[Federal Register Volume 63, Number 237 (Thursday, December 10, 1998)]
[Rules and Regulations]
[Pages 68366-68367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32897]
[[Page 68365]]
_______________________________________________________________________
Part V
Department of Transportation
_______________________________________________________________________
Federal Transit Administration
_______________________________________________________________________
49 CFR Part 639
Capital Leases; Final Rule
Federal Register / Vol. 63, No. 237 / Thursday, December 10, 1998 /
Rules and Regulations
[[Page 68366]]
DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
49 CFR Part 639
[Docket No. FTA-98-4407]
RIN 2132-AA65
Capital Leases
AGENCY: Federal Transit Administration, DOT.
ACTION: Final rule
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SUMMARY: This final rule implements the Transportation Equity Act for
the 21st Century, Public Law 105-178 (TEA-21), which allows all Federal
Transit Administration (FTA) capital grant funds to be used for leasing
facilities and equipment if a lease is more cost effective than
purchase or construction. Before the enactment of TEA-21, recipients
were permitted to lease assets only with funds received under 49 U.S.C.
5307. This rule amends FTA's leasing regulation to extend this option
to all FTA funds, to the extent a recipient meets all other regulatory
requirements.
EFFECTIVE DATE: This rule is effective January 11, 1999.
SUPPLEMENTARY INFORMATION:
A. Background
Under 49 U.S.C. 5307, Federal funds are provided to urbanized areas
on the basis of a statutory formula. These funds are available for the
acquisition or construction of mass transportation facilities and
equipment (``capital assistance grants''), as well as, beginning in
fiscal year 1999, for the payment of a portion of the net operating
cost of mass transportation facilities and equipment (``operating
assistance grants'') in areas of less than 200,000 in population.
Historically, few Federal Transit Administration (FTA) grantees
leased capital assets, because under Office of Management and Budget
cost principles (OMB Circular A-87, ``Cost Principles for Grants to
State and Local Governments'') a significant portion of lease costs (as
much as forty percent) representing imputed interest was ineligible for
reimbursement.
In 1987, section 308 of the Surface Transportation and Uniform
Relocation Assistance Act, Public Law 100-17 (STURAA), expressly
authorized the use of section 5307 capital assistance funds to acquire
facilities and equipment by lease where leasing is more cost effective
than purchase or construction. As explained in the accompanying Senate
Report, section 308
Permits grantees to use [section 5307] grant funds to lease
major capital cost items such as computers, maintenance of way and
other heavy equipment, maintenance of effort rail equipment, radio
equipment, bus garages, property or structures for park and ride,
and other buildings or facilities used for mass transit purposes.
The Committee recognizes that it is often more cost effective for
grantees to lease rather than purchase major capital items. Leasing
arrangements can also provide transit authorities with flexibility
that is needed, for example, to maintain their communications and
computing equipment or to adapt buildings and other facilities to
changing needs. By including this section, the Committee intends to
help grantees better manage their operations and conduct long-term
and short-term planning. S. Rep. No. 3, 100th Cong., 1st Sess. 6
(1987).
On October 15, 1991, FTA issued 49 CFR Part 639 (56 F.R. 51786),
which implements section 308. The rule sets out the factors for
determining whether leasing is more cost effective than purchase or
construction of such items. In accordance with section 308, sections
639.1, 639.3, 639.5, and 639.13(a) of the regulation limit eligibility
for the award of capital leasing funds to requests for assistance under
section 5307.
B. Section 3003 of TEA-21
Section 3003 of the Transportation Equity Act for the 21st Century,
Public Law 105-178 (TEA-21), amends 49 U.S.C. 5302(a)(1) by adding,
inter alia, the following subsection to the definition of ``capital
project'':
(F) Leasing equipment or a facility for use in mass
transportation, subject to regulations that the Secretary prescribes
limiting the leasing arrangements to those that are more cost
effective than purchase or construction.
