[Federal Register Volume 85, Number 158 (Friday, August 14, 2020)]
[Notices]
[Pages 49715-49718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17777]


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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

[Docket No. FTA-2019-0002]


Notice of Issuance of Final Circular: Guidance on Joint 
Development

AGENCY: Federal Transit Administration (FTA), Transportation (DOT).

ACTION: Notice of availability of final circular.

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SUMMARY: The Federal Transit Administration (FTA) has placed in the 
docket and on its website guidance in the form of FTA Circular 7050.1B, 
FTA Guidance on Joint Development. The purpose of the final Circular is 
to increase flexibility for project sponsors to pursue joint 
development projects, reduce FTA oversight of joint development 
agreements negotiated between project sponsors and their partners, 
streamline FTA's project eligibility review process, and clarify prior 
guidance in FTA Circular 7050.1A.

DATES: The effective date of the Circular is August 14, 2020.

FOR FURTHER INFORMATION CONTACT: For policy guidance questions, 
Margaretta Veltri, Office of Budget and Policy, Federal Transit 
Administration, 1200 New Jersey Ave. SE, Room E52-315, Washington, DC 
20590, phone: (202) 366-5094, or email, [email protected]. For 
legal questions, Heather Ueyama, Office of Chief Counsel, 1200 New 
Jersey Ave. SE, Room E54-417, Washington, DC 20590, phone: (202) 366-
7374, or email, [email protected].

SUPPLEMENTARY INFORMATION:

Availability of Final Circular

    This notice provides a summary of the final changes to the FTA 
Guidance on Joint Development Circular and responds to comments 
received on the proposed Circular. The final Circular itself is not 
included in this notice; instead, an electronic version may be found on 
FTA's website, at www.transit.dot.gov, and in the docket, at 
www.regulations.gov. Paper copies of the final Circular may be obtained 
by contacting FTA's Administrative Services Help Desk, at (202) 366-
4865.

Table of Contents

I. Overview
II. Changes to Circular 7050.1A
    A. Fair Share of Revenue
    B. Submission and Review Process
    C. Technical and Conforming Changes
III. Response to Comments Received

I. Overview

    FTA is finalizing its update to its Joint Development Circular to 
increase flexibility for project sponsors to pursue joint development 
projects, reduce FTA oversight of joint development agreements 
negotiated between project sponsors and their partners, streamline 
FTA's project eligibility review process, and clarify prior guidance in 
FTA Circular 7050.1A. The final changes to the Circular affect: (1) The 
minimum threshold for the statutory ``fair share of revenue'' 
requirement; and (2) the submission and review process for FTA-assisted 
joint development projects. The final Circular also incorporates 
technical and conforming changes that increase clarity, conformity with 
existing law, and internal consistency.
    This notice provides a summary of changes to Circular 7050.1A, and 
addresses comments received in response to the April 18, 2019 Federal 
Register notice of proposed updated circular and request for comments 
(84 FR 16339). The final Circular 7050.1B, FTA Guidance on Joint 
Development, is effective immediately and supersedes Circular 7050.1A. 
The final Circular applies to all new projects and those pending FTA 
approval at the time of the Circular's publication.

