Future expansion projects could be affected by oil prices

The DFW Connector rebuilt four highways, two interchanges, and five bridges to enhance mobility through expanded roadway capacity.

The DFW Connector rebuilt four highways, two interchanges, and five bridges to enhance mobility through expanded roadway capacity.

Each year more and more people are flocking to the Dallas-Fort Worth area, causing amplified congestion within the region’s roadway system.

Throughout the past couple of years Texas Department of Transportation officials have worked to relieve traffic-congestion issues with local projects such as the DFW Connector in Grapevine and SH 26 in Colleyville as well as many others in the region.

However, the DFW region is growing so fast that TxDOT officials say road funding cannot keep pace with projects needed to address congestion.

Future expansion projects could be affected by oil prices

“[The DFW region] just passed 7 million people last year and we will be at almost 11 million by 2040 so we have to continue to work hard because we are going to continue to grow,” said Michael Morris, director of transportation for the North Central Texas Council of Governments.

Reports from the NCTCOG, an association that assists local governments with regional development, say that by 2030 the region will need about $129.5 billion to eliminate the most severe levels of congestion—money for which the region does not currently have funding sources.

To help bridge the funding gap for transportation projects, statewide, Texas voters approved Proposition 1 in 2014 and Proposition 7 in 2015, both of which add money to the State Highway Fund.

Prior to the passage of the propositions the state received funding for transportation through state and federal gas taxes, motor vehicle registration fees and federal reimbursements.

The state Legislature has not increased the gas tax since 1991, which is why, according to transportation officials, the propositions are so important.

While not expected to solve the state’s transportation funding shortfall, both measures are expected to help the issue.

However, with the funds from proposition 1 and 7 depending on the state’s oil and gas industry, which has taken a downturn and overall state economy, the impact to the SHF may be less than some officials hoped.

Funding the propositions

In fiscal year 2015 Proposition 1 contributed $1.7 billion to the SHF to be used by TxDOT.

With the price of oil declining significantly, Tarrant County Precinct 3 Commissioner Gary Fickes said Proposition 1 will probably send less money to the SHF in future years because a portion of the state’s oil and gas tax revenue funds it.[polldaddy poll=9391259]

“[The] price of oil was up above $70-$80 a barrel,” he said. “All of a sudden it’s not selling for that much, and it went as low as $25 [per barrel]. I don’t think [TxDOT is] going to get $1.7 [billion] back for a while.”

Proposition 7, although funded by the general sales tax revenue and car sales tax revenue rather than the oil and gas tax revenue, is still expected to suffer from the effects of the energy industry downtown.

As oil prices continue to fall, the energy industry continues to cut back on its workforce, which Fickes said in turn affects the state sales tax revenue as those unemployed workers are less likely to make a lot of purchases.

Fickes said Proposition 7 has the ability to direct up to $2.5 billion of general sales tax revenue annually to the SHF once the state sales tax revenue exceeds the $28 billion threshold. Funds for Proposition 7 will not begin being collected until 2017 and will not be deposited into the SHF until 2018.

Beginning in 2019, a portion of the car sales and rental tax revenue will also be directed to the SHF as part of Proposition 7.

After the first $5 billion in annual tax revenue is collected, 35 percent of all additional car sales and rental tax revenue would go to the SHF.

That 35 percent is expected to translate to roughly $500 million to $600 million for TxDOT in 2020, according to TxDOT estimates.

“We have already seen thousands of oil/petroleum jobs lost,” Fickes said. “When [energy industry workers] lose their job the first thing they don’t do is buy a new car. So the price of oil is going to affect the sale of cars. These two propositions are both going to affect TxDOT’s ability to meet the needs that they have.”

Future expansion projects could be affected by oil prices

 Future of oil prices

With both propositions having the potential to add billions to the SHF, transportation officials said they are hoping the oil industry bounces back.

Ed Ireland, associate professor of energy and economics at Texas Christian University, said oil prices will never be $100 a barrel again, but prices will eventually increase.

“I think, and the analysts agree, that the recovery of the price isn’t going to happen anytime real soon,” he said. “It’s going to be a slow process most likely. I think it is projected by the end of the year we will be up to $40 a barrel. I know people are wondering when are we going to get back up to $100 barrel, and my answer to that is we are not.”

Future expansion projects could be affected by oil prices

Ireland said this is because of the discovery of the Barnett Shale formation in North Texas, which some experts say is the largest onshore natural gas field in the United States.

“There has been a permanent change in the supply of oil and natural gas, and that’s from the shale energy revolution,” he said. “There’s just a huge new supply of oil and gas in the world, and it’s going to be there for hundreds of years. I think we are looking at a range of $50-$70 as to what [the cost of oil per barrel] might recover to.”

Morris said although oil prices will never be as high as they once were, the Texas comptroller is projecting both propositions will still yield money.

“As of [early April] he expects that the state will meet the minimum threshold [of Proposition 1] that is required to receive money,” Morris said. “And in 2018 we should see the first installments of Proposition 7. But we are in 2016 so we have a little bit of a ways to go before we know if that is going to happen or not.”

A continuing problem

Heading into the 2013 legislative session, officials with TxDOT said maintaining Texas roadways at current congestion levels would require an additional $5 billion in funding annually.

The biggest chunk of TxDOT’s $23 billion budget for the 2016-17 biennium—39 percent, or roughly $9 billion—has been set aside for maintaining and replacing the existing system. That does not include projects to alleviate any roadway congestion.

Morris said the region is growing at a million people per decade, and that will continue, which is why funding for increased roadway capacity, not only maintenance, is greatly needed.

Because of the current shortage in the SHF, most roadway-expansion projects are currently dependent on toll revenue, Morris said.

“If we weren’t using tolls, we wouldn’t be expanding any transportation project,” he said.

By Sherelle Black
Sherelle joined Community Impact Newspaper in July 2014 as a reporter for the Grapevine/Colleyville/Southlake edition. She was promoted in 2015 to editor of the GCS edition. In August 2017, Sherelle became the editor of the Lewisville/Flower Mound/Highland Village edition. Sherelle covers transportation, economic development, education and features.


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