[Federal Register Volume 61, Number 189 (Friday, September 27, 1996)]
[Notices]
[Pages 50890-50900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24793]


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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration


The Congestion Mitigation and Air Quality Improvement (CMAQ) 
Program of the Intermodal Surface Transportation Efficiency Act--
Guidance Update--March 7, 1996

AGENCIES: Federal Highway Administration (FHWA) and Federal Transit 
Administration (FTA), DOT.

ACTION: Notice of policy guidance.

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SUMMARY: The Federal Highway Administration (FHWA) publishes this 
revised guidance with regard to the Congestion Mitigation and Air 
Quality Improvement (CMAQ) program. This guidance was previously issued 
as a memorandum and is printed in its entirety.

EFFECTIVE DATE: March 7, 1996.

ADDRESSES: USDOT, Federal Highway Administration or Federal Transit 
Administration, 400 Seventh Street, SW., Washington, D.C. 20590.

FOR FURTHER INFORMATION CONTACT: at FHWA, Mr. Michael J. Savonis, Team 
Leader for Air Quality Policy, (202) 366-2080; at FTA, Mr. Abbe Marner, 
Environmental Specialist, (202) 366-0096.

I. Introduction

    As established under the Intermodal Surface Transportation 
Efficiency Act (ISTEA), the CMAQ Program was designed to substantially 
expand the

[[Page 50891]]

focus and purpose of Federal transportation funding assistance to 
include air quality improvement as a specific objective. These funds 
are to assist areas designated as nonattainment and maintenance under 
the Clean Air Act Amendments (CAAA) of 1990 to achieve healthful levels 
of air quality by funding transportation projects and programs. Six 
billion dollars is authorized under the program, and apportionments 
totaling $1 billion are made each year to the States between 1992 and 
1997. The first CMAQ apportionment was made in December 1991, and the 
last will not lapse until the end of fiscal year (FY) 2000.
    The CMAQ program has reached mature spending rates, and States have 
obligated these funds at levels comparable to other, more familiar 
Federal funding programs, growing to 99 percent in FY 1995. In 1994, 
the Federal Highway Administration (FHWA), Federal Transit 
Administration (FTA), and Environmental Protection Agency (EPA) 
conducted an extensive review of the CMAQ program with the stated 
purpose of improving efficiency of program delivery and determining how 
to better achieve the program's goals. This revised guidance was 
originally issued as a result of that review process in an effort to be 
as responsive as possible to the States, local governments, project 
sponsors, and other stakeholders in the program. Additional changes 
have been made as a result of the National Highway System Designation 
Act of 1995 (NHS legislation). Additional copies of this revised 
guidance are available from the FHWA Hotline at (202) 366-2069. The 
provisions contained herein are effective immediately and supersede all 
previous guidance, including all questions and answers and policy 
memoranda issued to date.

II. Program Purpose

    The original purpose of the CMAQ program was to fund transportation 
projects or programs that will contribute to attainment of a national 
ambient air quality standard (NAAQS), primarily for ozone and carbon 
monoxide (CO). The NHS legislation expands eligibility to areas that 
were designated as nonattainment under the CAAA of 1990 but were since 
redesignated to attainment status by EPA (referred to as ``maintenance 
areas'' (see Section III.B.4)). Nonetheless, the CMAQ Program's primary 
purpose is to fund improvement projects that will assist nonattainment 
and maintenance areas to reduce transportation emissions rather than 
maintain the existing transportation networks.
    States with areas which are designated as nonattainment for ozone 
or CO must use their CMAQ funds in their nonattainment or maintenance 
areas. States with a maintenance area and no nonattainment area should 
give the air quality needs of the maintenance areas first priority (see 
Section III.B.4). A State may also use its CMAQ funds in any of its 
particulate matter (PM-10) nonattainment or maintenance areas, if the 
requirements below are met. This and all subsequent mention of 
nonattainment status contained in this guidance refers to those areas 
classified as marginal or worse for ozone, and moderate or worse for CO 
or PM-10 under the CAAA of 1990.
    Funding under the CMAQ program may not be used in areas that are 
designated as nonattainment by operation of law prior to enactment of 
the CAAA of 1990. These include but are not limited to the ozone 
``transitional,'' ``submarginal,'' and ``incomplete data'' areas and 
the CO ``not classified'' areas.
    States with ozone or CO nonattainment or maintenance areas, but 
wishing to use CMAQ funds in PM-10 nonattainment or maintenance areas, 
must meet the following requirements.
    1. The State must consult with, and consider the views of, the 
metropolitan planning organizations (MPOs) in all nonattainment and 
maintenance areas within the State before programming CMAQ funds for a 
PM-10 project. The State must obtain the concurrence only of the MPO in 
whose jurisdiction the project is to be implemented.
    2. Also, the EPA regional office must agree that the proposed use 
of CMAQ funds for PM-10 projects or programs will not detract from or 
delay efforts to attain the ozone or CO standards.
    The CMAQ provisions in ISTEA recognize ozone and CO as the primary 
transportation pollutants. The requirements listed above will ensure 
proper consideration of the views of the agencies charged with 
controlling transportation emissions of ozone precursors, CO, and PM-
10, especially their views on the most effective use of transportation 
funds in achieving the NAAQS. The CMAQ eligibility of PM-10 projects 
will not affect a State's CMAQ apportionment, but has the potential to 
spread the limited CMAQ funds over a greater number of nonattainment 
and maintenance areas within the State. Examples of eligible projects 
and programs in a PM-10 nonattainment or maintenance area, if the above 
requirements are met, are paving dirt roads, diesel bus replacements, 
and purchase of more effective street-sweeping equipment.
    These requirements apply only to projects and programs whose sole 
justification for CMAQ eligibility is the reduction in PM-10 emissions. 
In an area which is nonattainment or maintenance for both PM-10 and one 
of the other pollutants, projects which reduce emissions of CO or ozone 
precursors in addition to reducing PM-10 emissions are not subject to 
these additional requirements.
    Congress did not intend CMAQ funding to be the only source of funds 
to reduce congestion and improve air quality. Other funds under the 
Surface Transportation Program (STP) or FTA's capital assistance 
programs, for example, may be used for this purpose as well. 
Furthermore, the greatest air quality benefit will accrue not solely 
from Federal funds but from a partnership of Federal, State and local 
efforts.

III. Project Eligibility

    In general, all projects and programs eligible for CMAQ funds must 
come from a conforming transportation plan and transportation 
improvement program (TIP), and be consistent with the conformity 
provisions contained in Section 176(c) of the Clean Air Act. Projects 
also need to complete the National Environmental Policy Act (NEPA) 
requirements and be included in the appropriate statewide program, and 
meet basic eligibility requirements for funding under titles 23 and 49 
of the United States Code.
    Transportation projects and programs are eligible for CMAQ program 
funds only if they meet certain criteria spelled out in the ISTEA as 
amended. In determining project eligibility under these criteria, 
priority should be given to implementing those projects and programs 
that are included in an approved State implementation plan (SIP) as a 
transportation control measure (TCM) and will have air quality 
benefits. The activity must be eligible under the law and this 
guidance, even if it is included as a TCM in a SIP, before CMAQ funds 
may be used for it. Any reference to improving air quality contained in 
this guidance means reducing ozone precursors in ozone areas, CO 
emissions in CO areas or, if applicable, transportation-related PM-10 
pollution in PM-10 areas, whether these areas are designated as 
nonattainment or maintenance.
    In cases where specific guidance is not provided, either below or 
in other communications, the following should guide CMAQ eligibility 
decisions.

