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any given year Can be withdrawn and reallocated to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