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mandated distribution formula Limited funding Not every state will receive allocations in any given year Can be withdrawn and reallocated to other states if not used within specified period of time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

Availability New formula apportionments are added to amounts unused (uncommitted) from previous years and new allocations 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 Financing Authorization Act (e.g., TEA-21 & SAFETEA-LU) Annual Distribution (Apportionment) Total Federal Aid Available for a Fiscal Year Obligation Limitation (Federal Government’s Promise to Pay) Reimbursement (Federal Government Pays Its Share) Annual Appropriations 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 method of 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 Project Project 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 Categories Formula 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 Appropriation Bills 27 projects with balances SAFETEA-LU High Priority Projects 134 projects Transportation Improvement Projects 3 projects

Planning/Programming Process

State Transportation Improvement 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 Transportation Partnership (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 Transportation Partnership (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 2 nd, 3 rd or 4 th 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 factsheets.htm Mn/ DOT Home Page Mn/ DOT Office of Investment Management Home Page