Infrastructure Constraints Loom as Texas Grows

Touting Texas’ low taxes and light regulations, Gov. Rick Perry has relished trying to poach jobs from other states. In February, he described building a business in California as “next to impossible.” Last month, he warned Illinois entrepreneurs to “get out while there’s still time.”

Chicago Mayor Rahm Emanuel had a ready retort: “We don’t have to measure our showers like they do in Texas.”

Emanuel’s jab was well aimed. Texas’ drought and water-supply problems have captured headlines and inspired frank, worried comments from Texas officials. But with the state’s rapid population growth projected to continue in future decades, other infrastructure problems also loom, including clogged roads and a strained power grid.

“If we don’t address these issues, the message is — don’t go to Texas,” Bill Hammond, the president of the Texas Association of Businesses, said of financing for water and roads.

The challenge is prominently on display in the waning days of the state legislative session. Lawmakers have access to a multibillion-dollar budget surplus but are struggling to find ways to finance roads and water projects that can draw support from Republican majorities in the House and Senate wary of the proposals’ large price tags.

“Everybody right now is saying no new fees and no new taxes,” said Harris County Judge Ed Emmett, who is looking for state financing for roads that would support busy and expanding Gulf Coast ports. “And you have to spend money to build roads.”

Texas’ population growth has propelled infrastructure strains into the spotlight. The statistics breed superlatives. From 2011 to 2012, Midland, an oil boomtown, ranked as the nation’s fastest-growing metropolitan area, according to the U.S. Census Bureau. Of metropolitan areas with at least 1 million people, Austin was the fastest-growing, and Houston, Dallas and San Antonio also made the top 10.

“The state’s population has more than doubled since 1970,” said Michael Cline, the associate director of the Hobby Center for the Study of Texas at Rice University. “It will probably more than double in the next 40 years.”

Perry has a record of backing large infrastructure projects. Last decade, he supported a multibillion-dollar project to string transmission lines across Texas to harvest power from wind farms, and he also pushed, unsuccessfully, for a huge network of toll road, rail and utility corridors. Recently he has highlighted infrastructure challenges anew, warning that ignoring them will end the “Texas miracle,” shorthand for the state’s recent economic success.

“It’s also important to remember that a big part of convincing employers to come to Texas is convincing them we’ll have adequate electricity, water and transportation infrastructure to fit their needs,” Perry said last month in a speech to the Texas Lyceum conference on infrastructure. “Now is the time to make sure we do.”

Of Texas’ infrastructure challenges, water is considered the most pressing. Nearly three years of drought have taken a toll on reservoirs and aquifers. Two key reservoirs that supply Austin have fallen so low — they are currently 39 percent full, combined — that most rice farmers downriver have been barred from using water from them this year and were last year as well. Eight small communities could run out of water within 45 days, according to the Texas Commission on Environmental Quality, and about more than 20 others could be out by the end of the year.

“Water is going to be the great scarce natural resource in Texas in the 21st century,” said Stephen Klineberg, co-director of the Kinder Institute for Urban Research at Rice.

Perry and other top officials have made water financing a priority during the legislative session, which ends in 10 days. After a protracted debate this session on where the money should come from, budget leaders appear poised to come to a deal on taking $2 billion from the state’s bulging Rainy Day Fund, fed largely by oil and gas tax revenues, to endow a special fund for water projects. Voters may need to approve the fund.

Road financing, another of Perry’s stated priorities this session, faces a trickier future. The Texas Department of Transportation has relied heavily on borrowed money and tolls in recent years to develop new roads. Its officials have warned lawmakers that they need $4 billion extra annually just to maintain the current level of congestion.

Efforts to find at least some of that financing have met significant resistance this session, particularly from Tea Party-friendly Republicans uninterested in raising vehicle registration fees or allowing the state to take on more debt. Talk of increasing financing for public transportation, which planning experts consider crucial for absorbing urban growth, has also met stiff resistance.

The department  has enough financing on hand to continue projects through 2015, creating a perception that its situation could be handled in the legislative session scheduled for that year. Sen. Robert Nichols, R-Jacksonville and chairman of the Senate Transportation Committee, said that sentiment ignored how transportation projects develop.

“TxDOT needs to plan six years out, eight years out,” Nichols said. “You cannot do that if you don’t know what revenue is going to be.”

The size of the challenge was evident at last month’s Texas Lyceum conference, as speaker after speaker tried to convey how the state’s runaway population growth and road network were on a collision course.

“We are looking at somewhere around 150 people moving to Austin every single day,” said Linda Watson, president of Capital Metro, that city’s public transportation provider. “That’s putting 70 cars on the road every day.”

A third infrastructure issue, the state’s laboring power grid, has been a less visible concern for lawmakers. Texas has its own power grid, and keeping up with the summer air-conditioning load of a growing number of customers poses a perpetual challenge. Relatively low power prices have diminished the incentives for power companies to build new plants.

It is a problem that regulators are trying to solve, in part, by raising the maximum price that electricity-generating companies can get for their power. But in recent reports compiled at the behest of Congress, the nonprofit North American Electric Reliability Corporation has singled out the Texas grid as having particularly serious challenges in meeting future demand.

In economically prosperous parts of the state, infrastructure concerns are only growing more pressing. An oil drilling boom in West and South Texas has brought heavy truck traffic, leading to torn-up roads and a sharp rise in vehicle collisions, while also increasing strains on water and power supplies. Gulf Coast ports are eager to accommodate rising trade, according to Emmett of Harris County, but need government money to assist with road and rail.

Without improvements to the infrastructure supporting the Gulf Intracoastal Waterway, “our economy will stagnate,” said Emmett, who also heads TxDOT's freight advisory committee. “You have to invest in infrastructure now in order to have an infrastructure in place for 20 and 30 years from now.”