Section 3003 therefore makes all leasing arrangements for mass
transit projects that meet FTA's cost-effectiveness criteria eligible
for capital funding. Moreover, section 3003 does not limit eligibility
for capital lease funding to requests for assistance under section
5307, but allows all categories of FTA funds to be used for leasing
purposes, to the extent that they meet the regulatory requirements. FTA
is thus amending 49 CFR Part 639 to reflect this expansion of its
capital leasing authority.
C. FTA's Final Action
In keeping with section 3003 of TEA-21, FTA is amending 49 CFR
639.1, 639.3, 639.5 and 639.13(a) to recognize that all categories of
FTA funds, and not merely section 5307 block grant formula funds, may
be used to acquire equipment and facilities under leases that meet
FTA's cost-effectiveness criteria.
Regulatory Impacts
A. Regulatory Analyses and Notices
FTA has determined that this action is not significant under
Executive Order 12866 or the Department of Transportation regulatory
policies and procedures. Because this rule merely expands the
categories of FTA grant funds eligible for capital leasing and does not
make substantive changes in evaluation criteria, it is anticipated that
the impact of this rulemaking will be minimal; therefore, a full
regulatory evaluation is not required. There are not sufficient
Federalism implications to warrant the preparation of a Federalism
Assessment under Executive Order 12612.
B. Regulatory Flexibility Act
In accordance with 5 U.S.C. 603(a), as added by the Regulatory
Flexibility Act, Pub. L. 96-354, FTA certifies that this rule will not
have a significant impact on a substantial number of small entities
within the meaning of the Act, because it gives section 5311 recipients
an option not currently extended to them, which is to lease mass
transit equipment or facilities when it is more cost effective than
purchasing them.
C. Paperwork Reduction Act
This action does not contain a collection of information
requirement for purposes of the Paperwork Reduction Act of 1995.
List of Subjects in 49 CFR Part 639
Government contracts, Grant programs--transportation, Mass
transportation. Accordingly, for the reasons described in the Preamble
of this document, FTA is proposing to amend Title 49, Code of Federal
Regulations, Part 639 as follows:
PART 639--[AMENDED]
1. The authority citation of Part 639 is revised to read as
follows:
Authority: 49 U.S.C. 5302; 49 CFR 1.51.
2. Section 639.1 is revised to read as follows:
Sec. 639.1 General overview of this part.
This part contains the requirements to qualify for capital
assistance when leasing facilities or equipment under the Federal
transit laws. This part is set out in four subparts, with subpart A
containing general information on scope and definitions. Subpart B
contains the principal requirements of this part, including eligibility
requirements, the self-certification system used, and identification of
the various forms of leases and grants that are eligible under
[[Page 68367]]
the program. Subpart B also contains a section on other Federal
requirements that may apply. Subpart C includes the actual calculations
that each recipient should undertake before certifying that a lease is
cost-effective. Finally, subpart D contains requirements on early lease
termination and project management in general.
3. Section 639.3 is revised to read as follows:
Sec. 639.3 Purpose of this part.
This rule implements section 3003 of the Transportation Equity Act
for the 21st Century (Pub. L. 105-178). Section 3003 amended section
5302 of Chapter 53 of Title 49 of the United States Code to allow a
recipient to use capital funds to finance the leasing of facilities and
equipment on the condition that the leasing arrangements are more cost
effective than purchase or construction.
4. Section 639.5 is revised to read as follows:
Sec. 639.5 Scope of this part.
This part applies to all requests for capital assistance under
Chapter 53 of Title 49 of the United States Code where the proposed
method of obtaining a capital asset is by lease rather than purchase or
construction.
5. Section 639.13(a) is revised to read as follows:
Sec. 639.13 Eligible types of leases.
(a) General. Any leasing arrangement, the terms of which provide
for the recipient's use of a capital asset, potentially is eligible as
a capital project under Chapter 53 of Title 49 of the United States
Code, regardless of the classification of the leasing arrangement for
tax purposes.
* * * * *
Issued on: December 7, 1998.
Gordon J. Linton,
Administrator.
[FR Doc. 98-32897 Filed 12-9-98; 8:45 am]
BILLING CODE 4910-57-P