DEPARTMENT: Transportation and Capital Improvements
DEPARTMENT HEAD: Mike Frisbie
COUNCIL DISTRICTS IMPACTED: Citywide
SUBJECT:
Resolution in support of a constitutional amendment to increase State highway funding.
SUMMARY:
This resolution indicates support of a constitutional amendment to increase State highway funding by dedicating a portion of the oil and gas production tax revenue to the state highway fund, for non-toll projects.
BACKGROUND INFORMATION:
During the 83rd Legislative Session in 2013, the Texas Legislature approved Senate Joint Resolution (SJR) 1, proposing a constitutional amendment to dedicate a portion of the oil and gas production tax revenue to the state highway fund, for non-toll highway projects. The amendment, on the November 4, 2014 state ballot, will read as follows:
The constitutional amendment providing for the use and dedication of certain money transferred to the state highway fund to assist in the completion of transportation construction, maintenance, and rehabilitation projects, not to include toll roads.
The amendment does not constitute a tax increase. Rather, existing oil and gas production tax revenue would be redirected. Currently, 25% of the oil and gas production tax revenue is earmarked for the State's Education Fund and the remaining 75% of the revenue is earmarked for the State's Economic Stabilization Fund, also known as the Rainy Day Fund. If voters approve the constitutional amendment, half or 37.5% of the Rainy Day Fund, estimated at $1.4 billion, will be redirected to the State Highway Fund. The redirected revenue would be allocated throughout the state by TxDOT, consistent with existing formulas outlined by the Transportation Committee.
The City actively supported SJR 1 during the 83rd Legislative Session in 2013. Additional funding to improve mobility and to maintain, expand and improve transportation infrastructure was an initiative in the City's 83rd State Legislative Program.
Bexar County recently passed a similar resolution in support of the amendment.
ISSUE:
TxDOT's contract awards for highway construction have been funded through tax revenue, federal stimulus, and issuing bonds. However, the funding levels and subsequent contract awards are projected to decrease over the next two (2) years due to the lack of federal stimulus dollars and the need to repay the bond debt, leaving only the tax revenue to fund the highway maintenance budget.
TxDOT's recent estimates indicate a $4 billion annual shortfall for maintenance and construction of the State's infrastructure and a $1 billion annual shortfall for maintenance and construction on infrastructure heavily used by the energy sector due to the increase in energy-related activity in the State. While the $1.4 billion estimated revenue in redirected funds would not fully fund the state's highway maintenance, but would contribute to the overall transportation budget and may increase mobility funding.
If approved in November by Texas voters, the redirected revenue will be allocated throughout the State based on existing formulas, improving State highways throughout the State, including San Antonio. Completing highway maintenance and capacity improvements ensure drivers continue to use the state highways for regional travel and not divert to local roadways, which will lead to congestion and pavement deterioration on the local roadways.
ALTERNATIVES:
In review of potential alternatives, staff recommends that Council issue this resolution indicating support of a constitutional amendment to increase State highway funding by redirecting a portion of the oil and gas production tax revenue to the state highway fund, for non-toll projects.
FISCAL IMPACT:
There is no fiscal impact associated with this Resolution.
RECOMMENDATION:
Staff recommends approval of the resolution in support of the proposed State constitutional amendment to increase State highway funding by dedicating a portion of the oil and gas production tax revenue to the state highway fund, for non-toll projects.
The constitutional amendment will provide a new revenue stream and allow the Texas Legislature to continue working on other measures to fill the remaining funding gap.