Federal-Aid Highways: States Need Guidance on Sales or Leases of 
Real Property Purchased with Federal Funds (13-DEC-02,		 
GAO-03-207).							 
                                                                 
In 1998, the Transportation Equity Act for the 21st Century	 
(TEA-21), authorized the states to retain the federal share of	 
proceeds from the sale or lease of real property that had been	 
purchased with federal-aid funds. It also required the states to 
use the federal share on other highway projects eligible for	 
funding under the federal-aid highway program. GAO determined (1)
the extent to which states are selling, leasing, or disposing of 
real property purchased with federal-aid funds and (2) how the	 
proceeds generated from the sale or lease of real property are	 
being used, including whether they are being used in accordance  
with TEA-21. GAO issued a related legal opinion in September	 
2002.								 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-207 					        
    ACCNO:   A05720						        
  TITLE:     Federal-Aid Highways: States Need Guidance on Sales or   
Leases of Real Property Purchased with Federal Funds		 
     DATE:   12/13/2002 
  SUBJECT:   Federal aid for highways				 
	     Federal funds					 
	     Funds management					 
	     Real property					 
	     Central Artery/Tunnel Project (Boston,		 
	     MA)						 
                                                                 
	     Highway Trust Fund 				 

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GAO-03-207

                                       A

Report to the Ranking Minority Member, Committee on Commerce, Science, and
Transportation, U. S. Senate

December 2002 FEDERAL- AID HIGHWAYS States Need Guidance on Sales or
Leases of Real Property Purchased with Federal Funds

GAO- 03- 207

Letter 1 Results in Brief 2 Background 4 All States Report Selling,
Leasing, or Disposing of Real Property 5 States* Use of Proceeds Vary and
Sometimes May Not Comply with the Statutory Requirements on the Use of the
Proceeds 10

Conclusions 12 Recommendations for Executive Action 12 Agency Comments and
Our Evaluation 13

Appendixes

Appendix I: Objectives, Scope, and Methodology 15

Appendix II: GAO Legal Opinion 17

Appendix III: GAO Letter and Survey to State DOTs 24

Appendix IV: Survey Responses of State DOTs* Sales or Leases of Real
Property 27

Appendix V: Fiscal Year 1999 Proceeds Information 33

Appendix VI: Fiscal Year 2000 Proceeds Information 35 Tables Table 1:
State DOTs that Sold, Leased, or Disposed of Real Property Purchased with
Federal- Aid Funds, June 1998 - May 2002 27

Table 2: Number of Properties Originally Purchased with Federal- Aid Funds
for Which States Retained Proceeds Upon the Properties Sale or Lease, June
1998 * May 2002 29 Table 3: States* Total Proceeds from the Sale, Lease,
or Disposal of

Real Property Purchased with Federal- Aid Funds, June 1998 * May 2002 31
Table 4: Comparisons of States* Property Proceeds with States* Total
Receipts, Fiscal Year 1999 33

Table 5: Comparisons of States* Property Proceeds with States* Total
Receipts, Fiscal Year 2000 35 Figures Figure 1: Comparison of State
Proceeds from Property Sales and

Leases with State Highway Receipts, Including Federal Aid, in 1999* Top
Five Ratios 8

Figure 2: Comparison of State Proceeds from Property Sales and Leases with
State Highway Receipts, Including Federal Aid, in 2000* Top Five Ratios 9

Abbreviations

DOT Department of Transportation FHWA Federal Highway Administration TEA-
21 Transportation Equity Act for the 21 st Century

Lett er

December 13, 2002 The Honorable John McCain Ranking Minority Member
Committee on Commerce, Science, and Transportation United States Senate

Dear Senator McCain: The Federal Highway Administration (FHWA), within the
U. S. Department of Transportation (DOT), is responsible for the federal-
aid highway program. This program distributes billions of dollars in
federal highway

funds to the states. FHWA provides federal assistance to the states from
the Highway Trust Fund for several purposes, including the construction
and maintenance of highways and related activities. Federal- aid highway
projects are typically funded with an 80 percent federal contribution. The
nonfederal share of the cost (typically 20 percent) must come from state,
local, and/ or private funds and is commonly referred to as a match. One
of the related activities eligible for federal aid involves the cost of
acquiring

necessary real property for a highway project. When such property is no
longer needed, it can be sold or disposed of by the state. Similarly, land
retained by states can be leased to others. The 1998 Transportation Equity
Act for the 21 st Century (TEA- 21), which authorized DOT highway and
transit programs from 1998 through 2003, provided the states greater

flexibility in connection with selling and leasing real property
associated with federal- aid transportation projects. TEA- 21 authorized
the states to retain the federal share of net proceeds from the sale or
lease of real property and to apply the federal share to other projects
eligible for funding under title 23, U. S. C., herein known as federal-
aid highway and related programs. 1 FHWA has interpreted the statutory
provisions governing the federal share

of proceeds from the sale or lease of real property as permitting the
states to use the federal share of the net proceeds without having to
follow the rules and regulations associated with a federal- aid project.
FHWA believes that the federal government*s interest in such funds is
satisfied as long as the proceeds are used for projects eligible for
funding under federal- aid highway and related programs. FHWA has informed
the states that they 1 Such projects may include certain highway, transit,
bicycle or pedestrian or other transportation- related projects covered
under title 23.

may treat the proceeds from such transactions as state funds that are not
subject to restrictions that would apply if the funds were treated as
federal highway funds. In a recent legal opinion, we disagreed with FHWA*s
interpretation (see app. II).

As the authorized period under TEA- 21 draws to a close in 2003, Congress
will need to make decisions about reauthorizing the surface transportation
programs, including requirements related to selling, leasing, and
disposing of real property. As agreed with your staff, this report
discusses (1) the extent to which states are selling, leasing, or
disposing of real property

purchased with federal- aid funds and (2) how the proceeds generated from
the sale or lease of real property are being used, including whether they
are being used in accordance with TEA- 21.

To determine the extent to which states are selling, leasing, or disposing
of real property purchased with federal- aid highway funds, we obtained
information from FHWA officials and surveyed 51 state DOTs, including the
District of Columbia. We then compared fiscal years 1999 and 2000 total

proceeds reported by each state from the sale or lease of real property
with the states* total highway receipts reported by DOT. We obtained
information from state DOTs about how they use the proceeds generated from
the sale or lease of real property and about any restrictions they placed
on the proceeds, and we compared these responses with our legal opinion.
We also obtained information from officials of the DOT Inspector General*s
office regarding their review of Massachusetts* Central Artery

Project that had initially raised concerns about FHWA*s interpretation of
TEA- 21 changes related to sales and leases of real property. We conducted
our review from June 2002 through December 2002 in accordance with
generally accepted government audit standards.