II. Changes to Circular 7050.1A

A. Fair Share of Revenue

    Section 5302(3)(G)(iii) of title 49, United States Code, requires 
FTA-assisted joint development projects to provide a ``fair share of 
revenue that will be used for public transportation.'' Prior to the 
October 1, 2014 effective date of Circular 7050.1A, FTA generally 
deferred to a project sponsor's assessment of a ``fair share of 
revenue,'' and did not require any specific amount of revenue for 
transit from a joint development project. FTA defined ``fair share of 
revenue'' in Circular 7050.1A to incorporate a minimum revenue 
threshold that a joint development project must produce for transit 
purposes that at least equals the federal government's initial 
investment in the joint development project. (79 FR 50,728; 50,731-32).
    Over time, FTA has found that defining a fair share of revenue 
minimum threshold unnecessarily limits the pool of potential projects 
by reducing flexibility for project sponsors and their partners to 
determine what amounts to a fair share of revenue. Accordingly, the 
proposed Circular eliminated the fair share of revenue minimum 
threshold and monetary requirement. FTA received several comments 
supporting this proposal. In response, the final Circular adopts this 
change.
    FTA allows the amount and form of revenue received by the project 
sponsor to be negotiated between joint development parties. Consistent 
with the proposed Circular and Circular 7050.1A, the project sponsor 
must continue to report to FTA the amount and source of the revenue it 
will receive, and the revenue must be used for transit purposes. FTA 
advises in the final Circular that the project sponsor should determine 
how to document its reasonable determination that the terms and 
conditions of the joint development improvement (including the share of 
revenue for public transportation which shall be provided thereunder) 
are reasonable and fair to the recipient. For example, a project 
sponsor's Board of Directors (or similar governing body) could, 
following a reasonable investigation, document the fair share of 
revenue determination in a Board resolution or other Board materials. 
This change provides discretion to the project sponsor, while also 
ensuring compliance with the fair share of revenue requirement in lieu 
of the certificate of compliance and baseline market analysis that FTA 
no longer requires, as discussed in Section (B) below.
    Further, in response to a comment, and to provide additional 
flexibility to the project sponsor, FTA will no longer reserve the 
right to decline joint development project funding or approval if the 
project does not generate revenue for the project sponsor.

B. Submission and Review Process

    Circular 7050.1A prescribed a process by which project proposals 
are submitted to FTA for review. It required a formal project proposal 
to include: (1) A completed project request form that contains 
pertinent information about the joint development project, including 
how the eligibility criteria are to be satisfied; (2) all proposed 
agreements between the project sponsor and project partners; (3) an 
executed certificate of compliance; and (4) two forms identifying other 
required and supplemental documentation, including a baseline market 
analysis to demonstrate a good faith effort to provide a fair share of 
revenue to the project sponsor.
    FTA will update the project request form to reflect the changes 
regarding the ``fair share of revenue'' requirement

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described in Section (A) above. The revised project request form will 
be published on FTA's website at www.transit.dot.gov/jointdevelopment.
    FTA has determined that the elimination of the fair share of 
revenue minimum threshold makes the submission of a baseline market 
analysis and certificate of compliance unnecessary. Accordingly, the 
proposed Circular no longer required project sponsors to submit either 
document. In response to several comments expressing support for this 
proposal, the final Circular finalizes these changes. This will 
streamline the review of FTA-assisted joint development projects by 
reducing the amount of paperwork that project sponsors must prepare and 
FTA must review. In response to another comment, FTA encourages, but 
does not require, project sponsors to conduct baseline market analyses 
to better understand current market conditions and evaluate the 
viability of joint development projects.