[[Page 50892]]

    Capital Investment: Federal contributions to air quality 
improvements under the CMAQ program should be used for establishment of 
new or expanded transportation projects and programs to reduce 
emissions. In most cases this is likely to be capital investment in 
transportation infrastructure or establishment of a new demand 
management strategy or other program.
    Operating Assistance: There are several general conditions which 
must be met in order for any type of operating assistance to be 
eligible under the CMAQ program. These apply equally to traffic flow 
improvements, transit, ridesharing, bicycle and pedestrian programs, 
inspection and maintenance (I/M) programs, travel demand management 
(TDM) measures and any other project funded under the CMAQ program and 
not covered elsewhere in this guidance;
    1. Operating assistance is limited to new or expanded services.
    2. In extending the CMAQ funds to operating assistance, the intent 
is to help start up viable new services which have air quality benefits 
and eventually will be able to cover their costs to the maximum extent 
possible. Other established funding sources should supplement and 
ultimately supplant CMAQ operating assistance. Thus, CMAQ funds must be 
used in combination with usual fares or user fees (or reasonable fares/
fees in the absence of an established fare/fee).
    3. Operating assistance under the CMAQ program is limited to 3 
years, except as noted elsewhere in this guidance.
    Emission Reductions: The proposal for funding must be expected to 
result in tangible reductions in CO and ozone precursor emissions (and 
under certain conditions PM-10 pollution). This can be demonstrated by 
the assessment of anticipated emission reductions that is required 
under this guidance for most projects. The FHWA and FTA strongly 
encourage State and local governments to use CMAQ funds for their 
primary purpose under the ISTEA: to assist nonattainment and 
maintenance areas to reduce transportation-related emissions.
    Public Good: Finally, the proposal for funding should be for the 
good of the general public. While the transportation service may be 
focused on a specific area, CMAQ funds can be used for services which 
benefit a specific entity, such as a major employer, only for short 
trial periods to test the viability of the program or project. Public-
private partnerships, however, are allowed if a project will benefit 
both the public and elements of the private sector (see Section 
III.A.13).

A. Previously Eligible Activities

    The kinds of activities that have been, and continue to be, 
eligible for CMAQ funds are described below, together with any 
restrictions. All possible requests for funding are not covered; 
instead this section provides particular cases where guidance can be 
given and rules of thumb applied to assist decisions regarding CMAQ 
eligibility.
    1. Transportation Activities in an Approved SIP or Maintenance 
Plan: Transportation activities in approved SIPs and maintenance plans 
are likely to be eligible activities and, if so, must be given the 
highest priority for CMAQ funding. Their air quality benefits will 
generally have already been documented. If not, such documentation is 
necessary before CMAQ funding can be approved. Further, the 
transportation activity must contribute to the specific emission 
reductions necessary to bring the area into attainment.
    2. Transportation Control Measures: The TCMs included in Section 
108(f)(1)(A) of the CAAA of 1990 are the kinds of projects intended by 
the ISTEA for CMAQ funding, and generally satisfy the eligibility 
criteria. As above, and consistent with the statute, air quality 
benefits for TCMs must be determined and documented before a project 
can be considered eligible. Two of the CAAA TCMs, however, are 
specifically excluded from the CMAQ program by the ISTEA legislation. 
They are: xii--reducing emissions from extreme cold-start conditions, 
and xvi--programs to encourage removal of pre-1980 vehicles. Eligible 
TCMs are listed below as they appear in Section 108.
    (i) programs for improved public transit;
    (ii) restriction of certain roads or lanes to, or construction of 
such roads or lanes for use by, passenger buses or high-occupancy 
vehicles (HOV);
    (iii) employer-based transportation management plans, including 
incentives;
    (iv) trip-reduction ordinances;
    (v) traffic flow improvement programs that achieve emission 
reductions;
    (vi) fringe and transportation corridor parking facilities serving 
multiple-occupancy vehicle programs or transit service;
    (vii) programs to limit or restrict vehicle use in downtown areas 
or other areas of emission concentration particularly during periods of 
peak use;
    (viii) programs for the provision of all forms of high-occupancy, 
shared-ride services;
    (ix) programs to limit portions of road surfaces or certain 
sections of the metropolitan area to the use of non-motorized vehicles 
or pedestrian use, both as to time and place;
    (x) programs for secure bicycle storage facilities and other 
facilities, including bicycle lanes, for the convenience and protection 
of bicyclists, in both public and private areas;
    (xi) programs to control extended idling of vehicles;
    (xii) EXCLUDED BY ISTEA;
    (xiii) employer-sponsored programs to permit flexible work 
schedules;
    (xiv) programs and ordinances to facilitate non-automobile travel, 
provision and utilization of mass transit, and to generally reduce the 
need for single-occupant vehicle travel, as part of transportation 
planning and development efforts of a locality, including programs and 
ordinances applicable to new shopping centers, special events, and 
other centers of vehicle activity;
    (xv) programs for new construction and major reconstructions of 
paths, tracks or areas solely for the use by pedestrian or other non-
motorized means of transportation when economically feasible and in the 
public interest. For purposes of this clause, the Administrator shall 
also consult with the Secretary of the Interior.
    (xvi) EXCLUDED BY ISTEA.
    3. Bicycle and Pedestrian Facilities and Programs: Bicycle and 
pedestrian facilities and programs are included as a TCM in Section 108 
of the CAAA (ix, x, xiv, and xv above). In addition, the ISTEA makes 
specific mention of the eligibility of bicycle and pedestrian 
facilities and programs under CMAQ (see 23 U.S.C. 217 (a)(d)). Included 
as eligible projects are:
    a. construction of bicycle and pedestrian facilities,
    b. nonconstruction projects related to safe bicycle use, and
    c. establishment and funding of State bicycle/pedestrian 
coordinator positions, as established in the ISTEA, for promoting and 
facilitating the increased use of non-motorized modes of 
transportation. This includes public education, promotional, and safety 
programs for using such facilities.
    4. Management and Monitoring Systems: The ISTEA required that 6 
management systems be developed, established, and implemented by the 
States (see 23 U.S.C. 303(a)). The NHS legislation now makes these 
management systems optional. However, 23 U.S.C. 134(i)(3) still 
requires that the metropolitan planning process in all Transportation 
Management Areas (metropolitan areas

[[Page 50893]]

