Houston Strategies

Another excellent but sad guest post from Oscar Slotboom documenting the outrageous looting of HCTRA 😡 Let's hope the next County Judge can turn it around...

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The Harris County Toll Road Authority (HCTRA) fiscal year (FY) 2025 financial statement was posted on their site on April 21.

Harris County diverted $398.6 million of toll revenue out of HCTRA, which is the second highest annual diversion in HCTRA's history. It is a huge increase compared to 2024, which was $193.4 million.

This plot shows HCTRA toll revenue since 2004. 2025 toll revenue was $1.028 billion, a record for actual value. On an inflation-adjusted basis it is slightly below 2015, 2016, 2018 and 2019, with the all-time inflation-adjusted high $1.073 billion in 2019. Collection of tolls was substantially improved, going from an administrative loss of $44.7 million in 2024 to a gain of $5.93 million in 2025 (schedule 5 on page 57). HCTRA's total revenue was $1.125 billion, which includes $95.2 million in investment income. Total traffic count of 667.5 million is also a record, exceeding the previous record 648.3 million in 2024.

This plot shows diversion of toll revenue out of HCTRA, called "Transfers out" in the financial statements. Diversions have been substantially above historical values since Democrat control of Harris County Commissions Court in 2019.

This plot shows the percentage of toll revenue diverted out of HCTRA since 2004. 38.8% of toll revenue was diverted in 2025. The six-year average before Covid, from 2014 to 2019, was 16.8%. The six-year average after 2019 is 45.4%.

Where is the diverted toll revenue going?

Diverted toll revenue goes into the county Mobility Fund. (There was a one-time diversion of $300 million into a separate Infrastructure Fund in 2021.) The Harris County Annual Comprehensive Financial Report (page 290) shows the FY 2025 starting balance of the Mobility Fund was $376.1 million, expenditures were $249.7 million, and transfers in were $401.1 million (slightly above the toll diversion), leaving the fund with a FY 2025 ending balance of $547.0 million.

For the $249 million in expenditures, the comprehensive financial report shows $8.1 million to parks, $190.6 million to roads and bridges, and $51.0 million to "capital outlay", which is an expense which is also depreciated. Transparency and/or details of these large spending amounts has never been readily available, as Bill King (1, 2) and Wayne Dolcefino also discovered when they investigated how this money is spent. Dolcefino calls this fund the county commissioner slush fund (1, 2, 3, 4, 5, 6, 7). In April 2025, in response to legislative scrutiny, Harris County changed the allocation of funds to precincts to better match actual road mileage and needs in each precinct (page 79). The 2026 budget (page 80) recommends $180 million toll money for precincts, which is equal to the budgeted toll diversion (page 24). Actual amounts may differ.

The large balance in the mobility fund generates investment income, and the 2026 Harris County Budget (page 80) states that in 2026 a new accounting fund for "mobility fund interest" will be created. This fund will have the same restrictions as direct toll diversions, including the "related facilities" loophole which enables spending on non-road projects. Eligible uses are "the study, design, construction, maintenance, repair, or operation of roads, streets, highways, or other related facilities."

Harris County might be managing toll diversion amounts for political expediency. HCTRA finances were subject to scrutiny during the 2025 legislative session, so it was probably expedient to show a lower-than-usual diversion of $194.3 million in 2024. This year, with no scrutiny, Harris County diverted $399 million, 39% of record-setting toll revenue. If my suspicion is correct, 2026 will have a lower toll diversion.

It appears that Harris County is keeping the mobility balance very large, and padding it as much as possible, perhaps as insurance for any possible future legislative action to curtail diversions or redirect surplus toll revenue. In the 2025 legislative session, a bill sponsored by Senator Bettencourt to redirect surplus revenue out of HCTRA was passed in the Senate but did not get House support. (more details here)

The $283 million black hole in the financial statement

Separate from "Transfers out", the financial statement reports "Services and fees", which was a record $282.6 million, 27.5% of toll revenue. Page 11 of the financial statement says, "This is an increase of $72,126,093 from the prior year due to processing additional transactions tied to the onboarding of the Toll Services Agreement and additional resources needed for agency growth." This explanation is vague, and also doesn't explain why "services and fees" has been over $200 million for the last 3 years (page 55, excerpt below). As we'll see below, the "growth" is a growing budget, while HCTRA's project delivery remains dreadfully slow.

