project, the agreement will include timelines governing approvals of the executive director under this subchapter.

SUBCHAPTER F. MAINTENANCE AND OPERATION OF A TURNPIKE PROJECT

Section 26.51. General. To ensure compliance with law and operation of a safe facility, this section requires an RMA to maintain and operate a turnpike project in accordance with all applicable federal and state requirements. An RMA must perform all maintenance and repair required to ensure that the project is kept in its designed and constructed or updated condition and that the project functions as intended.

Section 26.52. Maintenance. This section requires an RMA to meet or exceed the most current "Texas Maintenance Assessment Program" minimum rating requirements for interstate highways as established by the commission in its implementation of Governmental Accounting Standards Board Statement No. 34. A proper level of maintenance is required to safeguard the traveling public and to ensure protection of the public investment in infrastructure. The standard set by this section will achieve that result with minimum intrusion on the RMA. The section allows an RMA to request an alternative standard. The department will approve an alternative if it is sufficient to protect the safety of the traveling public and to protect the integrity of the transportation system.

Section 26.53. Operation. To ensure compliance with legal requirements, this section requires an RMA to comply with all laws and rules applicable to a state highway. It also identifies the legal requirements for various aspects of a turnpike's operations. In addition, the section requires an RMA to coordinate any development of intelligent transportation systems with the department to ensure compliance with state and federal law and to ensure efficient operations. Finally, the section requires RMAs to adhere to department policy regarding interoperable electronic toll collection (ETC) systems so the public will realize the full benefits of interoperable ETC systems. By facilitating systems that are compatible across metropolitan areas, the rule will ensure that these benefits extend to vehicles traveling outside their home areas and include metropolitan areas they are visiting. Some of the benefits of ETC are: eliminating the need to stop and pay a cash toll; enhancing mobility; reducing congestion and delays; reducing vehicle and RMA operational costs; increasing fuel mileage and reducing vehicle emissions; promoting use of toll roads and increasing financial viability of future toll projects; allowing electronic payment at various public and private functions, such as airport parking, private parking lots, and drive-throughs; facilitating implementation of automatic vehicle access control systems; and providing a technology base for certain commercial fleet services.

Section 26.54. Project Operating Agreement. To help ensure that a project is maintained and operated in compliance with the rules and in a safe and efficient manner, this section requires the RMA and the department to enter into a project operating agreement. If the RMA agrees to pay all department costs, the department may maintain or operate an RMA project. Depending on the location and nature of the facility, in some circumstances this option may be practical and efficient for both entities and for the taxpayers.

Section 26.55. Project Constructed by the Department. This section provides that an RMA may ask the department to transfer to the RMA a segment of tolled state highway that was constructed by the department. To provide maximum flexibility allowing the commission to respond appropriately to the needs of a region, the commission wants the ability to transfer a TTA project to an RMA. A transfer could reduce the burden on the department of having to maintain and operate the highway while giving local governments more control over highway facilities within their jurisdictions.

The commission may approve a transfer under this section if the transfer is allowed by the trust agreement or indenture for the project, if property and contract rights in the project and bonds issued by the commission for the project would not be affected unfavorably, and if the RMA is capable of maintaining and operating the project in a safe and efficient manner. These criteria are necessary to ensure the financial viability of TTA and RMA projects, to protect the rights of other parties, and to protect the safety of the traveling public.

To ensure sufficient benefit to the state highway system, the commission may, as a condition to the transfer, require that some expenditures of surplus revenue derived from the highway be made to implement projects approved in the metropolitan transportation plan or the unified transportation program. The amount of these expenditures will be identified at the time of transfer, and will be mutually agreed upon.

Section 26.56. Department Assuming Jurisdiction of RMA Project. Transportation Code, §361.238, provides that a turnpike project becomes a non-tolled highway under the jurisdiction of the department when all debt issued for the project has been paid or otherwise provided for. If this occurs, §361.238 authorizes the commission to continue to charge a toll sufficient to pay the costs of maintaining the facility. This section of the rules restates these statutory provisions and further requires an RMA to ensure that, prior to the department assuming jurisdiction of a project, the project is in a condition that complies with §26.52(a). This requirement is intended to protect the department from being required to spend significant state funds to rehabilitate a poorly maintained facility.

SUBCHAPTER G. SURPLUS REVENUE

Section 26.61. General. This section requires an RMA to use surplus revenue from turnpike projects to reduce tolls, to spend it on other transportation projects in the geographic area of the RMA, or to deposit it in the Texas Mobility Fund. These options are required by Transportation Code, §361.003. Expenditures on other transportation projects are limited to projects within the geographic region to ensure that the region benefits from the success of its operations. The RMA must determine whether it has surplus revenue each fiscal year to ensure proper accountability to the public and the commission.

Section 26.62. Finance or Construction. As provided by Transportation Code, §361.003, this section authorizes an RMA to spend surplus revenue on other transportation projects by assisting in the financing of a transportation project of a governmental entity or by constructing a transportation project and transferring the completed project to a governmental entity. The construction and transfer of a transportation project is only permitted if the construction complied with all laws applicable to the governmental entity. The governmental entity must authorize construction and must assume all liabilities and all responsibility for subsequent maintenance and operation of the project. These provisions provide RMAs with flexibility in the use of surplus revenue while involving local governments in the decision to assume responsibility for a transportation project.

Section 26.64. Commission Approval. This section establishes the conditions under which the commission will approve an RMA's construction of a transportation project using surplus revenue. The conditions will ensure that a new project conforms to the existing and planned transportation infrastructure. The conditions include requirements that the project comes from a conforming transportation plan and transportation improvement program, when required by federal law, and that the project is consistent with the Texas Transportation Plan, the metropolitan transportation plan, and the Statewide Transportation Improvement Program. Under 23 C.F.R. §450.216 and §450.324, in order for a project to receive federal highway funding it must be included in a federally approved Statewide Transportation Improvement Program (STIP) and financially constrained transportation improvement program (TIP). Moreover, regionally significant transportation projects for which Federal Highway Administration (FHWA) or Federal Transit Administration (FTA) approval is required must be included in the STIP and TIP whether the project is funded with federal, state, local, or private funding. Projects included in the STIP must be derived from the Texas Transportation Plan (statewide transportation plan). Similarly, projects included in a metropolitan TIP developed by the metropolitan planning organization must be derived from a metropolitan transportation plan. Projects included in a rural TIP must be consistent with the statewide transportation plan. Projects in nonattainment areas included in the STIP and TIP must conform to the State Implementation Plan. In addition, this section sets forth the factors the commission will consider in analyzing the effect of the proposed project on regional mobility. These factors include traffic congestion, environmental compliance, benefits to local governments, and the effect on the availability of transportation funding.