Results in Brief All of the 51 state DOTs that we surveyed, including the
District of Columbia, reported selling, leasing, or disposing of real
property such as unused land purchased with federal- aid funds. From June
1998 through May 2002, 37 states sold, leased, or disposed of at least 5,
636 properties that generated about $148 million (2001 dollars) in
proceeds for the states. However, states varied as to whether they tracked
and reported this information to DOT. For example, eight states did not
distinguish sold,

leased, or disposed of properties originally acquired with federal funds
from those properties that were acquired without federal funds and/ or did
not identify the amount of proceeds generated. States also varied in their
policies for retaining the proceeds they receive from the sale or lease of

real property. Out of the 51 states surveyed, 3 states reported that they
returned the federal share of the proceeds by crediting an existing
federalaid project within their states. The proceeds generated from the
sale or lease of real property do not currently appear to be a major
source of revenue for states* transportation programs. On the basis of our
comparison of proceeds the states reported they generated from the sale,

lease, or disposal of real property with the states* overall revenues
available for highway projects, we found that the ratios were less than 1
percent in 1999 and in 2000. Nevertheless, state DOT officials view the
current regulations that allow them to retain the federal share of the
proceeds as positive because they provide the states greater flexibility
for financing their transportation programs.

States reported using the proceeds generated from the sale or lease of
real property in several ways; and at least two states may have used the
proceeds in ways that do not comply with specific statutory requirements
to only use the proceeds on projects eligible for funding under federal-
aid

highway and related programs. This use of the proceeds conflicts with
FHWA*s interpretation of the statute. For the states we surveyed and
visited, 47 states use the proceeds generated from the sale or lease of
real property to fund other state transportation projects eligible for
federal aid, and at least four states use the proceeds as their match for
projects receiving federal contributions. In our legal opinion, we
concluded that Congress did not intend for states to use such proceeds as
their match. Under FHWA*s interpretation of the statute, however, states
would be allowed to use the federal share as the state*s match. For the 51
states we surveyed, the restrictions on the use of the proceeds varied.
Forty- two states reported that they deposit the proceeds in accounts used
for road projects, and 47 states reported that they restrict the use of
these proceeds to projects eligible for federal aid. However, at least two
states did not have similar restrictions; and in these cases, the proceeds
of property sales could be used for projects that are not eligible for
funding under federal- aid

highway and related programs, contrary to the specific requirements of the
statute and FHWA*s interpretation. FHWA officials told us, that at
meetings with state officials, they told the states that *as a practical
matter* they should take steps to demonstrate that the federal share of
proceeds from

property sales are being allocated to projects eligible for federal aid.
FHWA officials were not aware of the potential noncompliance that we
identified but said they may issue guidance on tracking the use of
proceeds from property sales in 2003.

We are making recommendations to (1) clarify how FHWA plans to comply with
our legal opinion about the eligible uses of these funds and (2) improve
the agency*s guidance for complying with TEA- 21 language regarding
property sales and leases. DOT officials commented on a draft of this
report and generally agreed with the facts regarding states* sales and
leases of property originally purchased with federal funds. Because DOT is
still considering how to

respond to GAO*s legal opinion, the officials did not comment on the first
recommendation and said that DOT would consider our second recommendation
when the review of GAO*s legal opinion is completed.

Background In our recent legal opinion, we reviewed the statutory
provisions governing the disposition of the proceeds from the sale or
lease of real property acquired with federal highway grant funds and
FHWA*s interpretation of

that provision. FHWA issued regulations in 1999 implementing real property
management policies in conjunction with the federal- aid highway program,
which we reviewed. We disagreed with FHWA*s interpretation of the law. We
concluded that Congress did not intend for states to convert federal money
to state money by buying and selling property and/ or use the

federal share of recaptured funds to reduce or avoid their obligation to
provide matching funds. DOT*s Inspector General raised similar concerns
about FHWA*s interpretation of the federal law governing the proceeds from
the sale or lease of real property in its report 2 regarding the finance
plan for the Central Artery Tunnel Project 3 in Massachusetts. In its
report, the DOT Inspector General questioned whether the proceeds derived
from the sale of excess properties purchased with federal- aid highway
funds should be

counted against the $8.549 billion cap imposed by Congress on federal 2
October 2001 Finance Plan for the Central Artery/ Tunnel Project, Federal
Highway Administration, DOT Inspector General (March 11, 2002). 3 The
Central Artery Tunnel Project is the largest federally funded public works
project in recent history, involving the reconstruction of Interstate 93
(the Central Artery) and the extension of Interstate 90 (the Ted Williams
Tunnel). Interstate 93 reconstruction includes a new eight- lane highway
beneath the existing elevated Central Artery through downtown Boston.
Interstate 90 extension involves placement of a four- lane immersed tube
tunnel beneath Boston Harbor. The Central Artery Tunnel Project is
approximately 7. 5 miles long and includes approximately 160 lane- miles
of new and reconstructed highway.

contributions to the Central Artery Tunnel Project. 4 Further, the DOT
Inspector General found that Massachusetts intended to sell land,
originally purchased with federal aid, on which it had temporarily located
its project headquarters, reinvesting the money in the project as *state

funds.* The sale of the project headquarters is expected to generate about
$100 million. All States Report

All 51 of the state DOTs we surveyed, including the District of Columbia,
Selling, Leasing, or

reported selling, leasing, or disposing of real property purchased with
federal- aid funds (see app. IV for responses from state DOTs). We found
Disposing of Real that from June 1998 through May 2002, 37 states reported
they sold, leased, Property

or disposed of at least 5,636 properties that generated about $148 million
(2001 dollars) 5 in revenue for the states. We excluded eight states 6
from our calculations of the total number of properties sold, leased, or
disposed of

because these states either did not distinguish sold, leased, or disposed
of properties originally acquired with federal funds from those properties
that were acquired without federal funds and/ or identify the amount of
proceeds generated. We excluded another six states from our calculations
for various reasons. 7 In all, we excluded 14 states from our calculations
because of these variances. For example, California has an agreement with
4 Our legal opinion did not address whether Massachusetts* actions would
cause the cap on federal contributions to be exceeded (see app. II).

5 We converted nominal dollars into constant 2001 dollars; we used price
indexes for gross domestic product based on federal fiscal years that were
constructed from data from the U. S. Department of Commerce*s Bureau of
Economic Analysis. 6 California, Illinois, Kansas, Louisiana, Maryland,
Nevada, Oklahoma, and Wisconsin were excluded from our calculations.
California, Illinois, Louisiana, Maryland, Nevada, and Wisconsin could not
distinguish sold, leased, or disposed of properties originally acquired
with federal funds or identify the amount of proceeds generated. State
officials in Kansas and Oklahoma could not distinguish sold, leased, or
disposed of properties originally acquired with federal funds but were
able to provide the amount of proceeds generated

from sales or leases. 7 The District of Columbia, Florida, Minnesota, New
Hampshire, Texas, and Virginia were excluded from our calculations. The
District of Columbia officials reported they disposed of excess property
by transferring one property to the National Park Service. This transfer
did not generate proceeds. Florida, Minnesota, and Virginia officials
reported that they could *sometimes* identify properties originally
acquired with federal funds. New Hampshire only provided averages. Texas
officials identified the number of properties originally acquired with
federal funds and the amount of proceeds, but they return the federal
share by crediting an ongoing federal- aid project within the state.