Where is this "services and fees" money going? The HCTRA financial statement provides no details. The Harris County comprehensive financial statement provides no details. The Harris County Purchasing Department procurement portal has a list of all active and pending contracts, but does not report contract value. I compiled a list of all active and pending contracts which include "toll" or "HCTRA" in the contract name, and others which are likely for HCTRA, which results in 106 items (spreadsheet). Most items appear to be low value (tens to hundreds of thousands per year), such as software licenses. Since this list is probably not comprehensive and it lacks contract values, it is impossible to make any conclusions.

56% Budget increase between 2024 and 2026

The Harris County 2026 budget document (page 42, excerpted below) shows the HCTRA budget has increased from $275.3 million in 2024 (actual) to $429.6 million (adopted) in 2026, a 56% increase. The actual 2026 amount will differ from adopted, and could be lower.

Category "Administration and support" shows the largest increase, from $39.5 million actual in 2024 to $87.6 million budgeted for 2026, a 122% increase, but is partially explained by a shift of $19 million into this category from another program. (page 49)

All these budget increases are happening with only one significant construction project in progress - the ship channel bridge, which is years behind schedule, and four connectors at the bridge and SH 225. Project delivery has been dismal for the last 8 years. Long-planned projects, such as the Hardy downtown extension, toll plaza modernization and connectors at Hardy/Beltway 8, are delayed year after year. This certainly looks like an expanding bureaucracy with a substantial decrease in project delivery productivity.

How much does it cost to collect tolls?

To an economist, the cost of collecting tolls is a "transaction cost". In an efficient economy, transaction costs should be minimized, and we want the cost of toll collection to be as low as possible. Lower transaction cost = higher productivity = higher incomes. Traditional road funding from the gasoline tax is very efficient. Google AI agent states, "The gasoline tax is highly efficient to collect, with administrative costs generally estimated to be less than 1% of the revenue generated."

The cost of collecting tolls is not reported in the HCTRA financial statement. Viewed from the budget perspective, it is likely covered within the $303 million in the 2025 budgeted amounts for administration and support ($54.5 million), customer service ($103.6 million) and tolling solutions ($145.5 million).

In contrast, the 2025 financial statement for the Fort Bend County Toll Road Authority explicitly states the cost of collecting tolls is $11.4 million of $68.5 million in toll revenue, an alarmingly high 16.7%.

What is HCTRA's cost to collect tolls? Is HCTRA becoming more or less efficient? There's no way to answer these questions from the financial statement.

Bond Activity

One item of good news is that there was not a major issuance of new debt in FY 2025.

The financial statement (page 32) reports on activity occuring after the fiscal year. Previously I reported on serious financial mismanagement by Harris County and HCTRA (see section "Commercial paper shenanigans"). In 2020 Harris County diverted $554.1 million out of HCTRA, 99% of toll revenue for that year and the largest ever annual diversion. Soon afterwards HCTRA had insufficient funds for operations and needed to issue the K and K-2 series of commercial paper debt, which carried a 10% interest rate for the first period. The K and K-2 debt was defeased by issuance of $227.44 million in long-term (30 year) debt maturing in 2055.

Instead of defeasing the debt with surplus toll revenue, Harris County diverts $399 million in toll revenue out of the agency and adds $227 in long-term debt to HCTRA.

More transparency, please

As I've stated in previous posts, HCTRA and Harris County need to provide more transparency about the huge costs reported in its financial statement.

Part 2

HCTRA has saturated local media with advertising. In part 2 I will investigate the cost of the marketing campaign.