Section 26.65. Eligible Transportation Projects. As required by Transportation Code, §361.003, this section lists the types of transportation projects that are eligible for funding or construction under §26.62. To maximize local control, the commission wants the list to be as comprehensive as possible and to cover all modes of transportation, with two exceptions. The commission does not believe that turnpike revenue should be used for maintenance or for the construction of local roads or rural minor collectors. The commission believes that these items should remain the responsibility of the applicable local government and wants surplus revenue to be used for projects that have a more substantial impact on regional mobility.

SUBCHAPTER H. CONVERSION OF NON-TOLLED STATE HIGHWAY

Section 26.71. Request. As provided by Transportation Code, §361.003, this section authorizes an RMA to request conversion of a segment of the non-tolled state highway system to a turnpike project and transfer of that segment to the RMA.

Section 26.72. Public Involvement. This section provides that if the commission determines that a proposed transfer is an integral part of the region's overall plan to improve mobility in the region, under Transportation Code, §361.003, the department will hold one or more public hearings and publish a notice in the Texas Register for the purpose of seeking comments. The commission believes that public input is particularly crucial before a highway is converted into a toll facility.

Section 26.73. Approval. This section sets out the circumstances under which the commission may approve a conversion. First, each affected city and county must support the conversion, and there must be significant public support for the conversion. The commission feels that local support is crucial in the conversion of a non-toll facility into a turnpike. Second, the RMA must agree to assume all liability and responsibility for the safe and effective maintenance and operation of the project. This protects both the traveling public and taxpayers. Third, the RMA must assume all liability and responsibility for compliance with federal laws, regulations, and policies applicable to the project, as required by Transportation Code, §361.003. Finally, the commission must determine that the conversion is in the public interest. This enables the commission to consider any relevant issue relating to the conversion.

Section 26.74. Use of Surplus Revenue. This section authorizes the commission to, as a condition of transfer, require that expenditures of surplus revenue derived from a transferred highway be made to implement projects approved in the metropolitan transportation plan or the unified transportation plan.

The commission has limited the expenditures of surplus revenue from a converted highway because federal and state funds have been used to construct, maintain, and operate the highway. Since taxpayers throughout the state have paid for the converted highway, the commission feels that the state highway system should benefit from revenues that are generated from the facility.

SUBCHAPTER I. REPORTS, AUDITS, AND RECORDS

Sections 26.81 - 26.84. Written Reports, Annual Audits, Other Reports, Operating Records. The commission anticipates that the primary source of funding for RMA projects will be bond proceeds. In order to issue bonds for a project, an RMA is required to comply with various terms and conditions in the trust agreement or indenture securing the bonds or in other financing documents. These terms and conditions include provisions relating to the submission of financial and operating reports and information, including annual operating and capital budgets and detailed financial information and notices of material events relating to the bonds, as well as provisions relating to project accounting and audits. An RMA will be required to report detailed financial information and audits and to disclose other information to institutions as required by federal laws and regulations, and which investors will rely upon to protect their investment in a project. The accounting and audit provisions generally require an issuer to maintain its books and records in accordance with generally accepted accounting principles (GAAP) and to have an audit of those books and records performed annually in accordance with generally accepted auditing standards.

In order to protect the taxpayer's and the state's interests, to ensure applicable laws and regulations are followed, and to facilitate an RMA's development and operation of projects, §§26.81 - 26.84 prescribe requirements an RMA must follow in submitting financial and operating reports to the department, in maintaining its books and records, and in auditing those books and records, and prescribe requirements relating to the retention of audit work papers and reports and other operating and financial records and documents. Those requirements are the same an RMA will be required to follow as a condition of issuing bonds.

COMMENTS--Public Hearing

A public hearing was held on February 27, 2002, to receive comments on the proposed new sections. Representative Mike Krusee led a Central Texas delegation that was opposed to the rules. The following individuals presented comments as members of that delegation: Sam Biscoe, Travis County Judge; John Doerfler, Williamson County Judge; Pike Powers, representing the Capital Area Transportation Coalition; Janice Cartwright, representing the Real Estate Council of Austin; Cliff Davis, representing the Austin Chamber Transportation Committee; Mike Robinson, representing the organization Momentum; Terry Bray, representing the Austin Area Research Organization; and Jim Boles, representing the Transportation Committee of the Round Rock Chamber of Commerce. Also presenting comments were Kevin Evans, representing the Ports-to-Plains Trade Corridor Coalition, and Jack Miller, representing the North Texas Tollway Authority.

Comment: The Central Texas delegation did not speak to specific rule provisions, but made the following general comments: provisions governing the makeup of the board could dilute the board and allow for an unstable situation that financial institutions would not accept; the rules do not allow for enough local control as envisioned by the legislation; and there is an intention in the rules to return surplus revenue to the state. The commenters supported the RMA concept, but complained of too much department involvement, too many department approvals, not enough flexibility, and not enough authority and autonomy for the RMAs. Representative Krusee summed up the testimony by stating that the rules do not properly balance maximized local control with accountability and that there is "insufficient local control over the road building process, over governance, and over toll revenue."

Response: The department will respond to these comments in more detail in its response to written comments. The department generally agrees with the philosophy espoused by the speakers, but still believes that a degree of department involvement is required by statute and necessary to ensure public safety and accountability. The final rules do increase local control and decrease department involvement, but the primary thrust of the revisions is to make the relationship between the department and an RMA a partnership whereby both parties will work together to improve transportation in the region.

Comment: Kevin Evans, Ports-to-Plains Trade Corridor Coalition, questioned the ability of an RMA to issue bonds or condemn property. He suggested that RMAs should have the opportunity to pursue design build or exclusive development contracts (EDCs) and take advantage of alternative financing such as sales tax or property tax dedication. He also argued that the request process is too onerous and that RMAs should have more autonomy.

Response: The department agrees that RMA powers are not explicit in some areas and may need legislative clarification. An RMA does not have the power to dedicate sales or property taxes. Concerning design build and EDCs, by statute an RMA may enter into exclusive development agreements only if a project does not use constitutionally dedicated funding. Finally, the department does not believe that the request process is onerous. The rules only require basic project information that should be readily available to the petitioner.

Comment: Jack Miller, North Texas Tollway Authority, argued that the process should be decentralized to carry out the intent of the legislation, and that the rules should enable "the people at the local level to do what it is you want them to do ultimately."

Response: The department agrees with these basic principles.

COMMENTS--Written

The following groups or associations offered written comments: Travis, Williamson, and Bexar Counties, the City of Round Rock, the North Texas Tollway Authority, Just Transportation Alliances, Save Our Springs Alliance, Gray Panthers of Austin, the Capital Area Metropolitan Planning Organization, San Antonio Mobility Coalition, Inc., and Koch Performance Roads, Inc.