of 200,000 or more in population) include a congestion management 
system. In addition, States are required to develop and implement a 
traffic monitoring system for highways and public transportation 
facilities and equipment (see 23 U.S.C. 303(b)).
    Projects to develop, establish, and implement these management 
systems and the traffic monitoring system, whether under the provisions 
of 23 U.S.C. 303 or under a State's own procedures, remain eligible for 
CMAQ funds where it can be demonstrated that such use is likely to 
reduce transportation related emissions.
    5. Traffic Management/Congestion Relief Strategies: Traffic 
management and congestion relief strategies in both the highway and 
transit fields are eligible for CMAQ funding as CAAA Section 108(f) 
TCMs provided that they can be shown to improve air quality. In 
addition to traffic signal modernization projects designed to improve 
traffic flow within a corridor or throughout an area like an urban 
central business district, intelligent transportation infrastructure 
(ITI) traffic management and traveler information systems can be 
effective in reducing traffic congestion, enhancing transit bus 
performance and improving air quality. A program of nine components has 
been identified as a framework for integrating and deploying ITI in 
metropolitan areas of all sizes. The following seven components of the 
ITI have the greatest potential for improving air quality:
    a. regional multimodal traveler information center
    b. traffic signal control systems
    c. freeway management systems
    d. transit management systems
    e. incident management programs
    f. electronic fare payment systems
    g. electronic toll collection systems.
    While interconnected traffic signal control systems and freeway 
management systems have been recognized for their air quality 
improvement benefits, other user services like electronic fare and toll 
collection systems can be useful in reducing or eliminating air quality 
``hot spots''. Individually, these core infrastructure elements can 
reduce emissions and therefore qualify for CMAQ funding. However, when 
linked together in a system, their benefits are likely to be greater.
    In recognition of the air quality benefits to be derived from the 
efficient and effective operation and maintenance of advance 
transportation management and traveler information systems, operating 
expenses are eligible for CMAQ funding, where:
    a. they can be shown to have air quality benefits;
    b. the expenses are incurred from new or additional services; and
    c. previous funding mechanisms, such as fees for services, are not 
displaced.
    The ISTEA requires that CMAQ funded projects contribute to the 
attainment of a national ambient air quality standard. Therefore, it 
must be found that these operating costs are necessary for the overall 
system to contribute to attainment of an ambient air quality standard. 
The FHWA/FTA, after consultation with EPA, is empowered to make this 
finding on a case by case basis. Furthermore, it is reasonable to 
assume that, after several years, a transportation service may no 
longer be considered to be an air quality improvement project, but that 
it has become a part of the existing transportation network. Hence, 
FHWA and FTA field offices are advised to use the consultation process 
with EPA to make a determination that operating assistance for traffic 
management and control will assist in the attainment of an air quality 
standard, particularly for proposals to extend this assistance beyond 
an initial 3-year period of eligibility.
    6. Transit Projects: Improved public transit is one of the TCMs 
identified in Section 108 of the CAA. A wide range of capital 
improvements are eligible for CMAQ funding as described below. In 
general, CMAQ eligibility is determined on the basis of whether or not 
the project represents an expansion or enhancement of transit service. 
If the capital project is clearly a system/service expansion, it is 
eligible. If it is a reconstruction or rehabilitation of an existing 
facility, it is not eligible and the project sponsor should pursue 
other funding sources, such as the Section 9 formula grant program or 
the Surface Transportation Program. There will be ``gray'' areas; for 
example, a major reconstruction of an old, underutilized railroad 
terminal might be done in conjunction with new park-and-ride facilities 
and a restructuring of bus routes to enhance transit service. In such 
cases, the eligibility determination by FTA will focus on whether it is 
reasonable to expect a significant gain in ridership due to the 
project.
    Transit facilities--Eligible capital projects include such 
facilities as new stations, terminals, transit centers, transit malls, 
intermodal transfer facilities, and preferential treatment for buses/
HOVs on existing roads. Consistent with previous policy, park-and-ride 
facilities located adjacent to a transit stop are eligible, although in 
a CO or PM-10 nonattainment or maintenance area, air quality analysis 
may be required to demonstrate that no localized ``hot-spot'' 
violations will occur. Major new fixed-guideway and bus/HOV facilities 
and extensions to existing facilities are also eligible.
    Transit vehicles and equipment--New buses, vans, locomotives and 
rail cars to expand the fleet and augment service are eligible. One-
for-one vehicle replacements of the existing bus, rail or van fleet are 
eligible, although the caveat in previous guidance still applies: that 
is, CMAQ funding for bus replacements in PM-10 nonattainment and 
maintenance areas is clearly justified, whereas bus replacements in CO 
and ozone nonattainment and maintenance areas will provide much smaller 
air quality benefits with respect to the pollutants of concern. 
Purchase of new buses, as well as refueling infrastructure, dedicated 
to alternative fuels is eligible notwithstanding the conditions in 
Section III.A.9. Automobiles used solely by the transit agency are not 
eligible.
    Determining the eligibility of transit-related equipment will be 
handled on a case-by-case basis. Major system-wide upgrades, such as 
advanced signal and communications systems which improve speed and/or 
reliability of transit service will likely be eligible, whereas in-kind 
replacements will not be. Again, the guideline is whether or not the 
equipment can reasonably be expected to enhance service and generate 
additional ridership.
    Transit-associated development--This includes various types of 
retail and other services located in or very close to transit 
facilities. They offer convenience for the transit patron but are not 
required for the functioning of the system. In general, transit-
associated development is not eligible under the CMAQ Program. Child-
care centers located adjacent to a major transit stop have been 
proposed in the past as beneficial to air quality. This type of use 
could now be funded as an experimental pilot project.
    Transit operations--Operating assistance under the CMAQ Program is 
limited to the introduction of new transit services. Examples are: 
shuttle service feeding a station; circulator service within an 
activity center; or fixed-route service linking activity centers. Minor 
adjustments in existing routes and service schedules do not constitute 
new service. The intent is to support demonstrations of new transit or 
paratransit service to try to tap new markets and increase transit use. 
Service demonstrations will usually involve buses or vans since the 
service should be relatively low-cost and easily

[[Page 50894]]

