Harvey’s impact to infrastructure could be Texas-sized problem

With literally 400 road segments still impacted by the flood waters of hurricane and tropical storm Harvey, the long-term effects to Texas infrastructure along the Texas coast and in the Houston area may be equally devastating. Few state leaders have publicly waded into the tricky waters of how to pay for the massive rebuilding effort of Texas’ infrastructure damaged due to Harvey. One state lawmaker hinted at tapping the state’s Rainy Day Fund, but Governor Greg Abbott quickly tamped down any talk of raiding the Rainy Day Fund before lawmakers come back into session in 2019.

Abbott told reporters Friday that Texas has adequate resources to “address the needs between now and next session.”

In 2005, Hurricane Katrina cost taxpayers $110 billion, and Harvey is expected to top that. Regardless of the final dollar amount, it’s going to be big, and it’s hard to know where the funds will come from. The state’s Rainy Day Fund sits at $10.3 billion.

Texas Transportation Commissioner Jeff Austin commented at this week’s commission meeting that, “Right now is not the time to worry about how we’re going to pay for it, but we are going to rebuild. It’s too critical to the Texas economy.”

President Donald Trump asked congress for a $7.9 billion down payment toward Harvey relief, but congressional leaders have yet to dive into how to pay for it. With the deadline looming to raise the debt ceiling and tax relief as priority number one for the White House, it’s going to get dicey real quick as Congress returns to Washington this week to dig into the politics of tying Harvey relief to raising the debt ceiling.

Texas’ infrastructure push
Like most states, Texas has struggled to keep pace with highway construction and maintenance needs with a fixed federal and state gasoline tax for over 20 years. Under former governor Rick Perry, now Trump’s Secretary of Energy, the state turned to a massive tolling scheme, particularly public private partnerships (P3s) that hand the exclusive right to charge tolls for the use of public highways to private entities (often foreign) in 50 year contracts. Though Perry promised no public money would go into such deals, financial details on the Federal Highway Administration Office of Innovative Finance Support’s web site reveal every single P3 in Texas involved public funds and put the taxpayers on the hook for the private entity’s losses.

The backlash was predictable as Texans now face paying $40 a day in tolls to foreign corporations for generations, causing state lawmakers to retreat from tolls as the panacea for road funding woes. In 2014, Texas voters overwhelmingly approved a constitutional amendment, Proposition 1, that took a portion of the state’s oil and gas severance tax (that typically goes to the Rainy Day Fund) and placed it into the state highway fund, in part to end the reliance on tolls.

In 2015, Abbott, who campaigned against tolls, ushered in one of the largest infusions of  road funding in a generation by encouraging voters to approve yet another constitutional amendment, Proposition 7, to direct a portion of vehicle sales tax and general state sales tax to the state highway fund. All told, nearly $5 billion in new highway funding has been dedicated to the state’s highway fund in recent years. Neither Prop 1 nor Prop 7 funds can be used on toll roads. Earlier this year, the Texas Transportation Commission approved the projects for these new funds for the next 10 years.

Both Prop 1 and Prop 7 will be impacted by Harvey’s aftermath as oil production interruptions and sales tax in and along the gulf coast and Houston area have come to a stand still as road closures, flood waters, and the destruction of thousands of homes make normal commerce impossible.

Fast forward to a post-Harvey world and lawmakers face a tremendous struggle of how to keep those projects on track and still mount the massive resources necessary, even with federal aid, to rebuild the critical infrastructure lost due to Harvey. As Texans continue to stand shoulder-to-shoulder to help their fellow man recover and rebuild from Harvey’s devastating losses, elected officials have the unenviable task of figuring out how to balance needs in other parts of the state with getting that critical infrastructure in Harvey’s wake back online without jeopardizing the state’s overall economic growth.