Federal-Aid Funding
County Highway Accountants Conference
May 10, 2007
zpowerpoint/ProjManagersCriticalIssuesBOB Feb07.ppt
Congressional Procedure
Administration Bill prepared by the DOT and introduced to Congress through at least one member
Congress considers in development of their own legislation
House and Senate process includes public hearings, subcommittee bills, committee bills, house/senate bill
With differences they proceed to conference committee to reconcile
Conference Bill is returned to both floors for approval Passed on to the President for approval
Authorization Act
Establishes or continues a federal agency, activity or program for a period of time
Establishes an upper limit on amount of funds for the program
Authorizing legislation for highways began with the Federal-Aid Road Act of 1916
Highway legislation has been part of a larger, more comprehensive, multi-year surface transportation acts since 1978
Deductions to Authorizations
Administration takedown – 1.5% upper limit to administer provisions of Title 23 of the United States Code (U.S.C.) – salaries, travel, supplies, office space, etc.
Metropolitan Planning – approx 1.25% of authorization after administrative takedown. Finances metropolitan transportation planning activities. Minnesota has 7 Metropolitan Planning Organizations.
Non Highway (mass transit, NHTSA, Motor Carrier, Research) – SAFETEA-LU was approximately 21.5%
Apportionments The distribution of funds using formulas
provided in law Usually made on first day of federal fiscal year
(October 1) for which funds are authorized The funds are then available for obligation by
the state in accordance with the State Transportation Improvement Program (STIP)
Appropriations Act Legislative action that makes Formula and
Allocated funds available for expenditure with specific limitations as to amount, purpose and duration
For the highway program, the appropriations act specifies the actual amount of funds that will be made available (obligation limitation) for the fiscal year
Allocations Discretionary nature (Congressionally
directed/earmarked) Distribution of funds that do not have a
legislatively mandated distribution formula
Limited funding Not every state will receive allocations in
any given year Can be withdrawn and reallocated to
other states if not used within specified period
of time
Allocations (cont.) Also called EARMARKS High Priority Projects (HPP) – earmarked
during authorization of multi-year Authorization Act
Surface Transportation Projects – similar to HPP projects but vehicle to allow Congress to add projects during annual Appropriation Act
Discretionary Projects – Congress adds these projects during annual Appropriation Act. Expected to be spent in the year received
AvailabilityNew formula apportionments are added to
amounts unused (uncommitted) from previous years and
newallocations identified Most Federal Aid Program funds are available
for three years beyond the year received (4 year total)
Should a state not obligate these dollars within 4 years, the remaining amount lapses (no longer available)
HPP and Surface Transportation Projects earmarked are available until expended
Flexibility
Hallmark of ISTEA, TEA-21 and SAFETEA-LU
Broad highway/transit capital eligibility
Transfer of apportionments within Federal-aid highway program
Transfer of funds from FHWA to FTA and vice versa
Equity Bonus 1) Each state guaranteed a certain share of total
program (apportioned formula plus allocations) 2) Ensures that each state will receive at least
91.5 percent of its share of contributions in Federal FY 2007 and 92 percent thereafter
3) $1 million per year minimum per state
Funding Equity Addresses state’s concern that they contribute more in
federal user taxes than they receive in federal funds TEA-21 addressed this issue through minimum guarantee SAFETEA-LU addresses through equity bonus
Federal Aid FinancingAuthorization Act(e.g., TEA-21 &SAFETEA-LU)
Annual Distribution(Apportionment)
Total Federal AidAvailable fora Fiscal Year
Obligation Limitation(Federal Government’s
Promise to Pay)
Reimbursement(Federal Government
Pays Its Share)
AnnualAppropriations
Act
Federal Aid Highway Program Not a traditional grant (cash up-front)
program Reimbursable program Authorized amounts are “distributed” to the
states but no cash is disbursed Projects approved, work started, State pays
contractor, State bills FHWA, FHWA pays (reimburses) federal share of costs
Reimbursement
Advance Construction (AC)Congressionally established innovative finance
methodof using future (anticipated) years’ federal
funds to guarantee funding for a project to be let in the
current year AC has been used for many years on short-
term basis AC law changed in 1995 to provide states
with more flexibility in financing projects Key factor here was large number of
federal funds remaining unspent on multi-year projects
Benefits of Advance Construction Reduces need to stage project to stay within annual federal target limit
Facilitates funding of large project (packaged project)
Economies of scale (lower unit costs) Supports the design-build environment
attracts larger construction companies to state creating healthy competition
Not a loan, therefore no interest to pay Reduced inflation impact Large benefit to motoring public (roadway
completed earlier)
3-Year Construction ProjectProject Packaging is most often preferred: Economies of scale Inflation Lower administration costs
Desire is to only use Obligation Limitation (OL) needed for each year of project. Committing all OL up front reduced availability for other projects that year.
