July | August 2017

by Sean Slone
Texas added more new residents than any other state between July 2015 and July 2016, according to U.S. Census estimates. Nevada has the sixth strongest population growth rate in the nation. That kind of growth brings significant challenges to state officials trying to provide transportation mobility to the people they serve. Texas state Rep. Larry Phillips and Rudy Malfabon, director of the Nevada Department of Transportation talked about how their states have sought to fund transportation improvements in recent years and what the future may hold for Texas and Nevada.
Confronting a Toll Backlash in Texas
The anti-toll movement in Texas has state Rep. Larry Phillips concerned his state could miss out when it comes to the possibility of a federal infrastructure investment that, as suggested by President Donald Trump’s administration, could include a heavy reliance on public-private partnerships, or P3s, and financing.
“Within several miles of where I’m driving, we have a brand new headquarters of State Farm, the U.S. headquarters of Toyota is right here, the Dallas Cowboys practice field, tons of construction, malls, you name it,” Phillips said. “It’s all right around here and it’s because this toll road was built that all this is happening.”
According to Phillips, toll roads have been hugely profitable in Texas. Despite these successes, he believes the toll road model would be difficult to implement on new projects due to resistance from current leaders.
“If you went back 10 years ago, I would say ‘that is remarkable and Texas is going to do quite well under that system,’” Phillips said. “(But) we have elected people who are afraid of those P3s. They’re afraid we’re going to get taken advantage of” by infrastructure firms like Cintra, a Spanish company that owned 65 percent of the company that operated a toll road outside Austin, called State Highway 130.
The SH 130 Concession Company declared bankruptcy in 2016 after the toll road failed to bring in the anticipated revenues due to overly optimistic traffic projections. But Phillips said SH 130 is the perfect example of how a P3 is supposed to work.
“The risk shifted to that company, not to the taxpayers,” he said. “And so if it goes belly up, they aren’t going to close the road. … They’re still going to collect tolls. Nothing is going to change.”
Phillips said he has introduced legislation this session that includes a list of potential projects state planners say could be ready to move forward as public-private partnerships, or comprehensive development agreements as they are known in Texas, if the Trump administration’s infrastructure plans come to pass.
Recent transportation funding measures in Texas, such as a 2015 voter-approved ballot proposition that dedicated a portion of the state’s general sales and use taxes as well as motor vehicle sales and rental taxes to the state highway fund, specified that those dollars could only be used for non-tolled projects.
Phillips believes that’s shortsighted.
“We don’t want proliferation of toll roads, but if a project is something you could toll, you probably ought to do it so you can (fund) five other projects,” he said.
The 2015 proposition, and another approved in 2014, reallocated a portion of oil and gas tax revenues typically designated for the state’s economic stabilization fund to the highway fund, producing a windfall for transportation that most states can only dream about.
“We’ve been successful the last couple (legislative) sessions in getting huge increases of money by taking it from other sources,” Phillips said. “We don’t have the courage to raise taxes or to increase funding other than we’re going to take it from here and take it from there. … We have more money than we’ve had in years. We still need more money. Everybody needs more money. You just can’t get enough in a growth state like (Texas).”
Seeking ‘Funding, Not Financing’ in Nevada
Nevada Department of Transportation Director Rudy Malfabon has his own concerns about public-private partnerships.
“They don’t really pop out as far as something that’s a solution for Nevada,” said Malfabon, 2017 vice chair of the CSG Transportation and Infrastructure Public Policy Committee. “We need funding, not financing. … Since we don’t have tolling authority for roads and bridges in Nevada, we can always consider a public-private partnership, but it’s one that’s going … to be paid (for) out of our regular revenue stream. Those type of P3 projects don’t really lend themselves very well to the issues we have in Nevada. We usually have to have additional capacity, upgrades to interchanges. It’s not something that you can easily fit into that model of charging a toll or charging a user fee for that.”
Malfabon cites funding as the biggest transportation challenge facing his state, especially in the years ahead.
“Basing our revenue on fuel taxes is really not sustainable in the long run,” Malfabon said. “When you’re looking at fuel taxes and fuel efficiency in the long run, they’re just going in different directions.”
Like Texas, Nevada is a growing state, Malfabon said, and funding challenges are already leading to some difficult choices for his agency.
“We get into these issues of (funding) capacity versus preservation,” he said. “We’re probably not spending as much as we need to on preservation because being a Western state we’ve had such growth over the last decade even with the downturn of the economy. Just over the last 10, 15 years, we’ve seen so much growth, we’re still catching up.”
Malfabon said for his state it is transportation projects like the $560 million Project Neon to widen a stretch of Interstate 15 in Las Vegas, and the so-called Spaghetti Bowl interchange revamp in Reno that will have the biggest impact in the years ahead.
“Nevada has always been not only for the commuters but also for the visitors,” he said. “We have a tourism-based economy. We’re trying to diversify that. But even for the new Nevada economy, people have to commute through these major system interchanges. So those are two examples of big projects that we’re trying to do that are going to change the way that people commute and hopefully improve things to make more reliable commute times and safer commutes.”
Under Malfabon’s leadership, the Nevada Department of Transportation is also focused on building partnerships to meet the challenges that new disruptive technologies such as autonomous and connected vehicles could bring in the future. The department is working with other state agencies, the university system and others to enact policies that will allow and encourage companies to test their vehicles and pilot their programs in the state.
“It’s an exciting time for transportation,” he said. “(But) it’s hard to predict what it’s going to look like in 20 years.”
Texas state Rep. Larry Phillips serves as the 2017-2018 co-chair of The Council of State Governments’ Transportation and Infrastructure Public Policy Committee. A former chairman of the Texas House Transportation Committee, Phillips serves this year as chairman of the Texas House Insurance Committee.
Rudy Malfabon, director of the Nevada Department of Transportation, is the 2017 vice chair of the CSG Transportation and Infrastructure Public Policy Committee. Malfabon has worked for the Nevada DOT for more than 25 years. As director, he is responsible for the daily operations of a department with an annual operating budget of more than $800 million and close to 1,750 employees. His experience also includes a brief stint as state construction engineer for the Washington State Department of Transportation.