Save Our Springs Alliance (SOS) opposed adoption of the rules. SOS opposed the rules, the structure for RMAs, and RMAs in general as "another way to reduce public participation and accountability and increase the power of private, corporate interests in shaping the manner and rate of growth in Texas." SOS further commented: "Already too much of our transportation tax dollars are spent at the behest of real estate developers while real transportation needs go unmet. The proposed RMAs will only make this problem worse. At the same time, the public and taxpayers continue to bear the ultimate burden of the financial, environmental and public health costs of toll projects. RMAs pose a major threat to the traditional home rule powers of cities as well as the local control of general law cities and counties."

General Comments

Comment: Several commenters felt that the rules vest too much power in the commission and the department and undermine local control.

Response: A degree of department involvement was necessary to comply with statute, to ensure proper accountability, and to protect the safety of the traveling public, particularly due to the fact that an RMA project will be a part of the state highway system. Various changes, described in the section by section comment analysis, do give more control and responsibility to the local governments.

Comment: Along this same line, some commenters felt that the rules shift financial liabilities to the local governments without supporting local decision-making.

Response: The department disagrees. The local governments may choose to create an RMA and assume the attendant liabilities. Along with this, the RMA gains, in the view of the department, significant decision-making powers. The department reviews and approves various decisions, as required by law or necessary to ensure public safety and accountability.

Comment: Similarly, one commenter felt that the rules stifle and limit innovation and creativity. The commenter argued for a free market approach using end result criteria or performance-based outcomes.

Response: The department agrees that the rules can be revised to a certain degree to allow for innovation. Such revisions are discussed later in this preamble.

Comment: One commenter stated that RMAs threaten to further dilute local planning, and in particular the voting power of central city residents.

Response: The department is not sure how to respond to this comment. The commenter did not specify how RMAs dilute local planning and the voting power of central city residents. It should be noted that the rules allow for additional board members, primarily in an effort to ensure proper representation of central cities.

Comment: One commenter stated that the rules give too much authority to private entities that may be charged with building and operating toll roads. The commenter suggested that there should be explicit limitations on these powers and the use of funds.

Response: The department disagrees with this comment. The commenter failed to identify any examples of rule provisions that give authority to private entities, and the department is not aware of such provisions.

Comment: One commenter asserted that since Wall Street bond rating firms look at "overlapping debts," it should be required that any and all bonds approved for toll road financing require the approval of the county and any municipality affected by the proposed toll road.

Response: The department disagrees. RMAs will be only issuing revenue bonds that will not have any direct affect on tax supported debt issued by cities and counties.

Comment: One commenter stated that the scope of authority provided RMAs is too narrow and fails to address significant portions of the state's populations and ignores the environment. More specifically, this commenter and another argued that the commission provided RMAs with a limited horizon of transportation alternatives, and only one solution, roads. The commenters advocated various alternatives, including pedestrian and bike pathways and mass transit.

Response: The department disagrees with this comment. First, the statute requires RMAs to begin with a toll road. The legislature did give the commission the ability the regulate the expenditure of surplus revenue generated from the toll road. The commission did so by allowing RMAs to expend surplus revenue on all modes of transportation, including transit, aviation, rail, bicycle, and pedestrian.

Comment: One commenter argued that RMAs "must be provided with the geographic scope, tools, funding mechanisms, and capacity to pursue multimodal transportation planning, design, investment, and construction that meet the needs of citizens within a region." The commenter stated that the goal must be more than simply the creation of toll roads.

Response: The department agrees.

Comment: That same commenter also argued that RMAs "could serve as an innovative mechanism through which improvements and/or new projects that serve unmet regional transportation needs could be addressed, evaluated, integrated, planned, funded, and constructed. The commenter continues to say that this "promise of innovation is deferred, if not derailed by these proposed rules" for reasons discussed later in this preamble.

Response: The department agrees with the commenter's vision for RMAs, but feels that the rules support, not derail, this vision.

Comment: One commenter stated that the rules should "develop genuine participation in a regional effort developing criteria that facilitates relationship building, an open dialogue, and inclusion of every possible interest who can then work together over a long period of time." Specifically, the commenter complained that the rules allow the possibility of a single county RMA, lack clear criteria for an appropriate regional boundary, do not explicitly require regional planning, and do not establish "clear definitions of relationship between the current regional planning organizations, cities, and counties."

Response: The department agrees with the philosophy described in the initial sentence, but disagrees with the specific complaints. The rules need to be sufficiently flexible to allow both the commission and the petitioners to create, adapt, and plan as necessary for the given circumstances of an RMA.

Comment: One commenter suggested a "multi-level authority configuration" that includes various political and taxing jurisdictions.

Response: The department agrees with this comment and feels that the rules will enable such a result.

Comment: One commenter envisions RMAs becoming an effective mechanism for "cross-collateralization" of revenues. The commenter suggests that these funds could be used to offset some of the impacts of road construction.

Response: The department agrees that RMAs present a potential for innovative financing that in many instances can be used to offset some of the impacts of road construction.

Comment: One commenter suggested, in order to give each region financial control over its projects and revenue, utilizing "specific contractual obligations to insure fiscal responsibility and on-going operations that is in the state's primary interest."

Response: The department agrees with the general philosophy behind this comment. The department wishes to maximum local control and will enter into agreements with RMAs to encourage responsibility and to protect the state's interest.

Comment: One commenter stated that the rules make it appear that the local toll revenue position is increased based upon the level of investment. The commenter also states that given the "ambiguousness around 'surplus revenues,' this simply looks like slightly different version of states usual practice, i.e., continuing a direct or indirect system for extorting local funds for projects that have a predominantly state function."

Response: The department is not sure of the intent of the first sentence in the preceding paragraph, and disagrees with the rest of the comment. The department fails to see any ambiguity in the term or concept of "surplus revenues," and feels that as a whole, the rules governing surplus revenue give substantial latitude to the RMAs to spend it as they wish.

Comment: One commenter criticized the department's local participation policies.

Response: This comment is not related to the proposed rules.

Comment: One commenter suggested that the rules should establish criteria that "elevates local priorities, via cooperative planning and funding proposals, to the level of state/federal priorities for an efficient, multimodal transportation system." The criteria "should place all state/federal funding for the region at the disposal of the region." The commenter continues to say that the rules attempt to conform local activities to the state's priorities.

Response: The department disagrees. Much of this comment is beyond the scope of these rules. As far as requiring local activities to conform to the state's priorities, the department does believe that to the extent possible, local and state priorities should, not necessarily conform, but be consistent so that the transportation system as a whole is effective.

Comment: One commenter argued that RMAs should be comprehensive in their geographic range and in the range of strategic solutions they are authorized to investigate and employ.

Response: The department agrees.

Comment: One commenter criticized the transportation planning process, and suggested a process that fosters regional cooperation.

Response: The department welcomes any ideas on how to foster improved regional cooperation.

Comment: Concerning Subchapters E and F, two commenters argued that "if only state funds or no TxDOT money is involved in the project, then the federal guidelines should not be invoked."