FHWA that recognizes that the amount of revenue generated from the sales
or leases of land purchased with federal- aid funds is substantially less
than the state*s expenditures on highways; therefore, the state is not
required to track and report the proceeds from the sales. Also, Louisiana
state officials reported that they do not track and report federal dollars
because their real

estate property management database is not designed to distinguish sales
of property acquired with federal- aid funds. Nevertheless, these states
reported that they sold, leased, or disposed of some real properties
originally purchased with federal funds.

States also vary in their policies for retaining the net proceeds they
receive from the sale or lease of real property because they have
different views of the federal requirements. Most states that we surveyed
deposit the proceeds into state transportation accounts to be used at a
later date. However, three states reported that they do not follow that
procedure but credit an existing federal- aid project within the state.
For example,

Maryland DOT officials told us that they credit an ongoing federal- aid
project within their state. In their opinion, retaining the federal share
would require the state to establish special tracking accounts to trace
each dollar of revenue from affected property sales or leases from its
receipt to its expenditure on a specific eligible federal- aid project
which would not be cost effective. The cost to establish these accounts
would exceed its current annual state revenue from these properties.
Nevada and Texas DOTs also credit existing federal- aid projects within
their states because, in their view, it is more efficient not to track the
federal share of the proceeds.

FHWA officials told us that, in their view, when states credit the federal
share of the net proceeds to an existing federal- aid project, they lose
the opportunity provided by TEA- 21 to use the proceeds for other state
highway projects.

For states that retain the federal share of the net proceeds, five state
officials 8 that we contacted said they view the current regulations that
allow them to retain the federal share of the proceeds generated from the
sale or lease of real property as positive because it gives the states
greater flexibility to sell or lease real property to support the states*
transportation programs. For example, officials in California and Virginia
told us that selling or leasing surplus property and retaining the
proceeds provide

additional funds to complete more state highway projects. State DOTs and
FHWA officials in Illinois, Virginia, and California also told us that the
8 California, Georgia, Illinois, Texas, and Virginia.

current regulations eliminate the administrative burden of tracking and
returning the federal share of the funds to the federal government.

Proceeds from Property The proceeds generated from the state DOTs* sales
or leases of real Sales and Leases Are Not a

property do not currently appear to be a major source of revenue for the
Major Source of Revenue

states* transportation programs. We compared the proceeds generated, as
reported to us in our survey, with the states* revenues 9 available for
highway projects. The ratio between the proceeds generated by the states
and the states* receipts represented less than 1 percent of the states*
revenues in 1999 and 2000 10 (see apps. V and VI). Figures 1 and 2 show
the states with the highest ratio between the proceeds from property sales
or leases with the states* revenues for 1999 and 2000, respectively. We
calculated that in 1999, the total ratio of the federal share of proceeds
from

property sales and leases in comparison with the state revenues was 0.075
percent. Of the 35 states for which we calculated ratios, 8 states had
ratios that were greater than or equal to 0. 1 percent, and 27 states had
ratios that were less than 0. 1 percent. 9 State receipts (or *revenues*)
include highway- user revenue and all other receipts that are expended for
highway purposes, regardless of source, including state highway user tax
revenues, road and crossing tolls, general funds, miscellaneous income,
bond proceeds, and

payments from federal and local government. 10 Information on state
highway receipts for 2001 and 2002 are not available; therefore, states*
proceeds for fiscal years 2001 and 2002 were not compared with state
highway

receipts. We did not use the data obtained from states for 1998 and 2002
because the data from these years does not reflect the entire calendar
year.

Figure 1: Comparison of State Proceeds from Property Sales and Leases with
State Highway Receipts, Including Federal Aid, in 1999* Top Five Ratios

12 Dollars in millions

0.452% 10

8 6

0.279% 0.262%

4 2

0.440% 0.489%

0 Rhode Island

Michigan Idaho

Missouri Georgia

State proceeds Source: Developed by GAO from data provided by State DOTs
and FHWA.

We calculated that in 2000, the total ratio of the federal share of
proceeds from property sales and leases in comparison with the state
revenues was 0.069 percent. Of the 35 states for which we calculated
ratios, 10 states had ratios that were greater than or equal to 0.1
percent, and 25 states had ratios that were less than 0.1 percent.

Figure 2: Comparison of State Proceeds from Property Sales and Leases with
State Highway Receipts, Including Federal Aid, in 2000* Top Five Ratios

7 Dollars in millions

0.337% 6

5 4 3

0.203% 2

0.628% 0.217% 1

0.258% 0

Rhode Island Georgia

Hawaii Idaho

Oregon State proceeds

Source: Developed by GAO from data provided by State DOTs and FHWA.

We noted no particular trend in the amount of proceeds from these types of
property sales or leases over the period of our survey. Therefore, it is
possible that the proceeds from property sales or leases could increase or

decrease in the future. One likely sale of property in the near future by
the Massachusetts Highway Department would have a large effect on the
total proceeds from the sale or lease of properties purchased using
federal highway aid in that state. The Department used federal aid to
purchase a

substantial amount of property for rights- of- way associated with the
Central Artery Tunnel Project. Sale or lease of property associated with
this project has already generated nearly $9 million in revenue for the
state

during the period of our survey (see app. IV for state responses). In
addition, the state plans to sell the project*s headquarters building. The
federal government contributed 90 percent of the original cost to acquire

the building, and federal officials estimate that the sale of the building
will generate about $100 million for the state*s transportation program.
In 2000, Massachusetts received about $490 million in federal highway aid.

States* Use of Proceeds States reported using the proceeds generated from
the sale or lease of real

Vary and Sometimes property in different ways; and their survey responses
indicated that some

uses of the proceeds may not comply with specific statutory requirements
May Not Comply with of only using the proceeds on projects eligible for
funding under federal- aid

the Statutory highway and related programs. This use of the proceeds
conflicts with Requirements on the

FHWA*s interpretation of the statute. For the 51 states we surveyed, 42
states reported that they deposited the proceeds from sales of property
Use of the Proceeds originally purchased with federal funds in accounts
established to fund state highway projects. Officials from 47 state DOTs
reported using the proceeds to fund other state transportation projects
eligible for federal aid,

and at least four states use the proceeds as their match for projects
receiving federal contributions. For example, state DOT officials in
Illinois, Louisiana, Nebraska, and North Carolina told us, in our visits
or through their survey responses, that they use the proceeds generated
from the sale or lease of property for matching purposes. Our legal
opinion concluded

that the states could not use the proceeds to match contributions, stating
that the intent of Congress was not to allow states to *use the proceeds
of such transactions to reduce or avoid their matching fund obligations.*
FHWA has interpreted the statute as allowing for such use. In eight
states,

we could not determine from the survey responses how the states were using
the proceeds because they do not (1) track property purchased with
federal- aid funds separately from other property or (2) separate federal
and state proceeds generated from the sale and lease of real property. In
these cases, the federal share is commingled with state funds and cannot
be accounted for separately.

