Construction and the Law in Texas

In my January article that was a preview of this session’s construction bills and initiatives, I identified five legislative priorities for the 83rd Legislature as announced by Texas Speaker of the House Joe Straus before the session started. Those priorities were education, transportation, water, jobs and budget transparency. As it currently stands in the middle of this session, and now that the filing deadline for bills has passed, we can better assess the path forward and identify certain legislation that may have a significant impact on the heavy construction industry.

By far, the most notable bill that seems to be on its way to passage is HB 4, which was referred out of the House Natural Resources Committee on March 14. That bill creates a $2 billion State Water Implementation Fund for Texas with money that has been accumulating in the Rainy Day Fund to provide financing and resources to pay for water infrastructure projects that are needed to address the state’s growing water needs. The fund will be maintained outside the state treasury and will be administered by the Texas Water Development Board. This bill provides $1 billion more funding than Lieutenant Governor David Dewhurst called for before the session and matches the amount Governor Rick Perry called for in his State of the State Address.

A similar bill, HB 19 combined the $2 billion addressed by HB 4 with $1.7 billion to be pulled from the Rainy Day Fund for transportation spending. That bill echoed the amounts called for by Gov. Perry in his State of the State address. With the passage of HB 4 out of committee, HB 19 will have to be amended to provide for only the transportation element of the bill in order to make it out of committee.

In addition to HB 4 that will impact the state’s water needs, other bills introduced near the March filing deadline should have an impact of funding for transportation projects. Representative Drew Darby has filed HB 3664, which is titled the Transportation Reinvestment Act, to provide additional funding for transportation. The bill would dedicate one-third of existing vehicle registration fees collected to retire existing debt on bonds issued for roadway construction. The bill would then dedicate the remaining two-thirds of fees collected to the planning, design and construction of non-tolled additions or improvements to the state highway system.

In addition to dedicating these fees for spending on highway improvements and retiring existing debt, the act also raises vehicle registration fees. The current debt servicing costs for the state on bonds issued for highway construction is approximately $1.24 billion each year. This debt is unsustainable and reducing this annual bill will do great things in the long term to improve TxDOT’s ability to procure highway improvement projects. This bill raises registration fees on all vehicles by about $30 per year. The fees increase slightly more on heavy vehicles weighing more than 6,000 pounds. These commercial trucks do the most damage to the state’s highway system and would be paying more towards the maintenance of our highways, accordingly. The fees for these trucks would increase by about $60 per year.

Another recently filed bill, HB 3836 would impose a mileage fee on all gasoline, diesel and electrically powered vehicles to supplement the gasoline tax based on miles driven. The bill calls for the Department of Motor Vehicles to implement a program to assess owners of motor vehicles a fee based on miles driven on public roads each year. The miles would be measured by odometer readings on an alternative device installed on vehicles to electronically report the number of miles driven.

On the Senate side, Sen. Robert Nichols filed his bill that would dedicate taxes generated from vehicle sales to the state highway fund. SB 287 would require the dedication of 10 percent of vehicle sales taxes each year between 2015 and 2024. Some rumors I have heard in recent weeks indicate that this bill might meet resistance from some influential legislators who are concerned about the drain this bill would create on the general revenue fund. Regardless, SB 287 would provide approximately $10 billion into the state highway fund over the next decade and would certainly provide a great benefit to the highway construction industry in Texas if it becomes law.

In addition to these finance related bills, other recently introduced bills will affect the industry if they are passed. For example, two bills propose to change the way Construction Manager at Risk (CMAR) contracts may be awarded on horizontal infrastructure projects. One bill, HB 1977 is designed to increase competition in the CMAR field and prevent a public owner’s design firm from also being awarded the CMAR contract for constructing the same project. Filed as a contradictory bill to HB 1977, HB 3202 is designed to specifically allow a design firm to also serve as the CMAR as long as it does so under two separate contracts. Other bills related to the construction industry with the most significant impact will be covered in another column later this year. Clearly, the most significant bills that will emerge from the 83rd Legislature for the heavy and highway construction industry involve financing and the need to address growing demand on the state’s water and transportation infrastructure.

– As seen in the April 2013 Issue of Texas Contractor.