terminated if sufficient ridership is not achieved. The 3-year period 
of funding assistance should be long enough to assess whether the 
service is worth continuing with other established sources of funding. 
While there is no requirement that the new service be implemented in 
conjunction with TDM measures, project sponsors are encouraged to do 
this.
    Operating assistance under the CMAQ program can also be used for 
the start-up of new major infrastructure projects, such as new rail 
lines or bus/HOV facilities and extensions to existing systems. 
However, CMAQ funds cannot replace previously committed funding from 
other sources to support operations, e.g., local financing plans for 
operations contained in Federal full-funding grant agreements for major 
investment projects. Under the CMAQ program, operating assistance for 
new transit services will be funded at an 80 percent Federal share. The 
Federal share applies only to the portion of operating costs not 
covered by fare revenue or fees for service.
    In addition to operating assistance for new transit service, this 
guidance also allows partial, short-term subsidies of transit/
paratransit fares as a means of encouraging transit use. This is 
subject to the conditions set out in Section III.B.7. Proposals such as 
reduced fare programs during periods of elevated ozone levels (so-
called ``ozone alerts'') and discounted transit passes targeted at 
specific groups or locations may now be eligible if these conditions 
are met.
    7. Highway and Transit Maintenance and Reconstruction Projects: 
Routine maintenance projects are ineligible for CMAQ funding. Routine 
maintenance and rehabilitation on existing facilities maintains the 
existing levels of highway and transit service, and therefore maintains 
existing ambient air quality levels. Thus, no progress is made toward 
achieving the NAAQS. Rehabilitation projects only serve to bring 
existing facilities back to acceptable levels of service. Other funding 
sources, like the STP and Section 9 formula grant programs, exist for 
reconstruction, rehabilitation and maintenance activities. Replacement-
in-kind of track or other equipment, reconstruction of bridges, 
stations and other facilities, and repaving or repairing roads are 
ineligible.
    8. Planning and Project Development Activities: Project planning or 
other development activities that lead directly to construction of 
facilities or new services and programs with air quality benefits, such 
as preliminary engineering or major investment studies for 
transportation/air quality projects, are eligible. This includes 
studies for the preparation of environmental or NEPA documents and 
related transportation/air quality project development activities. 
Project development studies would include planning directly related to 
a TCM or feasibility/developmental studies for any other eligible 
project or program. In the event that air quality monitoring is 
necessary to determine the air quality impacts of a proposed project, 
which is eligible for CMAQ funding, the costs of that monitoring are 
also eligible.
    General planning activities, such as economic or demographic 
studies, that do not directly propose or support a transportation/air 
quality project are too far removed from project development to ensure 
any emission reductions and are not eligible for funding. Funding for 
preparation of NEPA or other environmental documents that are not 
related to a transportation project to improve air quality is also 
ineligible. Such activities should be funded with other appropriate 
title 23 or Federal Transit Act funds.
    Region- or area-wide air quality monitoring is not eligible because 
such projects do not themselves yield air quality improvements nor do 
they lead directly to projects that would yield air quality benefits. 
Air quality monitoring is normally a State air quality agency 
responsibility which is funded under Section 105 of the Clean Air Act. 
If the MPO or State chooses, air quality monitoring could also be 
funded as a transportation planning activity and appropriate title 23 
funds used. However, it should be noted that regional air quality 
monitoring is subject to EPA guidance on siting and quality assurance.
    9. Alternative Fuels: In general, the conversion of individual 
conventionally-powered vehicles to alternative fuels is not eligible 
under the CMAQ Program. However, the conversion or replacement of 
centrally-fueled fleets to alternative fuels is eligible provided that 
the fleet is publicly owned (or leased)--such as city or State vehicle 
fleets--and one of the following conditions is met;
    a. The fleet conversion is in response to a specific requirement in 
the CAAA, e.g. the clean fuel vehicle program required of ``serious'' 
and worse ozone nonattainment areas, or
    b. The fleet conversion is specifically identified in the SIP as 
part of the emissions reduction strategy of a nonattainment area or in 
the maintenance plan for purposes of maintaining the air quality 
standards.
    Satisfying these conditions assures that the alternative fuel 
conversion is aimed primarily at air quality improvement and further 
requires that these projects be given the highest funding priority. 
There is one exception--replacement of a standard size, conventionally-
fueled transit bus with a new, dedicated alternative fuel vehicle is 
eligible under the transit provisions of this guidance and does not 
have to meet these requirements. Conversions of existing transit buses 
to alternative fuels and replacements with new dual fuel vehicles must 
be included in the SIP or maintenance plan to be eligible for CMAQ 
funding. As with all CMAQ proposals, it must be demonstrated that the 
proposed fleet conversion is effective in reducing the specific 
pollutant(s) causing the air quality violation.
    The establishment of on-site fueling facilities and other 
infrastructure needed to fill alternative-fuel vehicles are also 
eligible expenses under the above conditions. This means that the 
vehicles and facility must be publicly owned (or leased) and that the 
use of alternative-fuel vehicles must be either required under the CAAA 
or in the SIP or maintenance plan, with one exception. If private 
filling stations, that are reasonably accessible and convenient, exist 
to fuel the alternative-fuel vehicles, then CMAQ funds may not be used 
to fund publicly-owned fueling stations. Such an activity would 
interfere with private enterprise, and needlessly use transportation/
air quality funds for services duplicated in the area.
    10. Telecommuting: The DOT supports the establishment of 
telecommuting programs. Planning, technical and feasibility studies, 
training, coordination and promotion are eligible activities under 
CMAQ. Physical establishment of telecommuting centers, computer and 
office equipment purchases and related activities are not eligible. 
Such activities are not typically transportation projects and funding 
them would not meet the requirements in the ISTEA.
    11. Travel Demand Management: Travel demand management encompasses 
a diverse set of activities ranging from traditional carpool and 
vanpool programs to more innovative parking management and road pricing 
measures. Many of these measures are specifically referenced in the 
legislation creating the CMAQ program. Travel demand management 
projects meeting the basic eligibility requirements of the Federal 
Highway and Transit programs have always been eligible for CMAQ 
funding. Eligible activities include: market research and planning in 
support of TDM implementation; capital

[[Page 50895]]

expenses required to implement TDM measures; operating assistance to 
administer and manage TDM programs for up to 3 years; as well as 
marketing and public education efforts to support and bolster TDM 
measures (see also Sections III.B.1-3).
    Experience to date suggests that new transportation service has the 
greatest chance of success if offered along with complementary measures 
which discourage single-occupant vehicle use, such as parking 
restrictions or differential parking fees. Several provisions in ISTEA 
require metropolitan areas to consider TDM measures in the planning 
process and this guidance seeks to encourage their development and 
implementation.
    12. Intermodal Freight: The CMAQ funds have been, and may continue 
to be, used for improved intermodal freight facilities where air 
quality benefits can be shown. Capital improvements as well as 
operating assistance meeting the conditions of this guidance are 
eligible. In that many intermodal freight facilities include private 
sector businesses, several of the proposals that have been funded have 
been under public-private partnerships.
    13. Public/Private Initiatives: The CMAQ program may be used to 
fund projects or programs that are owned, operated or under the primary 
control of the public sector, including public/ private joint ventures. 
A State may use CMAQ funds for initiatives that are privately owned 
and/or operated, including efforts developed and implemented by 
Transportation Management Associations, as long as the activity is one 
which: (1) normally is a public sector responsibility (such as facility 
development for enhanced I/M programs), (2) private ownership or 
operation is shown to be cost-effective, and (3) the State is 
responsible for protecting the public interest and public investment 
inherent in the use of Federal funds. Activities which are the mandated 
responsibility of the private sector under the Clean Air Act, such as 
vapor recovery systems at gas stations, are not eligible. 
Implementation of employer trip reduction programs is also a private 
responsibility, but general program assistance to employers to help 
them plan and promote these programs is eligible. Further assistance to 
support trip reduction programs in the form of new public 
transportation services is also eligible as outlined in Section 
III.A.6.
    14. Other Eligible Transportation Projects and Programs: Other 
transportation projects and programs, even if they are not included 
under one of the categories above may also be funded under CMAQ. 
Innovative activities based on promising technologies and feasible 
approaches to improve air quality will also be considered for funding. 
This would include such ventures as new efforts to identify and curtail 
the emissions of gross emitters, planning and development of parking 
management programs, and preferential treatment for high- occupancy 
vehicles. Like all proposals, the State must provide documentation of 
air quality benefits, and FTA/FHWA, in consultation with EPA, must be 
satisfied that the project or program will help attain a NAAQS.
    15. Limitation on Construction of Single-Occupant Vehicle Capacity: 
Construction projects which will add new capacity for single-occupant 
vehicles are not eligible under this program unless the project 
consists of a HOV facility that is only available to single-occupant 
vehicles (SOV) at off-peak travel times. For purposes of this program, 
construction of added capacity for single-occupant vehicles means the 
addition of general purpose through lanes to an existing facility, 
which are not HOV lanes, or a highway on new location.