Response: The department agrees that typically the department would not invoke federal guidelines when not required, but in some circumstances following federal procedures is the prudent course.

Section 26.2--Definitions.

Comment: One commenter suggested, for clarity and to avoid any possibility of confusion, that the following terms be defined: transportation plan; metropolitan transportation plan; transportation improvement program; Texas Transportation Plan; and Statewide Transportation Improvement Program.

Response: The department disagrees with this comment. These terms are commonly used in transportation planning. The different plans are distinct and not subject to confusion.

Section 26.11--Petition.

Comment: One commenter supported limiting to counties the ability to petition for creation of an RMA.

Comment: Section 26.11 authorizes one or more counties to petition the commission for authorization to create an RMA. One commenter suggested stating in the rule that counties that, on November 6, 2001, were a part of a regional tollway authority or that operated a turnpike under Transportation Code, Chapter 284, could not submit a petition.

Response: The department disagrees with this comment. The commenter misunderstood a statutory provision. Transportation Code, §361.003(d) does not prohibit these counties from being a part of an RMA. Instead, it prohibits an RMA from constructing, maintaining, or operating a turnpike in those counties.

Comment: One commenter suggested language that would prohibit a county adjacent to a county that is a member of a regional tollway authority from being a part of an RMA unless the regional tollway authority approved.

Response: The department disagrees with this comment. Giving such power to another governmental body would not be appropriate and should be left to the legislature. The commission desires maximum flexibility in the makeup of an RMA.

Comment: Section 26.11(4) requires a petitioner to commit to being fully responsible for environmental approvals. One commenter suggested adding the word "required" before environmental approvals.

Response: The department agrees with this clarification and is revising the rule. This change reflects the department's original intent.

Department initiated clarification: The department has made some other revisions to §26.11 for clarification and to ease the burden on the counties in submitting a petition. First, an RMA may have several potential projects in mind. The commission did not intend for the petitioner to provide all of the requested information for every project under consideration. Therefore, paragraph (3) is revised to require the information for "an initial" project, instead of "one or more" projects. Further, a new paragraph (5) is added to require, "a brief description of any other project the petitioner is currently considering to be developed by the RMA." The department is also revising the section to add a new paragraph (6) to require the following information in the petition, "if the petitioner desires to add directors to the board in addition to those expressly required by Transportation Code, §361.003, a list of the political subdivisions that will be represented by those members and a description of how they are to be appointed." This provision is necessary to implement revisions to other sections.

Section 26.12--Public Hearing.

Comment: One commenter supported and one commenter opposed the requirement of at least one public hearing on the creation of an RMA.

Response: The department continues to believe that it is critical that the commission be given an opportunity to hear the views of all interested parties.

Section 26.13--Approval.

Comment: Two commenters supported the provision in the rule requiring the commission to consider the opinion of a metropolitan planning organization (MPO) when ruling on a petition to create an RMA. The commenters pointed out that political subdivisions potentially affected by an RMA will likely be members of an MPO and can use the MPO as a forum for discussing the creation of an RMA.

Comment: One commenter complained that the commission controls every aspect of an RMA. The commenter listed various required approvals and asserted that the approvals have "little in the way of objective criteria upon which decisions can be made...." One example pointed out by the commenter was the commission's approval of the creation of an RMA.

Response: The department disagrees with this comment and will respond to each "approval" section-by-section. In §26.13, as required by law, the commission must approve the creation of an RMA. The section lists several findings the commission must make in order to approve the RMA's creation. These findings were listed to allow the petitioner and the public to understand the issues that are important to the commission and that will guide the commission in its deliberations. Providing more objective criteria would not have been beneficial to the public and would have hamstrung the commission and the petitioner. Objective criteria are not possible when the rules have to predict so many variables.

Comment: Section 26.13(1)(A)(iii) provides for consideration of the expressed opinion of metropolitan planning organizations. One commenter suggested limiting this provision to "the affected" MPOs.

Response: The department agrees and is revising the rule. This provision was intended to only apply to "affected" MPOs.

Comment: Section 26.13(1) provides that the commission must find that the creation of an RMA has sufficient public support based upon public comments received at public hearings, resolutions of support from affected political subdivisions, and the expressed opinion, if any of the MPO. One commenter suggested inserting the words "the affected" prior to MPO. Another commenter objected to requiring documentation of support from affected political subdivisions.

Response: The department agrees with both comments. The first comment, concerning the role of the MPO, is made as suggested. Concerning the second comment, the department did not intend to require documentation, but merely to allow the commission to consider it if offered by either the petitioner or the affected political subdivision. To clarify this provision, the paragraph is revised by inserting the word "any" prior to "resolutions of support from affected political subdivisions."

Comment: Section 26.13(1) requires the commission to find that the creation of an RMA will result in direct benefits to the state, local governments, and the traveling public. One commenter argued that "direct benefits to the state" should not be a deciding factor. The commenter pointed out that RMAs are intended to enhance the ability of the citizens and local governments of a particular "region" to address mobility. The commenter suggested removing the word "state" and revising the subsequent finding to read, "will improve the efficiency of the state's transportation systems and will not duplicate or conflict with the efforts of the department." This last phrase was borrowed from the department's rules governing the creation of a regional tollway authority.

Response: The department disagrees with this comment. The commission is responsible for the state as a whole and, in making any decision, must consider the impact on the entire state.

Department initiated revision: Section 26.13 is also revised to provide that the commission may authorize the petitioner to create an RMA if it finds that, "the composition of the board as described in the petition or in an amended petition will adequately represent affected political subdivisions." This revision is necessary to respond to comments to §26.14 and §26.16. Various commenters objected to provisions in those sections that allowed the commission to provide for the appointment of board members in addition to those expressly required by statute. The commission agrees that the petitioner shall have more control over the composition of the board, but seeks to ensure that the composition, as proposed by the petitioner, will provide for fair representation of affected political subdivisions.

Section 26.14--Commission Action.

Comment: One commenter objected to the rules providing for "artificial geographical boundaries for the RMA." The commenter argued that RMAs should be shaped to address transportation in a comprehensive way so their boundaries must encompass the whole problem areas.

Response: The department agrees with this comment and believes that the rules as proposed are consistent with this philosophy. While the section, for ease of implementation and proper accountability, requires boundaries to be along county lines, there is no limitation on the number of counties that could be in an RMA. The commenter argued that the Austin-San Antonio corridor would be caught up in obtaining county solutions leaving out important players. The department points out that the rules allow for the addition of other "players" to the board.

Comment: Section 26.14(a)(2) provides that the commission's order approving the creation of an RMA will describe each turnpike project to be developed, maintained, and operated. Several commenters were concerned that this language may preclude RMAs from later developing additional turnpike projects. One commenter suggested limiting this provision to each "currently identified" project. Other commenters suggested limiting the provision to "the initial" turnpike project.