3-Year Construction Project
Federal Fund CategoriesFormula Categories Interstate Maintenance (IM) National Highway System (NHS) Bridge Replacement and Rehabilitation (HBRRP) Congestion Mitigation & Air Quality (CMAQ) Highway Safety Improvement Program (HSIP) Surface Transportation Program (STP)
Enhancements (TEA) Urban Guarantee (> 200 k population) Small Urban (< 200 k population) Any area
Equity Bonus
Federal Fund Categories (Cont.)Allocations TEA-21 High Priority Projects
28 projects with balances 01-06 Appropriation Bills
27 projects with balances SAFETEA-LU High Priority Projects
134 projects Transportation Improvement Projects
3 projects
Planning/Programming Process
State TransportationImprovement Program (STIP) Four year priority list of transportation
projects Consistent with:
Statewide Transportation Plan Metropolitan planning requirements Air quality requirements
Finanically constrained Public involvement
Area TransportationPartnership (ATP)
Roughly coincident with Mn/DOT’s 8 districts
Membership determined at ATP level Includes Mn/DOT district, MPO or regional
development commission representatives, transit representative, city and county perspectives, other key transportation stakeholders
Role is to recommend funding priorities for federal aid funds
Allocation of Federal and State funding to each ATP is by formula
Currently based on system size and usage, but transitioning to performance-based factors for 2009 investments
Support for reserving limited funding for major bridge preservation projects of statewide significance and major mobility corridor needs
Area TransportationPartnership (ATP)
ATPs
STIP
Each ATP develops an Area Transportation Improvement Program (ATIP)
Mn/DOT’s Office of Investment Management combines ATIPs into document called the STIP
Mn/DOT submits STIP to FHWA and FTA for formal approval
STIP updated each year. After STIP approval, federal funds may be
authorized to implement projects
STIP Amendments
Formal Amendments Add a project not listed in STIP Identifying use of Congestion Mitigation/Air Quality, Highway Safety Improvement
Program or Enhancement funds Major change in project termini or scope of work
Administrative Modifications Advancing a project from 2nd, 3rd or 4th year of STIP
to current year
Change requests to approved STIP
Project Approval Requirements FHWA needs to approve (authorize) federal
commitment Project must be in current STIP or have approved
amendment Federal apportionment must be available Federal obligation authority must be available
This FHWA approval needs to occur before projects are advertised
For TH this is typically 5 ½ weeks prior to bid opening
For State Aid/local projects, this is handled by not setting a letting date until federal funds are approved
NO FEDERAL REIMBURSEMENT WITHOUT FHWA APPROVAL
Web Sites FHWA SAFETEA-LU Program Fact
Sheets http:// www.fhwa.dot.gov/safetealu/
factsheets.htm Mn/ DOT Home Page
http:// www.dot.state.mn.us Mn/ DOT Office of Investment
Management Home Page http:// www.oim.dot.state.mn.us