B. Newly Eligible Activities

    1. Outreach Activities: Outreach activities, such as public 
education on transportation and air quality, advertising of 
transportation alternatives to SOV travel, and technical assistance to 
employers or other outreach activities for Employee Commute Option 
program implementation have been, and continue to be, eligible for CMAQ 
funds. The previous policy allowing up to 2 years of CMAQ funding for 
these activities has been changed. Now, outreach activities may be 
funded under the CMAQ program for an indefinite period.
    Outreach activities differ fundamentally from the establishment of 
transportation services. They are communication services that are 
critical to successful implementation of transportation measures, 
especially demand management measures. As such, they reach new 
audiences each time they are implemented, and the restriction on the 
length of time they may be funded seems contrary to one of the 
program's goals of effecting behavioral changes to reduce 
transportation emissions. Outreach activities may be employed for a 
wide variety of transportation services. They may equally affect new 
and existing transit, shared ride, I/M, traffic management and control, 
bicycle and pedestrian, and other transportation services.
    Marketing programs to increase use of transportation alternatives 
to SOV travel and public education campaigns involving the linkage 
between transportation and air quality are eligible operating expenses. 
Transit ``stores'' selling fare media and dispensing route and schedule 
information which occupy leased space are also eligible. These 
activities are not subject to the 3-year limit.
    Based on information from the 1994 program review, there appears to 
be a great need to educate the public on the impacts of their travel 
behavior. States and MPOs are encouraged to give due consideration to 
outreach activities in the programming of their CMAQ apportionments.
    2. Rideshare Programs: Previous guidance restricted eligibility to 
the implementation of new or expanded services. Rideshare services 
consist of carpool and vanpool programs, and important activities of 
these programs are computer matching of individuals seeking to carpool 
and employer outreach to establish rideshare programs and meet Clean 
Air Act requirements. These are outreach activities even if they are 
part of an existing rideshare program and are now eligible for CMAQ 
funding under the same rationale as above.
    New or expanded rideshare programs, such as new locations for 
matching services, upgrades for computer matching software, etc. 
continue to be eligible and may be funded for an indefinite period of 
time.
    Many expenses related to vanpooling are different from the above 
activities, and a distinction needs to be drawn from the above policy. 
Unlike carpool matching services the implementation of a vanpool 
operation entails purchasing vehicles and providing a transportation 
service. These activities are not communication services and not 
different from other transportation services. Therefore, proposals for 
vanpool activities such as these must be for new or expanded service to 
be eligible and are subject to the 3-year limitation on operating 
costs.
    Under the CMAQ program, the purchase price of a publicly-owned 
vehicle for a vanpool service does not have to be paid back to the 
Federal Government. Requiring payback would place an additional 
constraint to wider implementation and usage of rideshare programs. 
Nonetheless, CMAQ funds should not be used to develop vanpool services 
that would be in direct competition with and impede private sector 
initiatives. Consistent with the metropolitan planning regulation of 
October 28, 1993 (23 CFR 450.300),

[[Page 50896]]

States and MPOs should consult with the private sector prior to using 
CMAQ funds to purchase vans, and if local private firms have definite 
plans to provide adequate vanpool service, CMAQ funds should not be 
used to supplant that service.
    3. Establishing/Contracting with TMAs: Transportation Management 
Associations (TMAs) are comprised of private individuals or firms who 
organize to address the transportation issues in their immediate 
locale. Previous guidance allowed the funding of transportation 
projects generated by TMAs if air quality benefits were demonstrated 
but did not allow funding for the TMA itself. This guidance now allows 
the use of CMAQ funds for the establishment of TMAs. Eligible expenses 
for reimbursement are associated start-up costs for up to 3 years. As 
with previous guidance, the TMA must still be sponsored by a public 
agency, and the State (or other public agency) is still ultimately 
responsible for ensuring that funds are appropriately used to meet CMAQ 
program objectives.
    During the program review, representatives from several States felt 
that existing policy prevented them from contracting with TMAs to 
provide services and develop projects that have air quality benefits. 
The TMAs can play a useful role in brokering transportation services to 
private employers, and this guidance clarifies that CMAQ funds may be 
used to contract with TMAs for this purpose, including coordinating 
rideshare programs, providing shuttle services, developing parking 
management programs, etc. Sufficient care must be taken to specify the 
goals and deliverables before granting the use of CMAQ funds for this 
activity.
    4. Maintenance Areas: Under the NHS legislation, CMAQ funds may now 
be obligated for projects in maintenance areas, thereby lifting the 2-
year limitation contained in the previous program guidance of July 13, 
1995. CMAQ funds may be used to reduce transportation-related emissions 
in maintenance areas as well as nonattainment areas within a State with 
no time limit. CMAQ funds cannot be used for projects in areas 
designated as ``transitional,'' ``submarginal,'' or ``incomplete data'' 
nonattainment areas for ozone or in ``not classified'' nonattainment 
areas for carbon monoxide.
    If a State has a maintenance area and no nonattainment areas, the 
air quality needs of the maintenance area should be given first 
priority. Since the existence of maintenance areas was taken into 
account when the NHS legislation froze the distribution factors at FY 
1994 levels, it is clear that the intent of the change was to continue 
to provide funding for projects which reduce transportation emissions. 
Before using CMAQ funds elsewhere, a State must show that the 
maintenance area status is not endangered by the shift of funds. This 
can be done by demonstrating to FHWA, FTA, and EPA that the decision 
was made in consultation with the affected MPO along with an 
examination of the maintenance plan for CMAQ needs. A State could make 
a case for ``continued maintenance of the standard,'' for example, if 
it can be shown that any transportation activities contained in the 
maintenance plan have sufficient funding commitments to carry out such 
activities without the use of CMAQ funds.
    5. Expansion of I/M Eligibility: Emission I/M programs show strong 
potential for improving air quality and related activities are cost-
effective uses of CMAQ funds. Recognizing this, FHWA/FTA's previous 
policy indicated that construction of facilities and purchase of 
equipment for I/M stations in test-only networks were eligible. 
Projects necessary for the development of these I/M programs and one-
time start-up activities, such as updating quality assurance software 
or developing a mechanic training curriculum, were also described as 
eligible activities. Operating expenses were also determined to be 
eligible for CMAQ funding subject to the general conditions applying to 
all new transportation services. Specifically, the I/M program must 
constitute new or additional efforts; existing funding (including 
inspection fees) should not be displaced, and operating expenses were 
only eligible for 2, now expanded to 3 years.
    When implemented, the policy to allow expenditures for the 
establishment of I/M programs was in line with EPA's rationale that 
test-only I/M programs are the most effective way to realize emission 
reductions. Hence the policy was restricted to test-only I/M programs. 
Since that time, EPA has allowed some I/M programs to go forward that 
include elements of test-and-repair, provided that the overall 
estimated emission reductions necessary to meet the State's targets are 
still met. Thus, the CMAQ policy regarding I/M is now similarly 
revised.
    Funds under the CMAQ program may be used for the establishment of 
I/M programs at publicly-owned I/M facilities. This is true whether the 
I/M program is test-only or test-and-repair. Publicly-owned I/M 
facilities may be constructed, equipment may be purchased, and the 
facility operated for up to 3 years with CMAQ funds, provided that the 
conditions covering operations described above are met.
    The establishment of I/M programs at privately-owned stations, such 
as service stations that conduct emission test-and-repair services, can 
only be funded under the CMAQ program under the provisions covering 
``public-private partnerships'' contained in this guidance. However, if 
the State relies on private stations, State or local administrative 
costs for the planning and promotion of the State's I/M program--
whether test-only or test-and- repair, or both--may be funded under the 
CMAQ program.
    The establishment of ``portable'' I/M programs is also eligible 
under the CMAQ program, provided that they are public services, 
contribute to emission reductions and do not conflict with statutory I/
M requirements or EPA implementing regulations. These programs must be 
included in the area's TIP before they can be funded.
    6. Experimental Pilot Projects/Innovative Financing: States and 
local areas have long experimented with various types of transportation 
services--and different means of employing them--in an effort to better 
meet the travel needs of their constituents. These ``experimental'' 
projects may not meet the precise eligibility criteria for Federal and 
State funding programs, but they may show promise in meeting the 
intended public purpose of those programs in an innovative way. The 
FHWA and FTA have supported this approach in the past and funded some 
of these projects as demonstrations to determine what the benefits and 
costs actually are.
    The CMAQ provisions of ISTEA allow experimentation provided that 
the project or program can reasonably be defined as a 
``transportation'' project and that emission reductions can reasonably 
be expected ``through reductions in vehicle miles traveled, fuel 
consumption or through other factors.'' This is in addition to the 
broad flexibility allowed under the ISTEA to fund a wide variety of 
projects. A more flexible approach makes particular sense given the 
magnitude of the air quality problem in the most severe nonattainment 
areas in the country and the lack of substantial emission reductions 
gained from traditional transportation projects and programs.
    This guidance encourages States and MPOs to creatively address 
their transportation/air quality problems and to experiment with new 
services, imaginative financing arrangements, public/private 
partnerships and