TEA- 21 stated that proceeds must be used for projects eligible for
federal aid; and, according to their survey responses, most states have
placed such restrictions on the accounts into which the proceeds were
placed. FHWA officials said that, in their view, states would be in
compliance with TEA- 21 if they placed proceeds in accounts restricted for
use on projects eligible for funding under federal- aid highway and
related programs. However, officials in two states told us that their
accounts do not have this type of restriction. Therefore, in at least two
cases, it is possible that states have

used the proceeds on projects that are not eligible for federal aid. For
example, a state DOT official in Indiana 11 told us that the state uses
the proceeds to fund state highway projects but does not track whether
these projects are eligible federal- aid projects. New Mexico DOT
officials 12 reported that the proceeds are not restricted to funding
eligible federal- aid

projects; therefore, the funds could be used for other transportation
projects not eligible for federal aid.

FHWA May Issue Additional FHWA officials said that they may issue
additional guidance in 2003 to Guidance on the Federal clarify how states
should implement the TEA- 21 language regarding Share of Property Sales
and property sales and FHWA*s subsequent regulations. They acknowledged

Leases that they were not aware of (1) the possibility that states were
not

complying with the explicit statutory requirements that the federal share
of proceeds from property sales or leases be used only on projects
eligible for funding under federal- aid highway and related programs and
(2) the amount of variation in how states tracked these types of property
transactions and the federal share of the proceeds. They also said that
FHWA has issued some guidance 13 to the states regarding the proceeds
generated from the disposal of properties purchased with federal aid. For

example, in meetings with state officials, FHWA officials explained that
as a practical matter states should have an accounting system in place
that documents (1) the amount of the federal share of the proceeds
deposited in the state transportation fund during the fiscal year and (2)
the amount of the federal share of net proceeds expended on eligible
federal- aid projects during the fiscal year. However, they also noted
that TEA- 21 does not require states to track and report the federal
share. FHWA officials told us they are considering additional guidance to
help ensure that states are using the federal share of these proceeds only
on projects eligible for

11 A DOT official in Indiana reported that the state sold 74 properties
that generated $15,724 in 1998; $76, 993 in 1999; $94,867 in 2000; $91,
282 in 2001; and $56, 497 in 2002. 12 DOT officials in New Mexico reported
that the state sold 58 properties that generated $50,739 in 1998; $106,
440 in 1999; $64, 770 in 2000; $212, 327 in 2001; and $77, 161 in 2002. 13
Questions and answers for the regulation at 23 Code of Federal Regulation,
part 710 available on FHWA*s Web site; FHWA Right of Way Program
Administration booklet; and FHWA Project Development Guide, chapter 12.

funding under federal- aid highway and related programs. 14 As of October
2002, FHWA had not decided on the details of what material to include in
the guidance or when to issue it. FHWA officials told us it is likely to
focus

on how states can demonstrate that they are ensuring that the applicable
federal share of proceeds from property sales or leases is being allocated
to eligible federal- aid projects. Conclusions Most states have taken
advantage of the greater flexibility for managing

and disposing of real property provided under TEA- 21 because it
streamlines the process for their highway programs. However, in accordance
with our recent legal opinion, those states that used the proceeds from
these property sales or leases to match federal- aid highway projects were
not complying with the statute governing the sale or lease of real
property. In addition, two states did not restrict the use of the proceeds
to projects eligible for funding under federal- aid highway and related

programs, as explicitly required by the statute. FHWA has an excellent
opportunity to clarify its interpretation of TEA- 21; and, after
considering all relevant factors, provide additional guidance to states
regarding how they should cost- effectively treat the proceeds from sales
or leases of property originally purchased with federal aid.
Recommendations for

To help ensure that states act in accordance with TEA- 21 in disposing of
Executive Action

real property originally purchased with federal aid, we are recommending
that the Secretary of Transportation direct the FHWA Administrator to

 develop and report on a strategy regarding how FHWA plans to comply with
GAO*s legal opinion concerning the statute governing the sale or lease of
real property; and

 provide additional guidance to the state DOTs that will help ensure that
states use the proceeds of property sales or leases as required by TEA21,
including the types of documentation or tracking that would be cost
effective and appropriate to demonstrate compliance. 14 FHWA officials
also agreed that their lack of knowledge about state practices might be
due to the low priority placed on oversight of property management and
disposal of real property.

Agency Comments and We obtained comments on a draft of this report from
DOT officials,

Our Evaluation including the FHWA Director of the Office of Program
Administration and

the Division Administrator, FHWA Massachusetts Division Office. They
agreed with the facts presented in the draft report regarding states*
sale, lease, and disposal of real property originally purchased with
federal funds and with the states* use of the proceeds. The DOT*s General
Counsel is considering GAO*s legal opinion on how the federal share of the
proceeds

should be used, so the officials did not comment on those sections of the
draft report. For the same reason, the officials did not comment on our
recommendation that the DOT develop and report on a strategy regarding how
it plans to comply with GAO*s legal opinion. The FHWA commented

that the report should recognize first, that FHWA*s interpretation of the
relevant provisions of TEA- 21 was based on a regulation issued in 1999
and secondly, that FHWA has provided extensive guidance on the
implementation of these provisions. We made several changes to the report
based on these comments. However, we continue to believe that the
potential noncompliance with TEA- 21 we observed in two states, which

FHWA acknowledges conflicts with its interpretation of the statute, and
the varying practices we observed in other states suggest the need for
clarifying existing guidance or issuing additional guidance, as indicated
in our recommendations. Regarding the recommendation to issue additional
guidance to help ensure that states use the proceeds from the sale or
lease of real property originally purchased with federal funds as required
by TEA- 21, FHWA officials said they would consider providing additional

guidance pending the outcome of the Department*s review of GAO*s legal
opinion. The FHWA officials also provided technical comments, which we
have incorporated into this report as appropriate.

As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this letter. At that time, we will send copies of this
report to the cognizant congressional committees, the Secretary of
Transportation, and

the Administrator, Federal Highway Administration. In addition, this
report will also be available on GAO*s Web site for no charge at http://
www. gao. gov.

If you or your staff have any questions about this report, please call me
at (202) 512- 2834. Key contributors to this report were Sally Gilley,
Octavia Parks, and Jobenia Odum. Sincerely yours,

Katherine Siggerud Acting Director, Physical Infrastructure Team

Appendi Appendi xes x I

Objectives, Scope, and Methodology The Committee on Commerce, Science, and
Transportation requested that we determine (1) the extent to which states
are selling, leasing, or disposing of real property purchased with
federal- aid funds and (2) how the proceeds generated from the sale or
lease of real property are being used in accordance with the intent of
TEA- 21. We drew from our legal opinion regarding FHWA*s interpretation of
the federal law governing the sale or lease of real property.

