Houston Strategies

An agenda item for the October 24 H-GAC Transportation Policy Council meeting includes a spate of delays to projects in the Transportation Improvement Plan. 18 projects and 18 right-of-way acquisition programs are being delayed.

Delayed projects include the items listed below. The new project year for most projects is listed as 2029, but realistically we can expect more delays since most are not included in TxDOT's 2029 information dashboard (see section below "Planned Contracts in the Next 4 Years").

Delays to right-of-way acquistion include the following (NHHIP section map)

This HGAC action is no surprise to anyone who closely watches TxDOT letting schedules (which includes me), since there is a reduction in non-tolled contracts in fiscal year 2026 compared to fiscal year 2025. The H-GAC document revision is an administrative confirmation of the funding reality for Houston projects.

Project delivery gets a double punch: dramatically increased costs and lower funding

We've seen this story before, especially in the mid 1970s (page 31). The post-Covid spate of inflation has increased Texas construction costs 67% since August 2021. Nationally, costs are up about 65% between Q1 2021 and Q1 2025 (the most recent data online). With flat revenue, this results in a 40% reduction in the amount of projects which can be awarded.

TxDOT's bank balance was nearly $10 billion as of January 2024, but was $3.5 billion as of May 2025 and is projected to be around zero by March 2026. This drawdown allowed a surge of project spending in 2024. The TxDOT chart says "Negative balances, if any, will be avoided through the issuance of short-term borrowing and other cash management strategies." If I were the TxDOT financial controller, I would reduce contract awards to avoid the risk of an empty bank account and the costs associated with short-term borrowing.

Contract awards for non-tolled projects statewide were generally $1 billion per month in fiscal years 2024 and 2025 (which ended in August), with an average of $1.01 billion per month in FY 2025. In fiscal year 2026 (now in progress) the average for non-toll projects is $824 million. In the screenshot for FY 2026, the spike in June is due to the $1.9 billion tolled Grand Parkway segment B, which will issue bonds for funding. Including toll funding, the monthly average is $980 million.

Planned Contracts in the Next 4 Years

TxDOT lists the projects expected to be let for construction in the next four fiscal years. This data is accurate for the current year (above the thick border line) and is subject to frequent change beyond the current year. This list has large Houston projects (over $100 million, or on freeways/tollways) currently scheduled. As this shows, the only major contracts in the Houston region in this fiscal year are based on toll revenue. NHHIP projects, with yellow background, appear to have priority over other projects but are delayed compared to the online schedule. The next big NHHIP projects are two years away, scheduled for letting in June 2027, October 2027 and March 2028.

Projects Most Affected By Delays

The only projects which are minimally affected by the funding shortfall are the toll projects, Grand Parkway Segment B and widening of the Grand Parkway between the Katy Freeway and North Freeway. The projects below are most affected and are delayed into the 2030s.

No Help From HCTRA to Fill the Gap

HCTRA has historically stepped up to expand the toll road system to meet Houston's needs, and also contributed to projects like the Katy Freeway and US 290. But not anymore. As I have reported previously, HCTRA has drastically curtailed its construction program in spite of near-record revenue in recent years. "Surplus" revenue has been diverted out of HCTRA, and the only large project to be awarded since 2019 is for four direct connectors at SH 225.

Outlook

The current Federal transportation funding act, the Infrastructure Investment and Jobs Act, expires on September 20, 2026. A big question is whether or not current federal funding levels can be maintained with the deteriorating financial status of the federal government. Much of the funding in IIJA was provided by debt, not by traditional gasoline tax revenue.

A significant component of state-generated TxDOT funding is proposition 1, which relies on oil & gas severance tax revenue and contributed $2.74 billion in 2025. Funding from this source is probably going to be lower in the near future due to lower energy prices.