[[Page 50897]]

complementary approaches that constitute comprehensive strategies to 
reduce emissions through transportation programs. The CMAQ program can 
now be used to support a well conceived project even if the proposal 
may not otherwise meet the eligibility criteria of this guidance. 
Proposals submitted for funding under this provision should show 
promise in reducing transportation emissions and should have the 
concurrence of FHWA/FTA and State transportation agencies, and the MPO. 
The proposal must also be coordinated with EPA and State/local air 
quality agencies. A particular example that might be funded under this 
approach could be to use CMAQ funds for capital improvements to transit 
stations for the establishment of day care centers.
    Certain projects may not be funded under the CMAQ program under any 
circumstances. Activities which are legislatively prohibited, including 
scrappage programs, programs to reduce emissions from extreme cold 
start conditions, and highway capacity expansion projects, may not be 
funded under the CMAQ program, despite the enhanced flexibility under 
this policy. Similarly, rehabilitation and maintenance activities as 
described in Section III.A.7 of this guidance show no potential to make 
further progress in achieving the air quality standards and may not be 
funded under the CMAQ program even under this provision. Program funds 
may also not be used for projects which are outside of nonattainment or 
maintenance area boundaries (in States with nonattainment and/or 
maintenance areas (see also Section III.B.4)) except in cases where the 
project is located in close proximity to the nonattainment or 
maintenance area and the benefits will be realized primarily within the 
nonattainment or maintenance area boundaries. Finally, projects not 
meeting the specific eligibility requirements under titles 23 or 49 may 
also not be funded under this provision.
    There is risk in employing this approach, and States and MPOs 
should do so cautiously. While the CMAQ provisions of ISTEA were 
written broadly to encourage an innovative approach, the principles of 
sound program management must still be followed. Under this approach, 
there will likely be proposals for funding with which transportation 
agencies have little experience. As such, before-and-after studies are 
required to determine the actual project impacts on the transportation 
network (measured in VMT or trips reduced, or other appropriate 
measure) and on air quality (emissions reduced). An assessment of the 
project's benefits should be forwarded to FHWA or FTA documenting the 
immediate impacts as well as a projection of what the project's long-
term benefits will be.
    All projects funded under this section should be explicitly 
identified in the annual report of CMAQ activities as required under 
Section V.B of this guidance. In future years, when before-and-after 
studies are complete, a summary of the actual project benefits should 
also be included in the annual report.
    Finally, it is appropriate to place limits on the amount of CMAQ 
funds given the speculative nature of these proposals. As such, the 
amount obligated for proposals made pursuant to this section should not 
exceed 25 percent of a State's yearly CMAQ apportionment.
    Another way that States and local agencies are encouraged to 
experiment is through the FHWA's or FTA's Innovative Financing Programs 
which can employ CMAQ funding. These programs allow FHWA and FTA 
greater latitude to use Federal transportation funds to set up 
revolving loan programs, employ creative approaches in meeting State or 
local match requirements, and other financial matters. Many innovative 
financing tools were adopted statutorily in the NHS legislation and now 
may be used in any title 23 program, including CMAQ:
    a. Expanded use of bonds and other forms of debt management, 
including eligibility of bond interest and other bond costs for Federal 
reimbursement;
    b. Allowing privately donated funds, materials and services to 
constitute the required State and local match on Federal projects; and
    c. Use of Federal funds as loans to revenue-generating facilities.
    The NHS legislation allows States to receive matching credit for 
donations of privately donated funds, materials and services on a 
specific Federal-aid project. Before this change, States could only 
receive credit for State and local funds, and the value of privately 
donated right-of-way used as the local match. Now, however, any donated 
funds, or the fair market value of any privately donated materials or 
services that are accepted and incorporated into a CMAQ project or 
program by the State, are credited to the match requirements on that 
CMAQ project or program.
    As a particular example of how the loan provision under the 
Innovative Financing program might be used in connection with CMAQ 
funding, a proposal has already been approved to construct an 
intermodal freight facility using CMAQ funds, in part, as a loan which 
will be paid back to the State from user fees. As the loan is repaid, 
the revenues will be used for transportation purposes. Similarly, there 
have also been inquiries about the use of CMAQ funds to convert 
privately-owned diesel trucks to alternative fuels, thus substantially 
reducing oxides of nitrogen (NOx) and PM-10 emissions. While this 
proposal would not be eligible under usual circumstances, a feasible 
approach could be developed to use CMAQ funds for the incremental cost 
of converting or replacing the diesel engines as a loan to private 
truck owners. Such a program would have to be fairly administered under 
direct State supervision and be open to all owners located in 
nonattainment and maintenance areas who are interested in 
participating.
    In addition to the statutorily-adopted innovative financing tools, 
FHWA continues to solicit proposals from States for other flexible ways 
to finance projects, including CMAQ projects. Under ``Test and 
Evaluation'' authority in ISTEA, FHWA can approve new and innovative 
concepts for moving projects forward which otherwise might not be 
permitted under title 23. States should contact their FHWA Division or 
FTA Regional offices to discuss any proposals of this nature.
    7. Fare/Fee Subsidy Programs: Previous guidance allowed short-term 
operating assistance to support the initiation of new transportation 
services but did not allow demand-side incentives, such as fare or fee 
subsidies as a means of reducing transportation emissions. Now, the 
CMAQ program is being expanded to allow funding for partial user fare 
or fee subsidies in order to encourage greater use of alternative 
travel modes (e.g. carpool, vanpool, transit, bicycling and walking). 
This more expansive policy has been established to encourage areas to 
take a more comprehensive approach--including both supply and demand 
measures--in reducing transportation emissions.
    The CMAQ funds can be used to subsidize fares or fees if the 
reduced fare/fee is offered as a component of a comprehensive, targeted 
program to reduce SOV use. Other components of such a program would 
include public information and marketing of non-SOV alternatives, 
parking management measures, and better coordination of existing 
transportation services. The intent of this policy is to focus on 
situations where alternate transportation modes are viable, but 
nonetheless, heavy reliance on single-occupant

[[Page 50898]]

vehicles exists, such as at major employment or activity centers.
    Examples of how the fare/fee subsidy might be used include: a 
discounted transit fare program developed through a cooperative 
arrangement between a transit operator and a major employer; a program 
subsidizing empty seats during the formation of a new vanpool; reduced 
fares for shuttle services within a defined area, such as a flat-fare 
taxi program; or providing financial incentives for carpooling, 
bicycling and walking in conjunction with a demand management program.
    An underlying tenet of this provision is to support experimentation 
but always with the goal of identifying projects which are viable 
without the short-term funding assistance provided by the CMAQ program. 
Thus, the subsidy must be used in conjunction with reasonable fares or 
fees to allow the greatest chance of holding on to ``trial'' users. 
While the fare/fee subsidy program itself is not limited in time, 
specific groups or locales targeted under the program must be rotated 
and the subsidized fare/fee must be limited to any one entity or 
location for a period not to exceed 2 years.
    The CMAQ program was never envisioned as a source of long-term 
support for transportation operations. However, FHWA and FTA believe 
this new policy is highly supportive of implementing and evaluating the 
effectiveness of a variety of demand management measures.