Response: The department agrees that clarification would be helpful to clarify the department's original intent. The paragraph is revised to apply to "the initial" turnpike project.

Comment: Section 26.14 authorizes the commission to add restrictions on the development, operation, or maintenance of the turnpike project and on the operations of the RMA. Several commenters objected to this language. They argued that restrictions on the project are not necessary due to the environmental review, planning, and design processes and that it is too early in project development to be adding restrictions. They also argued that restrictions on the operations of the RMA would be a matter of great concern to the capital markets, and expressed concern with the possibility that the commission would add restrictions at any time after the RMA is created. Two commenters suggested revising the rule to provide for mutually acceptable restrictions negotiated between the RMA and the commission.

Response: The department agrees with this last suggestion. The department desires the flexibility to add restrictions if necessary, but agrees that these restrictions should be mutually agreed upon. Having the ability to add restrictions at this point in the process enables the commission to approve a petition, instead of rejecting it and requiring the petitioner to start the process over again. Section 26.14(a)(2) and (3) is revised to provide for "mutually agreed upon" restrictions. Section 26.15 is also revised to require the petitioner, in its resolution creating the RMA, to accept any restrictions or limitations. If the petitioner does not accept, the petitioner may request renewed discussions with the department to resolve any differences.

Comment: Several commenters objected to the ability of the commission to add board members not expressly required by the statute.

Response: The department agrees with this comment. Instead of providing, on its own motion, for additional members, the commission, through amendments to other sections, will require the petitioner to describe the proposed composition of the board, and the commission, when considering approval of the petition, must find that the proposed composition will adequately represent affected political subdivisions. To further implement this policy, §26.14 is amended in two ways. The proposed rule required the commission to establish the size of the board. To clarify the commission's original intent, this provision is revised to state that the commission will establish the "initial" size of the board. The proposed rule also provided that the commission would designate any political subdivisions that will be represented on the board by directors appointed under §26.16(b). Proposed §26.16(b) authorized the commission to add board members. Revised (adopted) §26.16(b) will merely require the petitioner to appoint additional members as proposed in its petition. To emphasize that the appointment of board membership is now the responsibility of the petitioner, §26.14 is revised to provide that the commission will designate any political subdivisions that, "by the request of the petitioner," will be represented on the board by directors appointed under §26.16(d).

Section 26.15--Creation.

Comment: One commenter suggested amending this section to provide a means by which the petitioners can appeal the content of the minute order creating the RMA.

Response: The department agrees. First, the section is revised to require the petitioner to accept any restrictions or limitations described in the commission's order. Second, a new subsection (b) is added to provide, "If the petitioner objects to any restrictions or limitations described in the commission's order, the petitioner may request renewed discussions with the department to resolve any difference." Of course, the petitioner, under the commission's public access rules, may speak at a commission meeting at any time.

Section 26.16--Board of Directors.

Comment: Several commenters objected to the commission's ability to add other board members. Some of those commenters also argued that there was little in the way of objective criteria guiding the commission's decision.

Response: The department agrees that the petitioner should be more involved in establishing the composition of the board. The commission continues, however, to believe that it is necessary for the rules to provide flexibility to respond to the unlimited possible circumstances involved in the creation of an RMA. To meet these two objectives, §26.11 is revised to require the petitioner to include in its petition proposed board composition. Section 26.13 is amended to provide that the commission, when considering approving the creation of an RMA, will consider the proposed board structure. Section 26.16 is amended to remove all provisions concerning the commission adding board members, and replace those revisions with a requirement that the petitioner provide for the appointment of any additional members described in its petition.

Comment: One commenter asserted that "portions of §26.16 seem inconsistent with Senate Bill 342."

Response: The department disagrees with this comment. If the commenter is speaking to the addition of directors not expressly required by Senate Bill 342, the department is confident that the legislature intended for there to be additional directors. The commission's rulemaking authority granted in Senate Bill 342 empowers the commission to provide a mechanism for the appointment of these additional directors.

Comment: Section 26.16(f) requires the appointing entity to be responsible for reimbursing a board member for the member's expenses. One commenter argued that the commission has no legal basis for such a requirement and that member expenses should be payable from any revenue source the RMA chooses to pay them from.

Response: The department disagrees with this comment. The department feels that this is the most equitable manner to ensure proper reimbursement, and that when an RMA is first created, the RMA is not likely to have revenue sources from which to choose.

Comment: Section 26.16(h) prohibits elected officials from serving as RMA directors. Two commenters disagreed with this prohibition. One commenter argued that based on past experience with the Capital Metro Board made of appointed directors, he is convinced that having board members directly accountable to area residents is preferable to appointed directors. Both commenters stated that the common law doctrine of incompatibility would be considered prior to appointment.

Response: The department disagrees with this comment. Concerns with the common law doctrine of incompatibility were a primary reason for this prohibition. The commission feels a responsibility to do everything it can to ensure compliance with all ethics standards.

Section 26.21--Addition of Counties.

Comment: One commenter objected to the commission's ability to appoint additional RMA board directors if counties are added to an existing RMA. The commenter also argued that the rules needed objective criteria governing the commission's decision.

Response: The department agrees that the petitioner should be move involved in determining board membership. The commission, however, has an interest in ensuring fair representation of affected political subdivisions. The adoption of objective criteria governing the commission's decision is not practical since the commission cannot predict the circumstances that may arise. To address the commenters concerns, the ability of the commission to add board members is removed and subsection (b) is deleted. To allow the commission to ensure adequate representation, the section is revised to add another consideration for the commission when approving a request under this section. The commission may approve the request if, in addition to the existing issues, "the commission finds that affected political subdivisions within the new county or counties will be adequately represented on the board." The proposed section required RMA approval to add counties. To further clarify the petitioner's role determining board composition, this provision is revised to provide for the RMA to identify "any additional political subdivisions that will be represented on the board and the means by which their representatives will be appointed."

Comment: This section authorizes one or more counties to request the commission for consent to join an RMA. One commenter suggested stating in the rule that counties that, on November 6, 2001, were a part of a regional tollway authority or that operated a turnpike under Transportation Code, Chapter 284 could not submit a request.

Response: The department disagrees with this suggestion. The commenter misunderstood the statute. Transportation Code, §361.003(d) does not prohibit these counties from being a part of an RMA. Instead, it prohibits an RMA from constructing, maintaining, or operating a turnpike in those counties.

Comment: One commenter suggested language that would prohibit a county adjacent to a county that is a member of a regional tollway authority from joining an RMA unless the regional tollway authority approved.

Response: The department disagrees with this comment. Giving such power to another governmental body would not be appropriate and should be left to the legislature. The commission desires maximum flexibility in the makeup of an RMA.

Comment: One commenter objected to the rule requiring commission approval to add counties.

