Comment: Montgomery County recommends deleting a portion of §5.58(a)(3)(A) and §5.58(b)(3)(A) (addressing pass-through fares and pass-through tolls, respectively,) which state that "Unless authorized by the commission and incorporated in a pass-through agreement by the department, the department's liability under a pass-through agreement shall be neither increased nor decreased by cost overruns and underruns." Montgomery County recommends deleting the first portion of that sentence (in each referenced section) to remove the commission's discretion to modify the department's liability by agreement. The rules should recognize that it is up to the local entity to deliver the project. The local entity is in a better position than the department to assume the risks and benefits associated with project delivery and to negotiate appropriate risk transfers with its developer. By assuming the risk, the local entity bears the responsibility for any cost overruns, but it is also appropriate that the entity benefit from any cost underruns. They should not be penalized for delivering the project "under budget."

Response: Other than re-numbering, there has been no revision of the language contained in proposed §5.58(a)(3)(A) and §5.58(b)(3)(A) (see current §5.57(a)(3)(A) and §5.58(b)(3)(A)). The reimbursement amount to be paid to the entity by the department is fixed in the agreement. Project cost overruns or underruns are the responsibility of the entity and do not affect the amount of reimbursement as described in the executed agreement unless there was a mutually agreeable change in the scope of the project. Any amendments to the agreement would have to be agreed to and executed by both parties. Project cost underruns would not result in a penalty to the entity. No additional action affecting the substance of these rules as proposed is made as a result of these comments.

Comment: Montgomery County notes that in addition and similar to proposed §5.58(a)(1)(B)(ii), proposed §5.58(b)(1)(B)(ii) states that financing costs will not be considered in determining the level of pass-through tolls. Again, it is completely unfair to eliminate the substantial costs that local entities bear to accelerate a project from the calculus of the level of pass-through tolls. Those are real costs and are being paid during the same period that pass-through toll payments are being received. There is no reason not to consider these costs, and to exclude them seems inconsistent with the intent of Transportation Code, §222.104(b) which provides that pass-through tolls may be reimbursement for the "design, development, financing, construction, maintenance, or operation of a toll or non-toll facility" (emphasis added).

Response: The language contained in proposed §5.58((b)(1)(B)(ii) is unchanged from current §5.57(b)(1)(B)(ii). The commission has consistently indicated that financing costs will not be considered as part of the negotiation of the reimbursement amount. The inclusion of these costs would negate much of the benefit of the pass-through program approach from a state level perspective. No additional action affecting the substance of these rules as proposed is made as a result of these comments.

Comment: Montgomery County states that proposed §5.58(b)(2)(B)(iii) and (iv) include among the potential bases for variation in pass-through tolls, the condition of the roadway and whether the highway is tolled. Neither of those factors should impact the pass-through toll amount. That amount should be influenced by project costs and traffic volumes, and Montgomery County therefore recommends deleting this section.

Response: Other than re-numbering, there has been no revision of the language contained in proposed §5.58(b)(2)(B)(iii) and (iv) (see current §5.57(b)(2)(B)(iii) and (iv)). The factors cited, such as the condition of the roadway and whether the highway is tolled, will have a direct impact on both the project costs and the projected traffic volumes. The ability to consider such project factors and their influence on traffic volume needs to be the basis for negotiation of the project development agreement and the associated reimbursement amount. No additional action affecting the substance of these rules as proposed is made as a result of these comments.

Comment: Montgomery County notes that §5.59(a)(1) provides that the department may choose to conduct the environmental review and public involvement for a project. Montgomery County believes that it is essential that environmental review and public involvement should be delegated to the local entity and should remain under local control. Montgomery County recommends deleting the last sentence of proposed §5.59(a) so that local entities can more predictably develop the project schedules referenced above (in connection with proposed §5.57(b)(10)).

Response: Other than re-numbering, there has been no revision of the language contained in proposed §5.59(a) (see current §5.58(a)). Subsection (a) does not restrict an entity from having local control of the environmental review or public involvement process that is assigned as part of the agreement. However, the department may already have started environmental review and/or public involvement prior to a project being selected as a pass-through candidate. It may simply be more efficient for the department to complete some or all of the processes in order to keep the project on schedule to construction. No additional action affecting the substance of these rules as proposed is made as a result of these comments.

Comment: Montgomery County states that §5.59(f) would require public or private entities intending to sell bonds and use pass-through tolls or fares as evidence of financial capability to repay the bonds, to provide the department with an opportunity to review and comment on the bond offering documents prior to the sale of the bonds. While using debt to finance projects is relatively new to the department, public and private entities have issued bonds to finance projects for decades. The market requires a legal opinion to accompany any bond offering, including one from the Attorney General, which is ample safeguard to potential purchasers. No benefit is achieved by inserting the department in the process, and in fact this provision could add significant delay to a timely issuance - critical to a local entity. This provision also raises concern of whether the department is attempting to "approve" the issuance of debt, a role that is not appropriate for the agency. Montgomery County therefore recommends eliminating this proposed requirement.

Response: The intention of §5.59(f) is not for the department to approve the issuance of debt by another entity. The department wants an opportunity to review the bond offering documents to understand any obligations or interrelationships between the offering and the department, commission, or state highway fund, and any department obligation to provide bond investors with updated information on the status of the state highway fund. No additional action affecting the substance of these rules as proposed is made as a result of these comments.

Comment: Former county official Mr. Jim Powers notes that the majority of the proposed amendments to §5.53 are standard proposal requirements and should be readily available to proposers.

Response: The comment is noted and no additional action affecting the substance of these rules as proposed is made as a result of this comment.

Comment: Mr. Powers notes that the proposed §5.54 is intended to provide transparency in terms of notifying the public of available funding for program periods and to provide planning capability to the department in determining program periods.

Response: The comment is noted and no additional action affecting the substance of these rules as proposed is made as a result of this comment.

Comment: Mr. Powers notes that, along with the proposed programmatic changes in administrating the program, the additions to the proposed §5.55 are the substantive changes proposed for the pass-through program. Requiring proposers to enumerate specific benefits should give the department's evaluation efforts more transparency and put proposers on "equal footing" with regard to project selection.

Response: The comment is noted and no additional action affecting the substance of these rules as proposed is made as a result of this comment.

Comment: Mr. Powers notes that proposed §5.56 and §5.57 provide consistency with proposed proposal requirements and criteria.

Response: The comments are noted and no additional action affecting the substance of these rules as proposed is made as a result of these comments.

STATUTORY AUTHORITY

The repeals are adopted under Transportation Code, §201.101, which provides the commission with the authority to establish rules for the conduct of the work of the department, and more specifically, Transportation Code, §91.075(d), which provides the commission with the authority to adopt rules for a pass-through fare program and Transportation Code, §222.104(g), which provides the commission with the authority to adopt rules for a pass-through toll program.

CROSS REFERENCE TO STATUTE

Transportation Code, §91.075 and §222.104.