IV. CMAQ Programming Priorities

    The Clean Air Act requires that FHWA and FTA give priority to the 
implementation of transportation portions of applicable SIPs, and TCMs 
from applicable SIPs are provided the highest priority for funding 
under the CMAQ Program. The SIPs and the control measures they contain 
are necessary to assist a State to attain and maintain the NAAQS. If 
States are failing to implement TCMs in approved SIPs, adverse 
consequences can ensue. A basic criterion for making conformity 
determinations is the timely implementation of TCMs in the SIP, and 
conformity determinations are necessary before transportation plans, 
programs, or projects can be adopted and approved. If States fail to 
give priority to such TCMs, their conformity determinations and 
transportation initiatives will be in jeopardy. In addition, failing to 
implement TCMs is also the basis for application by EPA of the Clean 
Air Act's highway funding sanctions. Under certain circumstances, 
sanctions may be expanded even beyond the nonattainment area to cover 
an entire State. Once CMAQ projects and programs are identified, States 
need to insure that sufficient obligation authority is reserved to 
implement these projects and programs so that nonattainment areas make 
progress toward attainment of the NAAQS. While the continuation of CMAQ 
funds into the maintenance period under NHS legislation now makes it 
possible to look at longer term strategies, States and MPOs are still 
encouraged to consider and give priority to strategies that would help 
them meet their attainment deadlines.
    States and MPOs should make strategic use of the CMAQ funds 
allotted to them even if they will not be used for TCMs in their SIPs. 
Limited resources and the low levels of effectiveness in reducing 
emissions through transportation measures that have been the experience 
to date argue for maximizing the impact of Federal, State and local 
expenditures to improve air quality. The FHWA and FTA continue to 
recommend that States and MPOs put together their transportation/air 
quality programs using complementary measures that simultaneously 
provide alternatives to SOV travel while reducing demand through 
pricing, parking management, regulatory or other means.

V. Program Requirements

    Proposals for CMAQ funding should include a precise description of 
the project, providing information on the project's size, scope and 
timetable. Also, an assessment of the proposal's expected emission 
reductions in accordance with the provisions described below is 
required. States are also required to submit annual reports detailing 
the obligations made under the CMAQ program during the previous fiscal 
year.

A. Air Quality Analysis

    1. Quantitative Analyses: Quantitative assessments of how the 
proposal is expected to reduce emissions is extremely important to 
assist areas in developing and funding the most effective projects in 
nonattainment and maintenance areas. They also provide an objective 
basis for comparing the costs and benefits of competing proposals for 
CMAQ funding. In that States are required to submit annual reports, 
analysis of air quality benefits for individual project proposals will 
assist their preparation, as well. It is particularly important to 
assess the benefits of projects that improve or increase basic 
transportation services, including transit, traffic flow improvements, 
ridesharing, and bicycle and pedestrian improvements, and quantified 
emission reductions are expected for these projects. Similarly, 
analyses are expected for conversions to alternative fuels and I/M 
programs, as well.
    Decisions regarding the level and type of air quality analysis 
needed, as well as the credibility of its results, are left to FTA and 
FHWA field staff, in consultation with EPA. Across the country, State 
and local transportation/air quality agencies have different 
approaches, analytical capabilities and technical expertise with 
respect to such analysis. At the national level, it is not feasible to 
specify a single method of analysis applicable in all cases. While no 
single method is specified, every effort must be taken to ensure that 
determinations of air quality benefits are credible and based on a 
reproducible and logical analytical procedure that will yield 
quantitative results of emission reductions. Of course, if an air 
quality analysis has been done for other reasons, it may also be used 
for this purpose.
    2. Qualitative Assessments: Although quantitative analysis of air 
quality impacts is required whenever possible, some improvements may 
not lend themselves to rigorous quantitative analysis because of the 
project's characteristics or because practical experience is lacking to 
adequately analyze the project. In these cases, a qualitative 
assessment based on a reasoned and logical examination of how the 
project or program will decrease emissions and contribute to attainment 
of a NAAQS is appropriate and acceptable.
    Public education, marketing and other outreach efforts fall into 
this category. The primary benefit of these activities is enhanced 
communication and outreach that is expected to influence travel 
behavior, and thus, air quality. Yet tracing the benefits to air 
quality through the intervening steps requires a multi-disciplinary 
approach that incorporates market research analysis which is often 
beyond many transportation and air quality agencies' area of expertise. 
As such, these projects which can include advertising alternatives to 
SOV travel, employer outreach, public education campaigns, and 
communications or outreach to the public during ``ozone alerts,'' or 
similar programs do not require a quantitative analysis of air quality 
benefits.
    3. Analyzing Groups of Projects: In many situations, it may be more 
appropriate to examine the impacts of more comprehensive strategies to 
improve air quality by grouping TCMs. A strategy to reduce reliance on 
single-

[[Page 50899]]

 occupant vehicles in a travel corridor, for example, could include 
transit improvements coupled with demand management. The benefits of 
such a strategy should be evaluated together rather than as separate 
projects. Transit improvements, ridesharing programs or other TCMs 
affecting an entire region may be best analyzed in this fashion.

B. Annual Reports

    To assist in meeting statutory obligations, States are required to 
prepare annual reports for FHWA, FTA, and the general public that 
specify how CMAQ funds have been spent and what the air quality 
benefits are expected to be. Annual reporting makes the States and 
local agencies accountable to the general public. Also, the annual 
report enables FHWA and FTA to be responsive to the Congress on the 
utilization of the funds and their impact.
    This report should be provided by the first day of February 
following the end of the previous Federal fiscal year (September 30) 
and cover all CMAQ obligations for that fiscal year. The report should 
include;
    1. A list of projects funded under CMAQ, best categorized by one of 
the following seven project types;
    a. experimental pilot projects.
    b. transit: facilities; vehicles and equipment; operating 
assistance for new transit service, etc.
    c. shared-ride: vanpool and carpool programs, and parking for 
shared-ride services, etc.
    d. traffic flow improvements: traffic management and control 
services, signalization projects, intersection improvements, and 
construction or dedication of HOV lanes, etc.
    e. demand management: trip reduction programs, transportation 
management plans, flexible work schedule programs, vehicle restriction 
programs, etc.
    f. pedestrian/bicycle: bikeways, storage facilities, promotional 
activities, etc.
    g. I/M and other TCMs (not covered by the above categories).
    Project planning and other developmental activities, as well as 
public education, marketing and other outreach efforts which are 
eligible under the CMAQ program should be categorized the same way as 
the project or program they support.
    2. The amount of CMAQ funds obligated for the year, disaggregated 
by the type of project listed above; and
    3. A tabulation of the estimated air quality benefits for the year 
summed from project-level analyses and expressed as reductions of ozone 
precursors (volatile organic compounds and NOX, CO, or PM-10. 
These reductions should be expressed as kilograms per day removed from 
the atmosphere. This information will be important in monitoring and 
reporting to Congress on CMAQ program effectiveness.
    Note that the annual report should now specifically include and 
identify any projects funded under the Experimental Pilot Projects/
Innovative Financing provision of this guidance (see Section III.B.6). 
Summaries of before-and-after studies should be included as they become 
available.