To determine the extent to which the states are selling, leasing, or
disposing of real property purchased with federal- aid funds, we obtained
information from FHWA officials and surveyed 51 state DOTs, including the
District of Columbia, to identify the number of properties and value of
real properties that were sold, leased, or otherwise disposed of from June
1998 to May 2002. Before we submitted the survey to the 51 state DOTs, we

obtained input from FHWA officials in developing our survey because they
recently attempted to collect the same type of information from the state
DOTs. We pretested the survey with Georgia DOT. We obtained and analyzed
responses from all 51 states, including the District of Columbia, and
conducted follow- up interviews as necessary. We compared each state*s
1999 and 2000 total proceeds generated from the sale or lease of real
property with the states* total receipts obtained for highway projects
reported by DOT. We did not independently verify the data provided by the
state DOTs or assess the reliability of the data reported by DOT. We
obtained preliminary data regarding real property sales and leases from

FHWA and selected five states (California, Georgia, Illinois, Texas, and
Virginia), based primarily on* among other reasons* high property sales
and leases and how these states* were dispersed throughout the United
States. We selected California and Texas because they had the highest
income from property sales; Illinois was selected because of its
geographic

location, and it was one of the states that had a high number of property
sales and income. Georgia was selected because FHWA*s preliminary data of
states property sales indicated that Georgia had not taken advantage of

the provisions of title 23, section 156 of U. S. C. Finally, Virginia was
selected because FHWA*s preliminary data indicated total income from
property sales or leases, but the number of properties was not reported.
We interviewed state and federal officials at these states, regarding
their opinions about the benefits of the current regulations relative to
the states* transportation programs among other reasons.

To determine how the proceeds generated from the sale or lease of real
property are used, we contacted states DOT officials responsible for the
right- of- way programs and obtained information regarding (1) how they
use proceeds generated from the sale or lease of real property, (2) any
restrictions on the use of the proceeds, and (3) the states* sources for
matching federal contributions. We also obtained and reviewed state
rightof- way disposal procedures and other documentation related to the
sale or lease of real property. We obtained and reviewed documentation
regarding FHWA*s division office and headquarters oversight roles related
to the sale

or lease of real property. We also interviewed officials of the U. S. DOT
Inspector General*s office and reviewed documentation regarding their
review of the Massachusetts* Central Artery Tunnel Project that had
initially raised concerns about FHWA*s interpretation of TEA- 21 changes
related to sales and leases of real property.

Appendi x II GAO Legal Opinion

Appendi x II I GAO Letter and Survey to State DOTs

Survey Responses of State DOTs* Sales or

Appendi x V I Leases of Real Property Table 1: State DOTs that Sold,
Leased, or Disposed of Real Property Purchased with Federal- Aid Funds,
June 1998 - May 2002 Are you able to identify properties that were Has
your state sold, leased, or disposed of property State sold, leased, or
disposed? a purchased with federal- aid funds? b Yes No c Sometimes d Yes
No Sometimes

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland e

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada e

(Continued From Previous Page)

Are you able to identify properties that were Has your state sold, leased,
or disposed of property State sold, leased, or disposed? a purchased with
federal- aid funds? b Yes No c Sometimes d Yes No Sometimes

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvani a

Rhode Island

South Carolina

South Dakota

Tennessee

Tex as e

Utah

Ver mont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

a Column totals: *Yes* (40), *No* (8), *Sometimes* (3). b Column totals:
*Yes* (51), *No* (0), *Sometimes* (0). c *No** State officials could not
readily distinguish properties originally acquired with federal funds. d
*Sometimes* * State officials could sometimes distinguish properties
originally acquired with federal

funds. e State officials reported federal funds are returned by crediting
an ongoing federal- aid project.

Source: Developed by GAO from data provided by State DOTs.

Table 2: Number of Properties Originally Purchased with Federal- Aid Funds
for Which States Retained Proceeds Upon the Properties Sale or Lease, June
1998 * May 2002

FY 1998 FY 2002

State (Partial) a FY 1999 a FY 2000 a FY 2001 a (Partial) a Total

Alabama 79 63 119 67 40 368

Alaska 2 3 3 1 1 10

Arizona 29 23 24 34 28 138

Arkansas 35 13 11 9 3 71

California State officials could not readily distinguish properties
originally acquired with federal funds. Colorado 22 35 41 54 56 208

Connecticut 2 3 2 7 6 20

Delaware N/ R N/ R N/ R N/ R 1 1

District of Columbia State officials reported one transfer of jurisdiction
from Washington, D. C. to National Park Service. Florida b 3 111290Not
calculated

Georgia 48 112 107 61 0 328

Hawaii N/ R 44 51 55 57 207

Idaho N/ R 67 77 70 50 264

Illinois State officials could not readily distinguish properties
originally acquired with federal funds. Indiana 12 22 17 12 11 74

Iowa 9 68 58 65 50 250

Kansas State officials could not readily distinguish properties originally
acquired with federal funds. Kentucky N/ R 39 41 33 41 154

Louisiana State officials could not readily distinguish properties
originally acquired with federal funds Maine 7 11 11 6 6 41

Maryland State officials could not readily distinguish properties
originally acquired with federal funds. Also, state officials reported
federal funds are returned by crediting an ongoing federal- aid project.

Massachusetts 21 4 10 20 N/ R 55

Michigan 50 65 25 28 9 177

Minnesota b 6 6453Not calculated

Mississippi N/ R 12 9 5 13 39

Missouri 9 13 13 14 12 61

Montana N/ R 12 16 17 18 63

Nebraska N/ R 10 21 8 10 49

Nevada State officials could not readily distinguish properties originally
acquired with federal funds. Also, state officials reported federal funds
are returned by crediting an ongoing federal- aid project.

New Hampshire State officials only reported averages. New Jersey 0 7 10 7
7 31

New Mexico 0 2 0 2 54 58

(Continued From Previous Page)

FY 1998 FY 2002

State (Partial) a FY 1999 a FY 2000 a FY 2001 a (Partial) a Total

New York N/ R 5 8 2 6 21

North Carolina 6 14 11 10 1 42

North Dakota 2 4 2 2 0 10

Ohio N/ R 112 137 98 206 553

Oklahoma State officials could not readily distinguish properties
originally acquired with federal funds. Oregon 51 69 57 62 53 292

Pennsylvani a 7 17 21 18 7 70

Rhode Island N/ R 124 123 117 90 454

South Carolina 3 5 7 18 13 46

South Dakota N/ R N/ R 2 N/ R 1 3

Tennessee 13 25 27 27 16 108

Texas State officials reported the number of properties purchased with
federal aid funds but also reported federal funds are returned by
crediting an ongoing federal- aid project; therefore, we excluded these
numbers from our total.