Response: The department disagrees with this comment. The legislature charged the commission with approving the creation of an RMA. The geographic scope of the RMA is a critical part of that creation. To allow an RMA to add counties without commission approval would serve to circumvent the purpose of the legislation.

Section 26.22--Withdrawal of Counties.

Comment: One commenter objected to the rule requiring commission approval for a county to withdraw from an RMA.

Response: The department disagrees with this comment. To ensure financial stability and the proper administration of the statute, the commission must have a role in the structure of an RMA.

Section 26.23--Dissolution of an RMA.

Comment: One commenter objected to the commission's role in approving a dissolution and also argued that there should be objective criteria guiding the commission's approval.

Response: The department disagrees with these comments. The department believes that if the legislature wanted the commission to approve the creation of an RMA, it would want the commission to have a role in its dissolution. The adoption of objective criteria is not practical since the commission cannot predict the unlimited number of circumstances that may arise.

Comment: Various commenters argued that subsection (b), concerning involuntary dissolution, may present an insurmountable obstacle to public debt financing.

Response: The department agrees with this concern, and as suggested by some commenters, has revised the section to prohibit the commission from requiring dissolution unless "the holders of any indebtedness have evidenced their agreement to the dissolution."

Section 26.31--General Powers.

Comment: One commenter expressed concern with the statutory ability of an RMA to condemn property, issue debt, and enter into exclusive development agreements.

Response: The department agrees that an RMA's ability to perform some functions is uncertain at this time.

Section 26.32--Administrative Expenses.

Comment: Section 26.32 provided that the RMA is solely responsible for its administrative expenses. Various commenters expressed concern that the section was overly restrictive.

Response: The department agrees that the section should be clarified and has added the following language, which is similar to that suggested by some commenters: "This section is not intended to prevent an RMA from using toll revenue, bond proceeds, or funds loaned or granted by the department for the payment of reasonable administrative expenses incurred in connection with the planning, development, operation, and maintenance, of a turnpike project."

Sections 26.41--Social and Environmental Impact.

Comment: Section 26.41(c) requires commission approval of an RMA's environmental review prior to advertising the project for bid. Various commenters had three comments on this provision. First, they desired to limit the provision to projects using federal funds. Second, the commenters feel that approval should be required "prior to construction." Third, the commenters suggested requiring the commission to approve or disapprove an environmental review within 30 days.

Response: Concerning the first comment, Transportation Code, §361.103(c) requires commission approval of an environmental review. The commission has no power to limit the application of the statute to federally funded projects. The department agrees with the second comment. Section 26.41(c) is revised to state, "The commission must approve each environmental review under this section before construction of the project begins." The department disagrees with the third comment. The commission has promptly responded to TTA requests under this statute for many years and sees no reason to bind itself to an arbitrary deadline.

Section 26.42--Public Involvement.

Comment: Two commenters stated that the rules do not adequately address the need for analysis of the environmental impacts of highway projects; do not provide for legally binding analysis of the environmental impacts of new highways; and appear to allow RMAs to end-run the NEPA process and "required EIS by giving the appearance that no federal monies have been used in a highway project."

Response: The department disagrees and particularly does not understand the last part of the comment. If there is federal money in a project, the section requires the RMA to comply with NEPA. The commission went beyond this requirement by requiring a NEPA-type environmental review if not required by federal law. Moreover, by requiring commission approval of the environmental review, the department is ensuring that RMAs properly study and evaluate potential environmental impacts.

Comment: One commenter argued that there are "no clear public participation or planning and coordination requirements, nor are there any requirements for evaluating alternative transportation investments that might meet similar transportation goals in a more cost-effective or less environmentally-damaging fashion."

Response: The department disagrees with this comment. Section 26.41 requires a study that would include an evaluation of alternative transportation investments. Section 26.42 requires an RMA to comply with the department's public participation rules. Both of these sections will require early planning and coordination.

Comment: Another commenter argued that RMAs, "as developed in the proposed rules, pose a serious threat to public participation in transportation planning." The commenter specifically desired a greater role for metropolitan planning organizations.

Response: The department disagrees with this comment. This section of the rules requires significant public involvement. The commenter also appeared to confuse the rule's public involvement process governing the creation of an RMA with the public participation process for specific projects.

Section 26.43--Project Approval.

Comment: One commenter felt that any turnpike should be required to receive the approval of any county and any municipality that is affected, directly or indirectly, by any turnpike project. The commenter also felt that the local MPO should be required to approve the project.

Response: The department disagrees with this comment. This proposal would give project veto power to perhaps numerous governments. The turnpike project public involvement process required by §26.42 is sufficient to ensure the proper evaluation of the opinions of the affected governmental entities.

Comment: One commenter objected to the commission's role in approving projects and argued that the rule lacked objective criteria governing the commission's approval.

Response: The department disagrees with this comment. State law mandates this role for the commission. Further, more objective criteria would not be practical since the commission could not draft objective criteria that would be able to fit every type of circumstance that may arise.

Comment: Some commenters suggested requiring commission approval prior to construction instead of prior to advertising the contract for bid.

Response: The department agrees with this comment. The final sentence of §26.43(a) is revised to state, "The RMA must obtain approval after receiving approval of each environmental review under §26.41(c) of this subchapter and before final designation of the project as a turnpike project and before construction of the project begins."

Section 26.44--Design and Construction.

Comment: Section 26.44(b)(2) allows an RMA to request approval to use different nationally accepted design criteria for a particular item of work. Several commenters suggested striking "nationally accepted."

Response: The department agrees in part. The word "nationally" has been stricken to allow the department to consider requests to utilize locally accepted criteria in an effort to allow for increased innovation in the development of RMA projects.

Comment: One commenter suggested adding "unless an exception is approved by the executive director" to the end of the second sentence in subsection (b)(2).

Response: The department disagrees with this suggestion. The sentence already states that acceptable alternative criteria are "not limited to" those listed.

Comment: One commenter suggesting "requiring" instead of "authorizing" the executive director to approve alternative design criteria if the stated conditions are met.

Response: The department disagrees with this comment. The executive director will make the determination and may or may not approve the use of the alternative criteria requested by the RMA.

Comment: Section 26.44(b)(3) provides for the approval to deviate from the state or alternative design criteria for a particular design element. The executive director may approve an exception after determining that the criteria could not reasonably be met due to physical or environmental factors and that the proposed design is the best engineering solution. One commenter suggested replacing this last sentence with, "The executive director will approve an exception after determining that the proposed design is an effective engineering solution."

Response: The department agrees in part. To allow for more flexibility while still ensuring safety, the last sentence of the paragraph is revised to state, "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."

Comment: One commenter suggested deleting §26.44(c)(1), concerning frontage roads.

Response: The department agrees in part. Proposed amendments to the department's frontage road policy have been withdrawn and, therefore, this reference is no longer applicable. However, the department proposes to move forward with the adoption of an access management policy and, therefore, has revised paragraph (1) to require compliance with that policy.