C. Technical and Conforming Changes

    The final Circular incorporates several minor edits for clarity and 
ease of reading. One commenter noted that certain defined terms were 
not included in the text of the document. FTA has reviewed all defined 
terms to ensure all are used in the final Circular. For example, FTA 
has removed ``original federal investment'' and ``affordable housing'' 
from the list of definitions in Chapter I. These definitions are 
unnecessary because all joint development projects now are subject to 
the same statutory fair share of revenue requirements.
    Supporting access to affordable housing is a long-standing goal of 
FTA's joint development program. In Circular 7050.1A, only certain 
community service projects, publicly operated projects, and affordable 
housing projects were exempt from the fair share of revenue minimum 
threshold requirement. In this final Circular, however, FTA no longer 
defines a minimum fair share of revenue threshold for any type of joint 
development project. Two commenters indicated that this change will 
increase flexibility for project sponsors to pursue a greater range of 
affordable housing projects.
    The final Circular also no longer includes a definition of 
``incidental use'' in Section IV.3.e, as the term is already defined in 
Chapter I. To the extent practicable, FTA has removed redundant 
references to FTA Circulars and replaced them with direct references to 
the underlying statutes and regulations on which the text of the 
Circular is based.
    The distinction between joint development and public-private 
partnerships, as defined, was edited in Section II.1.c of the Circular 
for clarity and to conform with the definition of public-private 
partnership in 49 CFR 650.5.
    FTA also updated the Environmental Requirements in Section V.3 of 
the Circular for clarity and accuracy, and added a reference to the 
underlying statute for NEPA re-evaluations (23 CFR 771.129). The Civil 
Rights sections (Sections V.5.b and V.6) were updated for clarity and 
accuracy as well, and to accurately reflect the nondiscrimination 
prohibitions listed in 49 U.S.C. 53329(b).
    The final Circular incorporates technical corrections for 
conformity with existing law. For example, 49 U.S.C. 5302(3)(G)(i) 
requires that FTA-assisted joint development projects either enhance 
economic development or incorporate private investment. In Section 
III.3.a.2 of the proposed Circular, FTA reserved the right to decline 
joint development project funding or approval if the level of private 
investment was not meaningful to promote an economic benefit. FTA has 
determined that this language conflates the statutory text, and 
clarifies that per Sec.  5302(3)(G)(i), FTA requires a showing of 
either enhancing economic development or incorporating private 
investment--not both. Accordingly, FTA will no longer reserve the right 
to decline project funding or approval if the level of private 
investment is not meaningful to promote an economic benefit. Further, 
FTA clarified the use of the terms ``program income'' and ``period of 
performance'' when describing proceeds generated from joint development 
projects. ``Program income'' is defined as gross income ``generated by 
a supported activity or earned as a result of the Federal award during 
the period of performance.'' (2 CFR 200.80). ``Period of performance'' 
is defined as the duration of time designated within the initial grant. 
(2 CFR 200.77). FTA has determined that the term ``program income'' 
does not accurately describe proceeds derived from FTA-assisted joint 
development projects, as such projects often continue beyond the time 
designated within an initial grant. For clarity and accuracy, FTA has 
therefore revised the term ``program income'' to ``revenue'' in several 
places throughout the Circular.
    FTA has also updated the final Circular to ensure internal 
consistency. Although FTA declines to provide a minimum threshold for 
both the statutory ``fair share of revenue'' and ``fair share of 
costs'' requirements, the Circular provided an inconsistent level of 
discretion to the project sponsor for each requirement. As discussed in 
Section (A) above, with respect to ``fair share of revenue,'' the final 
Circular eliminates FTA's reservation of the right to decline joint 
development project funding or approval if the project does not 
generate revenue. For consistency, FTA has eliminated a similar 
restriction with respect to the ``fair share of costs'' requirement--
FTA will no longer reserve the right to decline joint development 
project funding or approval if a rental payment, or other means, is 
less than the actual cost to the project sponsor to operate and 
maintain the space in its facility. FTA made this change because this 
language unnecessarily inhibits a project sponsor's flexibility when 
making a ``fair share of costs'' determination and is inconsistent with 
the level of discretion that FTA provides with respect to the ``fair 
share of revenue'' requirement.
    FTA has also determined that the Circular provided inconsistent 
guidance on how a project sponsor should document compliance with 
certain statutory requirements. In response to comments regarding the 
``fair share of revenue'' determination, the final Circular 
incorporates a recommendation that the project sponsor should determine 
how to document its reasonable determination that the terms and 
conditions of the joint development improvement (including the share of 
revenue for public transportation that shall be provided thereunder) 
are reasonable and fair to the recipient. For consistency, the final 
Circular incorporates similar recommendations with respect to the Sec.  
5302(3)(G)(i) ``private investment'' and Sec.  5302(3)(G)(iv) ``fair 
share of costs'' determinations. Regarding ``private investment,'' the 
final Circular advises that a project sponsor should determine how to 
document its reasonable determination that the level of private 
investment is reasonable. Regarding ``fair share of costs,'' the final 
Circular advises that a project sponsor should determine how to 
document its reasonable determination that a rental payment, or other 
means, is reasonable and fair to the recipient. These changes ensure a 
consistent level of flexibility and discretion to the project sponsor 
when documenting its compliance with each of these statutory 
requirements.

III. Response to Comments Received

    Twelve parties submitted sixty-one comments in response to FTA's 
April

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18, 2019 notice of Proposed Changes to the Joint Development Circular. 
As outlined in Section II, comments addressed: (A) Fair Share of 
Revenue, (B) Submission and Review Process, and (C) Technical and 
Conforming Changes, including general comments on the circular outside 
the scope of the proposed updates.