Utah 5 6 12 5 0 28

Ver mont 1 4 6 2 5 18

Virginia b N/ R N/ R N/ R 21 9 Not calculated

Washington N/ R 308 310 321 302 1, 241

West Virginia 15 15 0 48 12 75

Wisconsin State officials could not readily distinguish properties
originally acquired with federal funds. Wyoming 1 2 4 2 N/ R 9 Tot al 429
1, 338 1, 393 1,307 1,184 5, 636

Notes: We obtained information from June 1998 to May 2002. We grouped the
total properties sold and leased for each state. N/ R indicates Not
Reported.

a We recognize that some states have different starting and ending months
for their fiscal years than the federal government. We believe that any
discrepancy due to these differences would be minimal. Information we
obtained for 1998 begins with the month of June, and 2002 ends with the
month of May.

b State officials from Florida, Minnesota, and Virginia reported they were
able to *sometimes* identify those properties that were sold, leased, or
otherwise disposed of that were originally acquired with federal funds.
This may indicate that these numbers are estimates; therefore, we excluded
these numbers from our total. Source: Developed by GAO from data provided
by State DOTs.

Tabl e 3: St at es* Total Proceeds from the Sale, Lease, or Disposal of
Real Property Purchased with Federal- Aid Funds, June 1998

* May 2002 FY 1998

FY 2002 State (Partial) a FY 1999 a FY 2000 a FY 2001 a (Partial) a

Alabama $604, 235 $260,577 $542,178 $438, 473 $89, 458 Alaska 154, 848
199,241 79, 892 51, 159 19, 769 Arizona 479, 301 198,883 1,317,343 7,005,
086 507, 228 Arkansas 54, 057 76, 896 38, 441 12, 791 18, 542 California
State officials could not readily distinguish properties originally
acquired with federal funds. Colorado d 1,099, 475 1, 290,467 1,295,209
2,477, 512 Estimate

Connecticut 23, 572 1, 068,000 52, 201 796, 363 697, 101 Delaware N/ R N/
R N/ R N/ R 129, 000 District of Columbia State officials reported the
transfer of one jurisdiction from Washington, DC to National Park Service
in which no proceeds were generated.

Florida b N/ R 404,671 233,605 1,030, 495 1, 842, 686 Georgia 3, 320, 000
4, 642,572 6,237,800 5,135, 129 N/ R Hawaii 528, 331 584,484 621,684 680,
584 N/ R Idaho N/ R 2, 083,429 1,095,484 512, 961 192, 148 Illinois State
officials could not readily distinguish properties originally acquired
with federal funds. Indiana 15, 724 76, 993 94, 867 91, 282 56, 497

Iowa 225 748,649 29, 553 105, 504 17, 061 Kansas c N/ R 267,705 907,980
245, 408 868, 701 Kentucky N/ R 655,025 885,958 259, 990 258, 610
Louisiana State officials could not readily distinguish properties
originally acquired with federal funds. Maine 63, 300 18, 000 82, 000 40,
750 26, 360 Maryland State officials could not readily distinguish
properties originally acquired with federal funds. Also, state

officials reported federal funds are returned by crediting an ongoing
federal- aid project. Massachusetts d 2,109, 218 990,610 4,387,582 5,312,
053 Estimate Michigan 2,508, 481 11, 539, 450 5,476,251 5,686, 225 2, 624,
650 Minnesota b 389, 765 775,252 163,571 170, 299 285, 571 Mississippi N/
R 584,791 58, 765 48, 325 423, 825 Missouri 101, 356 4, 436,584 73, 000
77, 768 334, 895 Montana N/ R 449,958 693,346 677, 102 816, 429 Nebraska
59, 121 245,342 1,065,344 454, 414 113, 184 Nevada State officials could
not readily distinguish properties originally acquired with federal funds.
Also, state

officials reported federal funds are returned by crediting an ongoing
federal- aid project. New Hampshire State officials only reported
averages. New Jersey 0 1, 027,612 4,203,700 525, 906 121, 000 New Mexico
50, 739 106,440 64, 770 212, 327 77, 161

(Continued From Previous Page)

FY 1998 FY 2002

State (Partial) a FY 1999 a FY 2000 a FY 2001 a (Partial) a

New York N/ R 698,625 585,955 651, 675 442, 869 North Carolina 129, 875
603,590 339,184 255, 530 18, 400 North Dakota 251, 000 168,794 2,901 9,
510 0 Ohio N/ R 121,281 133,792 179, 126 1, 189, 711 Oklahoma c 39, 742
221,282 384,379 233, 696 68, 647 Oregon 314, 105 1, 780,532 2,077,468
1,710, 214 594, 769 Pennsylvania 114, 000 2, 162,256 2,598,190 701, 000 1,
137, 789 Rhode Island N/ R 1, 566,057 1,679,374 2,830, 303 994, 526 South
Carolina 31, 639 83, 147 204,363 1,981, 969 332, 142 South Dakota N/ R N/
R 11, 060 N/ R 66, 920 Tennessee 111, 218 448,709 336,580 303, 453 52, 053
Texas State officials reported the proceeds from the sale or lease of
property acquired with federal funds but also reported federal funds are
returned by crediting an ongoing federal- aid project; therefore, we
excluded these numbers from our total.

Utah 92, 778 89, 810 1,061,239 119, 670 0 Vermont 850 79, 101 53, 600 3,
001 6, 850 Virginia b N/ R 2, 114,020 881,149 1,287, 344 608, 136
Washington N/ R 599,299 1,041,852 480, 053 218, 202 West Virginia 269, 807
152,470 0 1,472, 338 92, 231 Wisconsin State officials could not readily
distinguish properties originally acquired with federal funds. Wyoming 8,
100 86, 292 57, 912 522, 431 N/ R

Notes: We obtained information from June 1998 to May 2002. The dollar
amounts represented in this table are expressed in nominal values.

We grouped the total properties sold and leased for each state. N/ R
indicates Not Reported. a We recognize that some states have different
starting and ending months for their fiscal years than the federal
government. However, given the relatively low and steady rate of change in
the price level of the economy since 1998, we believe that any discrepancy
due to these differences would be minimal. Information we obtained for
1998 begins with the month of June, and 2002 ends with the month of May.

b State officials from Florida, Minnesota, and Virginia reported they were
able to *sometimes* identify the proceeds from the sale or lease of
property acquired with federal funds, which may indicate that these
numbers are estimates; therefore, these states were excluded from the
total. c State officials from Oklahoma and Kansas were able to report the
proceeds from the sale or lease of property acquired with federal funds
but were unable to report the number of properties sold or leased. This
may indicate that these numbers are estimates; therefore, we excluded
these numbers from our total.

d State officials reported estimates for 2002 totals; therefore, we
excluded these numbers from our report. Source: Developed by GAO from data
provided by State DOTs.