Comment: Section 26.44(d) requires an RMA to submit to the department for review and approval the project design when it is approximately 30% complete. Several commenters asked that this be revised to 50% or 60%.

Response: The department disagrees with this comment. Determining potential areas of non-compliance as early in project development as possible will benefit all parties by minimizing unnecessary costs and delays due to redesign. If these issues are not discovered until all detailed design work has been completed, then any changes will delay the project. The 30% phase of design development is commonly regarded as the point at which schematic design is complete. At this point the basic geometry of the facility will have been determined and the items listed for submission to the department should be available for review.

Comment: Section 26.44 requires department approval of project design at the 30% stage and upon final completion. Several commenters argued that the department should only review plans, not approve them.

Response: The department disagrees with this comment. As part of the department's oversight of projects developed by an RMA, the department must ensure that any state highway improvement project is developed in accordance with all applicable federal and state laws and regulations and that the appropriate design criteria are being properly utilized. Approval of the design will assure the RMA that they are not expending significant design resources on a plan that the department will not find acceptable when completed and that the final plans will protect the safety of the traveling public.

Comment: Several commenters argued that the department should be required to review submitted design within 30 days. The commenters pointed out that the capital markets would not tolerate a project development process that allowed a third party to delay project completion.

Response: The department agrees in part. The department agrees that it is essential for the parties to agree to timelines for required reviews of an RMA project. However, the department proposes to agree to a timeline for each specific project and include that commitment in the project agreement. Section 26.44(d) and (f) is revised to provide that department review and approval will be in accordance with the procedures and timelines established in the project development agreement described in §26.48.

Comment: Section 26.44(e)(2) authorizes the executive director to approve the use of alternative specifications in certain conditions. One commenter suggested "requiring" the director to approve alternative specifications if the conditions are met.

Response: The department disagrees with this comment. The executive director will make the determination and may or may not approve the use of the alternative specification requested by the RMA.

Comment: Section 26.44(f)(4) requires an RMA to submit to the department contract administration procedures containing criteria that comply with the appropriate national or state administration criteria and manuals. Two commenters suggested changing "appropriate" to "applicable."

Response: The department agrees and the language has been revised.

Comment: Section 26.44(g) provides that an RMA shall not advertise the project for bids until it has received approval of the PS&E from the department. Several commenters suggested revising subsection (g) to state that an RMA shall not advertise for bids earlier than 30 days after submitting final plans, instead of after approval of PS&E

Response: The department disagrees with this comment. The department cannot risk an RMA advertising for bids on a project that will be a part of the state highway system when the plans have not been determined to comply with all applicable federal and state laws and regulations and that the appropriate design criteria have been met. The department will agree to a timeline for this review in the project agreement so all parties will be able to schedule their plans accordingly.

Comment: Section 26.44(g) provides that procedures relating to bidder qualification, bidding, award, and execution of a contract for the development and maintenance of a project that is financed with state or federal funds shall comply with department rules. Some commenters suggested limiting the scope of this requirement to the development of a project, and remove its application to maintenance.

Response: The department disagrees with this comment. Proposed language does not require approval of documents for maintenance contracts. But the requirement that those projects comply with state law and requirements must remain since projects are part of the state highway system.

Comment: Section 26.44(i) requires all contract revisions to comply with the latest version of the appropriate national or state administration criteria and manual. Two commenters suggested changing "appropriate" to "applicable."

Response: The department agrees and the language has been revised.

Comment: Section 26.44(i) requires department approval of contract revisions. Several commenters objected to this requirement.

Response: The department agrees in part. The department recognizes that there are numerous contract revisions made during construction that do not substantially alter a project. Therefore, the language has been revised to require the submission, but not the approval, of all contract revisions. However, department approval of contract revisions that affect prior environmental approvals or significantly change the scope or geometric design of the project is required to ensure proper implementation of these critical project elements. The subsection was also revised to provide that, "Procedures governing the executive director's approval, including time limits for department review, shall be included in the project agreement described in §26.48 of this subchapter."

Comment: Section 26.44(l) requires an RMA to comply with all laws and regulations applicable to the state highway system. Some commenters objected to this requirement.

Response: The department disagrees with this comment. An RMA project is a part of the state highway system, and, therefore, must comply with all applicable laws and regulations.

Section 26.46--Funding.

Comment: One commenter argued that proposed new Chapter 27, Subchapter E, relating to toll financing, provides a much more streamlined approach to funding and construction of a turnpike project. The commenter asserted that there is no justification for providing two drastically different approaches. The commenter suggested replacing most, if not all, of Chapter 26 with the requirements set out in Chapter 27, Subchapter E.

Response: The department disagrees with this comment. First, the two rules are not addressing similar situations. The RMA rules govern not just funding and construction, but the primary question of whether an RMA should be created. Second, the differences in the approach, when it comes to project development, are not as significant as the commenter asserts. Finally, an RMA project is a part of the state highway system, over which the commission has a certain degree of statutory responsibility. A project funded under the Chapter 27 rules, other than an RMA project, is not a state highway.

Section 26.47--Pooling.

Comment: Section 26.47 requires an RMA to seek commission approval prior to pooling turnpike projects. Various commenters felt it was inappropriate for the commission to be involved in this decision.

Response: The department interprets the statute to require commission approval of pooling. The commission agrees to withdraw this section pending legislative clarification.

Section 26.48--Project Development Agreement.

Department initiated revision: Several commenters objected to provisions in the rules that require department review and approval of various steps in the project development project. The department agrees with some of the concerns raised. The department wants to ensure that the state does not slow project development and also wants to maximize local control. To this end, the department would like to characterize the project development process as a partnership between the state and the regional entities governing the RMA. Therefore, §26.48 is revised to help ensure that projects will be developed in the spirit of this partnership, and to help ensure expeditious project development. The revised section provides that the agreement will 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." A number of commenters had requested deadlines for department reviews or approvals. The department recognizes the value of setting deadlines to ensure expeditious project development, but cannot agree to establishing deadlines by rule. The department cannot predict how many RMA projects it may be reviewing at one time, and the nature and complexity of those projects. The revisions to §26.48 allow the department and the RMA to mutually agree to deadlines that are appropriate for each project.

Section 26.52--Maintenance.

Comment: One commenter pointed out that a project funded under Chapter 27, Subchapter E, is not subject to the same maintenance standards as an RMA under this section. The commenter asserted that there is no justification for the different approaches.

Response. The department disagrees. An RMA project is a part of the state highway system, over which the commission has certain statutory responsibility.

Comment: Section 26.52(a)(1) requires an RMA to meet the most current "Texas Maintenance Assessment Program" minimum rating requirements for interstate highways. One commenter suggested requiring the RMA to meet or "exceed" the requirement.

Response: The department agrees with this clarification and §26.52(a)(1) is revised accordingly.

Section 26.54--Project Operating Agreement.