A. Fair Share of Revenue

    In the Notice of Proposed Update to the Joint Development Circular, 
FTA invited comments on the proposal to no longer define a minimum 
revenue threshold. Section 5302(3)(G)(iii) of title 49, United States 
Code, requires FTA-assisted joint development projects to provide a 
``fair share of revenue that will be used for public transportation.'' 
Removing the minimum revenue threshold for the fair share of revenue 
requirement increases flexibility by allowing project sponsors to 
determine what constitutes a fair share of revenue in joint development 
projects. FTA will still require the project sponsor to report the 
expected amount of revenue it will receive, and its funding sources.
    FTA received fifteen comments on the fair share of revenue 
requirement, most of which supported no longer defining a fair share of 
revenue minimum threshold. One commenter suggested FTA clarify that the 
removal of a minimum threshold should not be interpreted as a fair 
market value requirement by default. One comment sought specific 
clarification of the documentation that would be required to 
demonstrate a fair share of revenue meeting FTA's expectations.
    Two commenters asked when to report on the expected revenue for a 
project, specifically: (1) Whether the amount of revenue should be 
reported as part of the joint development application or later in the 
joint development process, and (2) if a determination of revenue is 
required in the joint development submission, whether this still 
functionally creates a minimum threshold. Another commenter sought 
clarification on how the proposed changes would affect joint 
development projects that advance community service or publicly 
operated projects, or affordable housing.
    One commenter suggested FTA not retain the right to decline funding 
if a project does not generate revenue. Another commenter suggested FTA 
require the project sponsor's General Manager or Chief Executive 
Officer to certify that the terms and conditions of the joint 
development project are commercially reasonable and fair to the project 
sponsor.

FTA Response

    No longer defining a fair share of revenue minimum threshold is not 
new for FTA's joint development process. In 2007, FTA's guidance on 
joint development deferred to project sponsors and parties involved to 
determine what constitutes a fair share of revenue (72 FR 5788). The 
final updated Circular will no longer impose a fair share minimum 
threshold and defers to the project sponsors and parties involved to 
determine a fair share of revenue. In response to comments received, 
FTA has removed the provision reserving FTA's right to decline funding 
for joint development projects that do not generate revenue. FTA has 
declined to add clarification that the elimination of a minimum 
threshold should not be interpreted as a fair market value requirement 
by default, as this would be inconsistent with FTA's policy to not 
define ``fair share of revenue.'' In response to comments on reporting 
requirements for expected revenue, FTA will continue to require the 
project sponsor to report the fair share of revenue and the sources of 
funding in the joint development application submitted to FTA. In 
response to comments regarding the documentation of a fair share of 
revenue determination, FTA has added a recommendation that the project 
sponsor should determine how to document its reasonable determination 
that the terms and conditions of the joint development improvement 
(including the share of revenue for public transportation that shall be 
provided thereunder) are reasonable and fair to the recipient. FTA has 
adopted similar recommendations with respect to the statutory ``private 
investment'' and ``fair share of costs'' requirements.
    Since FTA will no longer define a fair share of revenue threshold, 
the proposed changes will now require all joint development projects to 
follow the same requirements regarding the fair share of revenue--
including community service projects, publicly operated projects, and 
affordable housing.
    In response to the suggestion that FTA require the project 
sponsor's General Manager or Chief Executive Officer (CEO) to certify 
that the terms and conditions of the joint development project are 
commercially reasonable and fair to the project sponsor, FTA has 
removed this requirement. It will be at the discretion of the project 
sponsor and parties involved if they want the General Manager or CEO to 
certify the joint development project.

B. Submission and Review Process

    FTA received seven comments on the proposed changes to the 
submission and review process. Most comments expressed support for the 
changes. Under the proposed changes, FTA will no longer require project 
sponsors to submit a baseline market analysis or certificate of 
compliance. One commenter noted that a baseline market study may 
continue to be useful in providing an expected amount for the fair 
share of revenue; another commenter suggested updating the Certificate 
of Compliance requirement rather than eliminating it.

