Proposition 14

What would Proposition 14 do?

Proposition 14 would authorize the Texas Department of Transportation (TxDOT) to borrow money on a short-term basis to improve cash flow and cash management and to issue general obligation bonds secured by the state highway fund to accelerate transportation projects.

Along with legislation passed to implement it, Proposition 14 would give TxDOT the authority to issue $3 billion in bonds - up to $1 billion per year - to improve our highways. Twenty percent of the bonds would be earmarked for safety projects.

Proposition 14 also allows TxDOT to borrow on a short-term basis to deal with cash flow issues that may arise due to the complicated nature of federal highway funding reimbursements and the seasonal and weather-related nature of road building.

Why issue bonds to build roads?

• Texas' need for new roads greatly exceeds its ability to pay for them. The Texas Department of Transportation only has enough funds to begin about a third of the state's needed transportation projects.
• Highways are the only major capital projects for which the state does not borrow money.
• With near-record low interest rates, Texas has a unique opportunity to use bonds to get needed highways and safety improvements built sooner. Inflation costs make these needed highways and improvements more expensive every year. Taking advantage of low interest rates to get projects built sooner makes fiscal sense.
• Texas will see less traffic congestion and fewer traffic deaths if new roads and safety improvements are built sooner rather than later.

Bonds may help build roads faster, but won't their interest costs add to the cost of construction?

• Although bond financing imposes interest and other debt related costs, building roads more quickly than otherwise possible by pay-as-you-go financing has many benefits, including job creation, productivity gains to commerce, commuter efficiency gains, avoidance of highway construction inflation and improved highway safety.
• According to estimates from the Texas Transportation Institute, the cost of traffic congestion in Texas is about $5.9 billion per year, based on $5.2 billion due to lost time in traffic and $700 million worth of excess fuel consumed. The Texas Department of Public Safety estimates the economic loss from traffic fatalities in the state at more than $9 billion per year.
• Road bonds could provide an economic gain for the state with benefits exceeding costs by 41% when used in areas in which traffic bottlenecks are significant, according to the Comptroller.
• The comptroller estimated the potential economic benefits of two successive annual $1 billion bond issues and concluded that the new highway construction related to the bonds would add more than 40,000 jobs annually to the Texas economy; generate 29 cents each year in cost savings for every dollar spent on new highway, primarily as a result of moving commercial goods across the state and within cities faster; save commuters five cents per dollar spent on highways by freeing up commute times and increasing their productivity; and avoid inflation costs of highway construction, which exceeded the general rate of inflation by about two percent in the 1990s.
• With short term bonding, TxDOT would be permitted to save interest costs by borrowing a smaller amount of money to finance the beginning stages of a turnpike project instead of having to issue bonds for an entire turnpike project in advance and pay interest costs on the entire bond issuance when all the money is not needed up front.

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