Summary of Report 07-031

April 2007

Report Number 07-031

Funding Gap

In its July 2006 strategic plan, the Department of Transportation (Department) reported that there was an $86 billion "funding gap" between transportation needs and available transportation funding. Auditors determined that the $86 billion amount includes:

• $8.6 billion in costs for metropolitan regions that should not have been included because (1) there were additional costs outside of the agreed-upon cost elements or (2) a mathematical error was made. Excluding these costs reduces the amount of the reported funding gap to $77.4 billion (a 10 percent reduction).

• Undocumented costs, including:
  -- $27.92 billion in undocumented costs for metropolitan regions.
  -- $9 billion in undocumented costs for urban regions.

The accuracy of the estimated costs for metropolitan and urban regions cannot be determined because of the lack of supporting documentation.

The methodology the Department used to calculate the amount of the funding gap provides a general assessment of the statewide need for additional mobility funding; however, it may not be reliable for making policy or funding decisions. To calculate the funding gap, the Department collaborated with the eight largest metropolitan planning organizations to obtain cost estimates, and it used those estimates to determine the funding gap for metropolitan regions. The Department provided some guidance to the metropolitan planning organizations. The data the Department used were cost estimates that were self-reported by the metropolitan planning organizations. The cost for urban regions was estimated by the Department based on broad and generalized assumptions. For the estimated costs in rural regions, the Department relied on cost estimates for the Texas Trunk System (a project developed in 1990 to connect the rural regions of the state with a statewide system).

The Department and metropolitan planning organizations also asserted that the main benefit from funding gap estimates was the increased communication and shared responsibility between the entities to address mobility and funding challenges. The Department stated that it plans to update the funding gap estimate every two years and make improvements to the reporting methodology.

Tax Gap

The Department also asserts that revenues associated with traveling on a specific highway are not sufficient to pay for the construction and maintenance of that highway over its estimated life. The costs associated with this "tax gap" (as defined by the Department) include the initial construction and right-of-way costs and the cost of preventive and routine maintenance.

However, it is important to note the following:

- The Department included reconstruction costs as a one-time cost of a road segment at the 30-year point, but the typical life expectancy of a road segment is 40 years.

- If reconstruction costs were excluded from the Department's cost model, some road segments would pay for themselves within their typical estimated life of 40 years.

- The Department's 40-year cost model does not include the revenue benefit beyond the 40-year point.

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