Federal-Aid Funding
County Highway Accountants Conference
May 10, 2007
zpowerpoint/ProjManagersCriticalIssuesBOB Feb07.ppt
Congressional Procedure
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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
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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
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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
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The distribution of funds using formulas
provided in law
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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
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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
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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.)
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Also called EARMARKS
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High Priority Projects (HPP) – earmarked
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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 Federalaid highway program
 Transfer of funds from FHWA to FTA and
vice versa
Funding Equity
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Addresses state’s concern that they contribute more
in federal user taxes than they receive in federal
funds
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TEA-21 addressed this issue through minimum guarantee
SAFETEA-LU addresses through equity bonus
Equity Bonus
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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
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
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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
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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:
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Economies of scale
Inflation
Lower administration costs
3-Year Construction Project
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.
Federal Fund Categories
Formula Categories
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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
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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 Transportation
Improvement Program (STIP)
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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
Area Transportation
Partnership (ATP)
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
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ATPs
STIP
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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
Change requests to approved STIP
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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
nd
rd or 4th year of STIP to
 Advancing a project from 2 , 3
current year
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
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Web Sites
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FHWA SAFETEA-LU Program Fact Sheets
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Mn/ DOT Home Page
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http:// www.fhwa.dot.gov/safetealu/
factsheets.htm
http:// www.dot.state.mn.us
Mn/ DOT Office of Investment
Management Home Page
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http:// www.oim.dot.state.mn.us