Comment: Section 26.54 requires the RMA and the department to enter into a project operating agreement. One commenter suggested revising the section to state that the RMA shall "negotiate and enter into a mutually acceptable project agreement." The commenter also suggested clarifying a cross-reference to §26.52(a) to read "§26.52(a)(1) - (2)."

Response: The department disagrees with both suggestions. It is understood that any agreement will be negotiated and would include mutually acceptable terms. The cross-reference is sufficient since the subsection only contains a paragraph (1) and (2).

Section 26.55--Project Constructed by the Department.

Comment: One commenter objected to the role of the commission in approving the transfer of a department toll road to an RMA, and argued that the rule should provide objective criteria governing the commission's approval.

Response: The department disagrees with this comment. The commission is ultimately responsible for state highways under the department's jurisdiction and would have to agree to any transfer of responsibilities. The criteria governing the commission's decision could not be more objective since the commission has to respond to unlimited circumstances that may arise.

Comment: Section 26.55(d) authorizes the commission to restrict the use of surplus revenue derived from a transferred toll project. Several commenters objected to this provision and argued that it violated the principle of local control and would cause concerns among the capital markets.

Response: The department agrees with these comments to a certain extent. An RMA is being handed a completed project that was constructed with the support of tax revenue. The department wants the ability, depending on the circumstances, to see a return on its investment--some benefit to the state highway system from the use of surplus revenue. To address the commenters' concerns, the provision restricting the expenditure of surplus revenue has been revised to allow the commission to, "require that expenditures of surplus revenue, if any, derived from a transferred highway be made to implement projects included in the metropolitan transportation plan or the department's unified transportation program. Within the project operating agreement described under §26.54 of this subchapter, the commission and the RMA shall, prior to transfer, mutually agree to the amount of expenditures subject to this section and projects to be funded under this section. These provisions may be revised at any time upon agreement of both parties." This revision is consistent with the spirit of partnership that is guiding other changes to the proposed rules. The department and the RMA will mutually resolve this issue on a case-by-case basis.

Section 26.56--Department Assuming Jurisdiction of RMA Project.

Comment: Various commenters objected to this section which provides that an RMA turnpike project becomes a non-tolled highway under the jurisdiction of the department when all debt issued for the project has been paid or otherwise provided for. Commenters argued that this section shifts the costs and liabilities for the project to the local level and that the local governments will be unable to reap the benefits of the project they build.

Response: The department disagrees with this comment. This section is required by state law (Transportation Code, §361.238).

Section 26.62--Finance or Construction.

Comment: This section authorizes an RMA to spend surplus revenue on other transportation projects. One commenter suggested clarifying that the project must be "in the region."

Response: The department agrees. The change will clarify the department's original intent. The words "in the region" are added after "may spend surplus revenue."

Section 26.63--Notification of Financial Assistance.

Comment: Section 26.63 requires an RMA to notify the commission prior to financing a transportation project with surplus revenue. Some commenters objected to this section and feared that notice actually implied approval.

Response: The department agrees that this section is unnecessary. The section is withdrawn.

Section 26.64--Commission Approval.

Comment: One commenter objected to the role of the commission in approving an RMA constructing a transportation project with surplus revenue, and argued that more objective criteria should be adopted to govern the commission's decision.

Response: The department disagrees. First, state law requires commission approval. Second, the adoption of more objective criteria is not practical given the unlimited number of circumstances that may arise.

Comment: The section states that the commission will approve an RMA constructing a transportation project under §26.62 of this subchapter if certain conditions are met. Some commenters suggested revising the cross-reference to §26.62(2) since commission approval is not required for §26.62(1)--"assisting in financing."

Response: The department agrees that this clarification may dispel some confusion and is revising the rule.

Section 26.73--Approval (Conversion of Non-Tolled State Highway).

Comment: One commenter objected to the role of the commission in approving the conversion of a non-tolled state highway into a RMA turnpike. The commenter also argued that the rule lacked objective criteria guiding the commission's decision.

Response: The department disagrees with this comment. State law requires commission approval of a conversion. Further, the adoption of more objective criteria is not practical since the commission could not draft a rule that would predict all of the numerous circumstances that could arise.

Comment: One commenter questioned the prudence in converting a non-tolled highway into a turnpike.

Response: The department shares the commenters concerns. The legislature explicitly gave this option to the commission and RMAs and the department intends to allow for its implementation. Such a conversion may be prudent in a given region in a given circumstance, and the rules therefore allow for that possibility.

Comment: Section 26.73 requires the support of each affected county and city in order for the commission to approve the conversion of a highway. One commenter asked the department to define "affected county and city."

Response: The department disagrees with this comment. For a conversion to be successful, it is critical that the local governments be supportive. The commission needs maximum flexibility to determine what city and county may be affected by a conversion.

Section 26.74--Use of Surplus Revenue.

Comment: Several commenters argued that the restrictions on the expenditure of surplus revenue were not authorized by the legislature, contrary to the principle of local control, and would cause concerns with the capital markets. Some commenters pointed out that the state is receiving sufficient compensation for the project by being released of the responsibility to maintain and operate the project.

Response: The department agrees with the commenters to an extent. The project would be constructed with the support of tax revenue. The department wants the ability to see a return on its investment by requiring improvements to the state highway system with surplus revenue. To address some of the concerns of the commenters, and to provide flexibility for both the RMA and the commission to address the issues on a case by case basis, the section is revised to state, "Notwithstanding the provisions of Subchapter G of this chapter to the contrary, the commission may, as a condition to the conversion and transfer, require that expenditures of surplus revenue, if any, derived from a transferred highway be made to implement projects included in the metropolitan transportation plan or the department's unified transportation program. Within the project operating agreement described under §26.54 of this subchapter, the commission and the RMA shall, prior to transfer, mutually agree to the amount of expenditures subject to this section and projects to be funded under this section. These provisions may be revised at any time upon agreement of both parties."

Section 26.82--Annual Audits.

Due to typographical error, the deadlines described in §26.82(b) and (e) were incorrect as published in the February 15, 2002, issue of the Texas Register . A correction of error notice was published March 8, 2002 (27 TexReg 1939). To correct the error, subsection (b) is revised to read, "The annual audit shall be submitted to the executive director within 90 days after the end of the fiscal year." Subsection (e) is revised to read, "If requested by the department, audit work papers shall be made available to the executive director within 30 days of request, at any time during the retention period."

Subchapter A. GENERAL PROVISIONS

Subchapter A. POLICY, RULES, AND PROCEDURES FOR PRIVATE INVOLVEMENT IN DEPARTMENT TURNPIKE PROJECTS

Subchapter B. SANCTION OF MAINTENANCE CONTRACTORS

Subchapter A. POLICY, RULES AND PROCEDURES FOR PRIVATE INVOLVEMENT IN AUTHORITY PROJECTS