VI. Federal, State and MPO Responsibilities

A. Federal Agency Responsibilities/Coordination

    As noted in previous guidance, the FTA and FHWA regional offices 
should establish a consultation and coordination process with their 
respective EPA regional offices for early review of CMAQ funding 
proposals. Review by EPA is critical to assist the determination of 
whether a project will have air quality benefits and to assure that the 
most effective projects and programs are approved for CMAQ funding. 
Proposals for funding should be forwarded to EPA as soon as possible to 
insure timely review.
    Either the local FTA or FHWA office will be responsible for project 
management. In cases where the project is clearly related to transit, 
FTA will determine the project's eligibility and manage the project. 
Similarly, traffic flow improvements that improve air quality through 
operational improvements of the road system would be managed by FHWA. 
For projects that include both traffic flow and transit elements, such 
as park-and-ride lots and intermodal projects, the managing agency will 
be decided on a case-by-case basis. Following initial review by the 
managing agency and consultation with EPA, the managing agency makes 
the final determination on whether the project or program is likely to 
contribute to attainment of a NAAQS and is eligible for CMAQ funding.
    The consultation process should provide for timely review and 
handling of CMAQ funding proposals considering the tight attainment 
deadlines facing many areas. A project category list should be 
developed for expedited funding under CMAQ without further review by 
the other agencies. As EPA will evaluate all TCMs in an approved SIP, 
they can be included on such a list. It is strongly recommended that 
the FHWA, FTA and EPA regional offices develop and implement a 
memorandum of understanding that specifies which projects can go 
forward without further coordination. It should also include deadlines 
for review beyond which it will be assumed that the review agencies 
have no comments on the proposal. For Federal agency review of 
individual proposals, that consultation period should be approximately 
2 weeks. For review of multiple proposals, such as a draft TIP, Federal 
review should be completed as expeditiously as possible so that the 
response time by Federal Agencies to CMAQ funding proposals is 
generally limited to about 1 month.

B. State and MPO Responsibilities

    Decisions over which projects and programs to fund under CMAQ 
should be made through a cooperative process involving the State 
departments of transportation, affected MPOs, and State and local air 
quality agencies. This process serves to develop a pool of potential 
CMAQ projects to be considered for funding in a State's nonattainment 
and maintenance areas. The programming of CMAQ projects should follow 
the procedures for TIP development noted below.
    Projects to be funded with CMAQ funds must be included in the TIPs 
that are developed by the MPOs in cooperation with the State and 
transit operators. Under the metropolitan planning regulations of 
October 28, 1993 (23 CFR 450.300), TIPs must contain a priority list of 
projects to be carried out in the 3-year period following adoption. As 
a minimum, projects must be grouped by year and proposed funding 
source. For projects targeting CMAQ funds, priority in the TIP should 
be based on the projects' estimated air quality benefits.
    Since the TIPs must be consistent with available funding, it is 
important that the State advise the MPOs of its proposed approach to 
utilize CMAQ funds in a timely manner. Once CMAQ projects are included 
in a TIP (approved by the MPO and the Governor), and included in a 
FHWA/FTA-approved statewide TIP, those projects in the first year may 
be implemented. Projects in the second or third year of the TIP could 
be advanced for implementation using the specified project selection 
procedures in the planning regulation.
    It is the State's responsibility to manage its obligation authority 
made pursuant to title 23 to ensure that CMAQ (and other Federal-aid) 
funds are obligated in a timely fashion and do not lapse. Other 
provisions affecting the overall Federal-aid program, such as

[[Page 50900]]

advance construction authority, apply to the CMAQ program as well.
    Close coordination is needed between the State and MPO to assure 
that CMAQ funds are used appropriately and to maximize their 
effectiveness in meeting the Clean Air Act requirements. States and 
MPOs must fulfill this responsibility so that nonattainment areas are 
able to make good-faith efforts to attain the NAAQS by the prescribed 
deadlines. State and MPO actions should include consultation with air 
quality agencies at the State and local levels to develop an 
appropriate project list of CMAQ programming priorities which will have 
the greatest impact on air quality.

C. Apportionments and State Suballocation

    According to the ISTEA legislation, CMAQ funds are apportioned to 
the States primarily based on the severity of their ozone pollution and 
the number of people affected by it. Each State is guaranteed a minimum 
of 0.5 percent of the total yearly apportionment even if it has no 
nonattainment areas.
    Under the CMAQ Program as amended by the NHS legislation, States 
which have ozone nonattainment areas that are classified as 
``marginal'' or worse during any part of FY 1994 (October 1, 1993--
September 30, 1994) are apportioned funds based on the population in 
these areas and the severity of the ozone problem at that time. If the 
ozone nonattainment area was also a CO nonattainment area classified as 
``moderate'' or worse during FY 1994, the State is apportioned 
additional CMAQ funds. If a State contains a CO nonattainment area that 
was not a nonattainment area for ozone as well, no additional funds are 
apportioned to the State. Areas redesignated to attainment status 
before FY 1994 would not be included in the apportionment factors. 
Changes to nonattainment classifications (from marginal to moderate for 
example) occurring during FY 1994 would affect the distribution. Any 
changes occurring before or after FY 1994 will have no effect on the 
distribution of CMAQ funds for FY 1996 or FY 1997.
    The CMAQ funds can be used in all areas designated as nonattainment 
under Section 107(d) of the Clean Air Act, including any areas later 
redesignated as maintenance areas. CMAQ funds cannot be used for 
projects in areas designated as ``transitional,'' ``submarginal,'' or 
``incomplete data'' nonattainment areas for ozone or in ``not 
classified'' nonattainment areas for carbon monoxide.
    Despite the statutory formula for determining the apportionment 
amount, the State can use its CMAQ funds in any ozone, CO or PM-10 
(under certain conditions) nonattainment or maintenance area. It is 
under no statutory obligation to suballocate CMAQ funds in the same way 
as they were apportioned. States may retain funds for use in specific 
nonattainment or maintenance areas or fund CMAQ projects on a case-by-
case basis. However, it is clear from the program review that there 
must be a collaborative process between the State and MPOs in 
nonattainment and maintenance areas for selecting projects to maximize 
emission reductions. Thus, States are strongly encouraged to consult 
with affected MPOs to determine CMAQ priorities and allocate funds 
accordingly.
    The Federal share for most eligible activities and projects is 80 
percent or 90 percent if used on certain activities on the Interstate 
System. Under certain conditions (including sliding scale rates), the 
Federal share under title 23 can even be higher. Certain activities 
identified in Section 120(c) of title 23, including traffic control 
signalization, and commuter carpooling and vanpooling, may be funded at 
100 percent Federal share if they meet the conditions of that section. 
Pedestrian and bicycle projects and programs previously limited to an 
80 percent Federal share, without the use of sliding scale rates, are 
now treated exactly the same as general Federal-aid projects (i.e. the 
Federal share payable on pedestrian and bicycle projects now includes 
the sliding scale rates) as a result of the NHS legislation. The NHS 
legislation also makes it easier for States to receive matching credit 
for donations of privately donated funds, materials, and services on a 
specific Federal-aid project (see Section III.B.6)

VII. States That Are in Attainment

    States that do not have any ozone or CO nonattainment areas may use 
their funds for any eligible projects under the STP or the CMAQ 
program. If a State has a maintenance area and no nonattainment areas, 
the air quality needs of the maintenance area should be given first 
priority (see Section III.B.4). States with PM-10 areas only are 
encouraged to use CMAQ funds for projects and programs that contribute 
to reduction of PM-10 emissions. This priority should be given only if 
mobile sources are considered significant contributors to such 
nonattainment.
    States that are in attainment or achieve attainment of 
transportation-related NAAQS, are further encouraged to give priority 
to the use of CMAQ program funds for the development of congestion 
management systems, public transportation facilities and equipment, and 
intermodal facilities and systems, as well as the implementation of 
projects and programs produced by those systems.

    Authority: 23 U.S.C. 315; 49 CFR 1.48.
Rodney E. Slater,
Federal Highway Administrator.
Gordon J. Linton,
Federal Transit Administrator.
    Dated: September 20, 1996.
[FR Doc. 96-24793 Filed 9-26-96; 8:45 am]
BILLING CODE 4910-22-P