FTA Response

    FTA agrees that a baseline market study may continue to be useful 
in providing an expected amount for the fair share of revenue. While a 
baseline market analysis is no longer required for submission, project 
sponsors are still encouraged to conduct baseline market analyses to 
better understand current market conditions and evaluate the viability 
of joint development projects.
    Eliminating the Certificate of Compliance requirement will 
streamline the review of FTA-assisted joint development projects by 
reducing the amount of paperwork that project sponsors must prepare and 
FTA must review. However, when requesting a formal FTA review of the 
proposed project, a project sponsor will still submit a completed Joint 
Development Project Request form and a proposed Joint Development 
Agreement, along with any supplemental documentation. FTA approval of a 
proposed joint development project will be contingent upon the project 
sponsor satisfying the eligibility criteria set forth in 49 U.S.C. 
5302(3)(G) and complying with the Uniform Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (Uniform Act), and the 
Uniform Administrative Requirements at 2 CFR parts 200 and 1201.
    Project sponsors are also encouraged to submit joint development 
project proposals for preliminary FTA review, prior to determining the 
terms and conditions to be agreed upon by all parties in the joint 
development project.

C. Notice of Update to Joint Development Circular Generally

    FTA received thirty-nine general comments, covering a wide range of 
topics, including: Real property, the period of performance as it 
pertains to program income, and FTA policy. Several commenters 
requested clarification on the requirements and terminology in the 
Circular. Comments

[[Page 49718]]

overall were receptive to the proposed changes.
    Nine comments--including eight from transit agencies--were written 
in direct support of the proposed changes to the Circular. Sixteen 
comments addressed concerns or asked questions about real property; 
specifically regarding disposition, incidental use, and federal 
requirements on FTA-funded real property. Three comments sought 
clarification of the term ``period of performance'' under which FTA 
requirements attach. Eleven comments offered suggestions for clarifying 
language in the Circular generally. One of these comments suggested 
that in Section III.3.a of the Circular, FTA should consolidate the 
``enhances economic development'' and ``incorporates private 
investment'' sub- elements into one element.

FTA Response

    FTA has included insights from several comments, and answered many 
of the questions received, in the final updates to the Circular. 
However, several comments addressed subjects outside the scope of the 
proposed changes. These comments were reviewed and will be useful in 
the development of FTA programs and guidance in the future.
    Regarding real property, any joint development project that 
includes FTA funding or FTA-assisted property is an FTA-assisted joint 
development project and must comply with the requirements and 
procedures set forth in Circular 7050.1B. FTA-assisted property 
includes land previously acquired with FTA funds.
    While joint development can be considered a form of transit-
oriented development, it is usually much smaller in scope and always 
uses FTA-assisted project property or a direct investment of FTA grant 
funds. FTA assistance may not be used in the construction of transit-
oriented development that is not eligible FTA-assisted joint 
development. However, FTA assistance may be used to plan transit-
oriented development that is not eligible FTA-assisted joint 
development, in conjunction with transit projects.
    Under the definition of program income, ``period of performance'' 
refers to the duration of time designated within the initial grant. In 
response to a comment requesting clarification regarding FTA's use of 
the terms ``program income'' and ``period of performance'' when 
describing proceeds generated from joint development projects, FTA has 
revised ``program income'' to ``revenue'' in several places throughout 
the Circular. Suggestions to apply separate federal requirements to 
joint development projects using real property are outside the scope of 
this update. Terminology in this Circular has been updated only as it 
relates to substantive changes in policy related to the ``fair share of 
revenue'' requirement and the submission and review process for FTA-
assisted joint development projects, as well as the technical and 
conforming changes discussed in Section (II.C) above.
    FTA disagrees that the ``enhances economic development'' and 
``incorporates private investment'' sub-elements should be consolidated 
in Section III.3.a of the Circular. Consolidating these two items would 
conflate the text of 49 U.S.C. 5302(3)(G)(i), which requires either 
economic enhancement or private investment--not both.

K. Jane Williams,
Deputy Administrator.
[FR Doc. 2020-17777 Filed 8-13-20; 8:45 am]
BILLING CODE 4910-57-P