Appendi x V

Fiscal Year 1999 Proceeds Information To analyze the significance of the
proceeds from the sale or lease of real property purchased with federal-
aid funds with other states* revenues available for highway purposes, we
compared states* property proceeds with states* total receipts. Table 4
shows the result of our analysis. Table 4: Comparisons of States* Property
Proceeds with States* Total Receipts, Fiscal Year 1999

States* proceeds from the sale or lease of real property purchased with

Total receipts including federal Ratio of proceeds and State a, b, c, d

federal- aid funds contributions highway receipts

Alabama $260, 577 $1, 149,923, 000 0.023% Alaska 199, 241 415,566, 000 0.
048 Arizona 198, 883 1,789,631, 000 0. 011 Arkansas 76, 896 781,194, 000
0. 010 Colorado 1,290, 467 1,400,358, 000 0. 092 Connecticut 1,068, 000
1,194,190, 000 0. 089 Georgia 4,642, 572 1,769,962, 000 0. 262 Hawaii 528,
331 321,264, 000 0. 164 Idaho 2,083, 429 473,902, 000 0. 440 Indiana 76,
993 1,675,527, 000 0. 005 Iowa 748, 649 1,274,354, 000 0. 059 Kentucky
655, 025 1,452,514, 000 0. 045 Maine 18, 000 413,718, 000 0. 004
Massachusetts 990, 610 4,035,797, 000 0. 025 Michigan 11,539, 450
2,553,633, 000 0. 452 Mississippi 584, 791 1,152,532, 000 0. 051 Missouri
4,436, 584 1,587,419, 000 0. 279 Montana 449, 958 435,175, 000 0. 103
Nebraska 245, 342 649,580, 000 0. 038 New Jersey 1,027, 612 3,021,151, 000
0. 034 New Mexico 106, 440 974,423, 000 0. 011 New York 698, 625
5,148,005, 000 0. 014 North Carolina 603, 590 2,433,617, 000 0. 025 North
Dakota 168, 794 413,951, 000 0. 041 Ohio 121, 281 3,377,774, 000 0. 004
Oregon 1,780, 532 1,007,122, 000 0. 177 Pennsylvania 2,162, 256 4,660,704,
000 0. 046 Rhode Island 1,566, 057 320,431, 000 0. 489

(Continued From Previous Page)

States* proceeds from the sale or lease of real property purchased with

Total receipts including federal Ratio of proceeds and State a, b, c, d

federal- aid funds contributions highway receipts

South Carolina 83, 147 1,007,385, 000 0. 008 Tennessee 448, 709 1,475,245,
000 0. 030 Utah 89, 810 869,845, 000 0. 010 Vermont 79, 101 254,560, 000
0. 031 Washington 599, 299 1,859,009, 000 0. 032 West Virginia 152, 470
1,089,541, 000 0. 014 Wyoming 86, 292 393,043, 000 0. 022

Total $39,867, 813 $53,313,565, 000 0.075%

a California, Illinois, Louisiana, Maryland, Nevada and Wisconsin could
not provide the proceeds from sales, leases, or otherwise disposed of
properties; therefore, these states were not included. Delaware and South
Dakota did not provide data for 1999. District of Columbia reported that
it did not have sales or leases but did transfer one jurisdiction to the
National Park Service, which did not generate proceeds. New Hampshire only
provided averages for its proceeds. b State officials from Florida,
Minnesota, and Virginia reported they were able to *sometimes* identify

the proceeds from the sale or lease of property acquired with federal
funds, which may indicate these numbers are estimates; therefore, these
states were excluded from the total. c State officials from Oklahoma and
Kansas were able to report the proceeds from the sale or lease of property
acquired with federal funds but were unable to report the number of
properties sold or leased, which may indicate these numbers are estimates;
therefore, these states were excluded from the total.

d State officials from Texas reported the proceeds from the sale or lease
of property acquired with federal funds but also reported federal funds
are returned by crediting an ongoing federal- aid project; therefore, we
excluded these numbers from our total. Source: Developed by GAO from data
provided by State DOTs and FHWA.

Appendi x VI

Fiscal Year 2000 Proceeds Information To analyze the significance of the
proceeds from the sale or lease of real property purchased with federal-
aid funds with other states* revenues available for highway purposes, we
compared states* property proceeds with states* total receipts. Table 5
shows the result of our analysis.

Table 5: Comparisons of States* Property Proceeds with States* Total
Receipts, Fiscal Year 2000 States* proceeds from the sale

Total receipts or lease of real property

including purchased with federal- aid

federal Ratio of proceeds and State a, b, c, d

funds contributions highway receipts

Alabama $542,178 $1,262, 239, 000 0.043% Alaska 79, 892 501, 359, 000 0.
016 Arizona 1, 317,343 2,113, 820, 000 0. 062 Arkansas 38, 441 1,037, 247,
000 0. 004 Colorado 1, 295,209 1,958, 473, 000 0. 066 Connecticut 52, 201
1,269, 463, 000 0. 004 Georgia 6, 237,800 1,852, 170, 000 0. 337 Hawaii
584,484 226, 138, 000 0. 258 Idaho 1, 095,484 504, 630, 000 0. 217 Indiana
94, 867 1,959, 235, 000 0. 005 Iowa 29, 553 1,410, 210, 000 0. 002
Kentucky 885,958 1,670, 428, 000 0. 053 Maine 82, 000 751, 571, 000 0. 011
Massachusetts 4, 387,582 3,468, 038, 000 0. 127 Michigan 5, 476,251 2,815,
272, 000 0. 195 Mississippi 58, 765 926, 906, 000 0. 006 Missouri 73, 000
2,038, 239, 000 0. 004 Montana 693,346 484, 248, 000 0. 143 Nebraska 1,
065,344 718, 604, 000 0. 148 New Jersey 4, 203,700 5,102, 359, 000 0. 082
New Mexico 64, 770 1,108, 855, 000 0. 006 New York 585,955 5,117, 702, 000
0. 011 North Carolina 339,184 2,619, 172, 000 0. 013 North Dakota 2,901
395, 485, 000 0. 001 Ohio 133,792 3,125, 999, 000 0. 004 Oregon 2, 077,468
1,023, 632, 000 0. 203 Pennsylvania 2, 598,190 4,026, 523, 000 0. 065

(Continued From Previous Page)

States* proceeds from the sale Total receipts

or lease of real property including

purchased with federal- aid federal

Ratio of proceeds and State a, b, c, d

funds contributions highway receipts

Rhode Island 1, 679,374 267, 353, 000 0. 628 South Carolina 204,363 872,
060, 000 0. 023 South Dakota 11, 060 411, 768, 000 0. 003 Tennessee
336,580 1,439, 811, 000 0. 023 Utah 1, 061,239 922, 769, 000 0. 115
Vermont 53, 600 272, 088, 000 0. 020 Washington 1, 041,852 1,680, 148, 000
0. 062 Wyoming 57, 912 385, 358, 000 0. 015

