Highways: New Unfunded Mandate

By Terri Hall l October 10, 2011

We’ve all heard of unfunded mandates and how federal and state governments kick their responsibilities down to the local level without paying for it. While building and maintaining federal and state highways is not being specifically mandated to local governments by federal and state authorities, the responsibility of building and maintaining our highways is quickly becoming a burden foisted upon local governments and hence, local taxpayers, despite the fact those same taxpayers are already paying federal and state taxes at the gas pump for highways.

What are the primary sources of revenue for a city or county? Property taxes and sales taxes.

San Antonians have already voted to raise their sales tax through the Advanced Transportation District (ATD) in November 2004 in order to have a local pot of money that could be used to ‘leverage’ state and federal dollars for transportation projects. Half of the increase was dedicated to road projects and half to public transportation projects.

Now, the San Antonio Express News is bolstering the efforts of some local elected officials, like Bexar County Commissioner Kevin Wolff, who want voters to consider tapping property taxes to pay for STATE and FEDERAL highway improvements. The Texas Legislature has given local government a new ‘tool’ to pay for transportation projects called Transportation Reinvestment Zones (TRZs), similar to Tax Increment Finance Zones, but were initially supposed to go strictly to fund transportation-related projects. Recent legislation has expanded what TRZ revenues can be used for, making them a new slush fund for politicians.

Proposition 4 on the ballot this November would expand this authority from municipalities to counties, too. What fun, now you can get hit with higher property taxes from both cities and counties if Texas voters approve the measure.

Follow the money

Where is the money we already pay for federal and state highways going? Some of it is being diverted to non-road uses, both at the federal (20% funds public transit) then an additional 6,000 earmarks for pet projects, including the bridge to nowhere in Alaska before that got nixed) and state levels (25% to Texas public schools, 5% to fund DPS, plus more diversions that go to help fund more than 7 different state agencies). The Texas Legislature actually increased the diversions of the gas tax in its budget adopted in May, bringing the total from $1.2 billion every two years to over $2 billion for the next two years.

Huge chunks of gas tax revenues also go to subsidize toll roads, which is a DOUBLE TAX (to use the gas tax to build the road and then charge us a toll every time we drive on it), even foreign-owned toll roads. In addition to that, TxDOT doles out our gas taxes to fund $1 million per mile bike trails, which may as well be paved with gold at that price.

Then lawmakers, special interests, and TxDOT team up to misuse our hard-earned tax money to build low priority projects like the Grand Parkway (a massive loop around Houston) through the Katy prairie where’s there’s no traffic congestion. Grand Parkway is not even on the state’s 100 Most Congested Roads List. Even worse, officials publicly admit Grand Parkway is to benefit ExxonMobil who wants to move its headquarters along the proposed footprint. TxDOT documents show over $4 billion in highway funds will go to SUBSIDIZE this toll road over the next 4 years, one of the 14 projects eligible to be sold-off to a foreign company. Yet officials continue the mantra that there’s no money for free roads, only toll roads.

The consequences of outsourcing to the locals

With all this push for ‘local control’ of state and federal highways in an effort to solve urban congestion — increasingly a job the state and feds just won’t seem to do, there are some high profile examples of why giving local toll authorities the task and why the remaking of our broken highway department into a Goldman Sachs-style “innovative financing” warehouse are the WRONG approach.

Regional Mobility Authorities (RMAs) have cost this state hundreds of MILLIONS of dollars through wasted and duplicative efforts, in some cases charging taxpayers “management fees” for supervising TxDOT doing the work! The Alamo RMA has sucked up over $40 million in TxDOT funds and hasn’t built anything other than a $7 million superstreet on US 281 (that TxDOT could have and should have done). RMAs also lack the knowledge and experience to properly supervise the work as is the case with the US 290 project in Austin where the contractor built 10 faulty pillars that have to be torn down and rebuilt.

Since ownership of our state and federal highways get transferred to the local toll entity, RMAs have to pay for the right of way on its projects, making taxpayers pay again for what TxDOT already has funds to pay for. For instance, on the US 281 toll project in Bexar County, taxpayers will pay $126 million more (in right of way and management fees) to have the RMA do the project than if TxDOT did it. RMAs also use contracting methods like design-build contracts that are not subject to competitive bidding, allowing contracts to be steered to their buddies and naturally drives up the overall cost of projects.

Then there’s the local bond debt that many local communities buy into to get projects done when the state and feds fail to give communities back their gas taxes. San Antonio Mayor Julian Castro has proposed a nearly $600 million bond package to fund transportation projects, which is just a few years after Mayor Phil Hardberger did the same to the tune of $500 million.

‘Innovative financing’ code for subprime mortgage-style, multi-leveraged highway debt

With Texas Governor Rick Perry’s choice of Ted Houghton (“I’m the most arrogant commissioner of the most arrogant state agency in the history of the state of Texas.” October 15, 2009) as the new Chair of the Transportation Commission and Perry crony and political hack Phil Wilson as the new Executive Director, Perry continues to put taxpayers on a collision course with controversial financing methods, the same risky multi-leveraging (using borrowed money to secure more borrowed money and so on) that caused the subprime mortgage crisis and subsequent near trillion dollar taxpayer bailout of Wall Street.

Perry’s ‘innovative finance’ gurus like Houghton and Wilson also encourage the sale of our sovereign Texas land and highways over to foreign entities using public private partnerships (or P3s). P3s are government-sanctioned monopolies that put the taxpayer on the hook for the losses, place the power to tax in the hands of a private corporation, use public money for private profits, last for a half-century, and contain other sweetheart provisions like non-compete clauses that guarantee free roads remain congested, forcing motorists to pay tolls to get anywhere.

Such schemes are far flung from TxDOT’s glory days when it actually focussed its energies on building and maintaining a freely accessible, world class highway system that was the envy of the nation. Now its devolved into an arrogant, scandal-ridden, wasteful agency that takes pleasure in sticking its finger in the taxpayers’ eyes, and whose primary goal is to sell Texas’ crown jewel, our highway system, to Perry’s buddies who will extort punitive levels of taxation, that they cleverly claim are not taxes but ‘user fees,’ from motorists (75 cents PER MILE, like adding $15 to every gallon of gas you buy) for simply driving to work.

Thomas Paine had it right: “If, from the more wretched parts of the old world, we look at those which are in an advanced stage of improvement, we still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping the spoil of the multitude. Invention is continually exercised, to furnish new pretenses for revenues and taxation. It watches prosperity as its prey and permits none to escape without tribute.”

Taxpayers should demand accountability and an end to all non-road diversions of ALL road and vehicle taxes before any new taxes are foisted upon us. Otherwise, paying tribute is likely to lead to serfdom.

Terri Hall is the founder of Texans Uniting for Reform and Freedom (TURF), which defends against eminent domain abuse and promotes non-toll transportation solutions. She’s a home school mother of eight turned citizen activist. Ms. Hall is also a contributor to

SFPPR News & Analysis.