Total $38, 541, 637 $55,739, 372, 000 0.069%

a California, Illinois, Louisiana, Maryland, Nevada, and Wisconsin could
not provide the proceeds from sales, leases, or otherwise disposed of
properties; therefore, these states were not included. Delaware did not
provide data for 2000. West Virginia did not generate proceeds from the
sale or lease of excess property for 2000. District of Columbia reported
that it did not have sales or leases but did transfer one

jurisdiction to the National Park Service, which did not generate
proceeds. New Hampshire only provided averages for its proceeds. b State
officials from Florida, Minnesota, and Virginia reported they were able to
*sometimes* identify

the proceeds from the sale or lease of property acquired with federal
funds, which may indicate these numbers are estimates; therefore, these
states were excluded from the total. c State officials from Oklahoma and
Kansas were able to report the proceeds from the sale or lease of property
acquired with federal funds but were unable to report the number of
properties sold or leased, which may indicate these numbers are estimates;
therefore, these states were excluded from the total.

d State officials from Texas reported the proceeds from the sale or lease
of property acquired with federal funds but also reported federal funds
are returned by crediting an ongoing federal- aid project; therefore, we
excluded these numbers from our total. Source: Developed by GAO from data
provided by State DOTs and FHWA.

(544043)

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a

GAO United States General Accounting Office

All of the 51 state Departments of Transportation GAO surveyed, including
the District of Columbia, reported selling, leasing, or disposing of real
property, such as unused land purchased with federal- aid funds. From June
1998 through May 2002, 37 states sold, leased, or disposed of at least
5,636 properties that generated about $148 million in proceeds for

states. States varied on whether they tracked and reported this
information to DOT; therefore, GAO did not report this information for the
other 14 states. State DOT officials view the policy that allowed them to
retain the federal share of the proceeds as being positive because it
provided states greater flexibility for financing their transportation
programs. However, proceeds generated from the sale or lease of property
are not currently a major source of revenue for states* transportation
programs. GAO determined that the proceeds generated from the sale, lease,
or disposal of real property were less than 1 percent of states*
transportation revenue from other sources, including federal aid, in 1999
and 2000.

Compa riso n o f State Pro c eed s fro m P roperty Sales a n d Leases with
S tate Hig hway Reven u es, inclu ding Fed eral Aid , in 2 00 0 T op F ive
Percentag es

$0 $1 ,00 0 ,000

$2 ,00 0 ,000 $3 ,00 0 ,000

$4 ,00 0 ,000 $5 ,00 0 ,000

$6 ,00 0 ,000 $7 ,00 0 ,000

Rh o d e I sland

Geo rg ia H awaii I daho Oreg o n State Proce e ds 0 .6 2 8%

0 .3 3 7% 0 .2 5 8% 0 .2 1 7% 0 .2 0 3%

Source: Developed by GAO from data provided by State DOTs and FHWA.

States reported using the proceeds generated from the sale or lease of
property in different ways; and at least 2 states may have used the
proceeds in ways that do not comply with the specific statutory
requirements to use the proceeds on projects eligible for federal- aid
highway funding. Forty- seven states reported using the proceeds to fund
other state transportation projects, and at least 4 states use the
proceeds as their match for projects receiving federal funds. GAO issued a
legal opinion in September 2002, concluding that Congress did not intend
for states to use such proceeds as their match. DOT has interpreted TEA-
21 as allowing for the use of the federal share as a state*s match. GAO
also found that 2 states did not have restrictions on how the federal
share of the proceeds should be used; therefore, the proceeds may have
been used on projects not eligible for federal- aid. DOT issued some
guidance but is considering issuing more guidance to states to ensure
proceeds are used for eligible projects under the federal- aid highway
program.

FEDERAL- AID HIGHWAYS

States Need Guidance on Sales or Leases of Property Purchased with Federal
Funds

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 207. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Kate Siggerud, (202) 512- 2834. Highlights of GAO-
03- 207, a report to the

Ranking Minority Member, Committee on Commerce, Science, and
Transportation, United States Senate

December 2002

In 1998, the Transportation Equity Act for the 21 st Century (TEA- 21),
authorized the states to retain the federal share of proceeds from the
sale or lease of real property that had been purchased with federalthe aid
funds. It also required the states to use the federal share on other
highway projects eligible for funding under the federal- aid highway
program. GAO determined (1) the extent to which states are selling,
leasing, or disposing of real property purchased with federal- aid funds
and (2) how the proceeds generated from the sale or lease of real property
are being used, including whether they are being used in accordance with
TEA- 21. GAO issued a related legal opinion in September 2002.

GAO recommends that DOT develop and report on how DOT plans to comply with
GAO*s legal opinion concerning the statute governing the sale or lease of
real property. GAO also recommends that DOT provide additional guidance to
the state DOTs that will help ensure states use the proceeds of property
sales or leases as required by TEA- 21.

Page i GAO- 03- 207 States' Sales or Leases of Real Property

Contents

Contents Page ii GAO- 03- 207 States' Sales or Leases of Real Property

Page 1 GAO- 03- 207 States' Sales or Leases of Real Property United States
General Accounting Office

Washington, D. C. 20548 Page 1 GAO- 03- 207 States' Sales or Leases of
Real Property

A

Page 2 GAO- 03- 207 States' Sales or Leases of Real Property

Page 3 GAO- 03- 207 States' Sales or Leases of Real Property

Page 4 GAO- 03- 207 States' Sales or Leases of Real Property

Page 5 GAO- 03- 207 States' Sales or Leases of Real Property

Page 6 GAO- 03- 207 States' Sales or Leases of Real Property

Page 7 GAO- 03- 207 States' Sales or Leases of Real Property

Page 8 GAO- 03- 207 States' Sales or Leases of Real Property

Page 9 GAO- 03- 207 States' Sales or Leases of Real Property

Page 10 GAO- 03- 207 States' Sales or Leases of Real Property

Page 11 GAO- 03- 207 States' Sales or Leases of Real Property

Page 12 GAO- 03- 207 States' Sales or Leases of Real Property

Page 13 GAO- 03- 207 States' Sales or Leases of Real Property

Page 14 GAO- 03- 207 States' Sales or Leases of Real Property

Page 15 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix I

Appendix I Objectives, Scope, and Methodology

Page 16 GAO- 03- 207 States' Sales or Leases of Real Property

Page 17 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix II

Appendix II GAO Legal Opinion

Page 18 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix II GAO Legal Opinion

Page 19 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix II GAO Legal Opinion

Page 20 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix II GAO Legal Opinion

Page 21 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix II GAO Legal Opinion

Page 22 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix II GAO Legal Opinion

Page 23 GAO- 03- 207 States' Sales or Leases of Real Property

Page 24 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix III

Appendix III GAO Letter and Survey to State DOTs

Page 25 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix III GAO Letter and Survey to State DOTs

Page 26 GAO- 03- 207 States' Sales or Leases of Real Property

Page 27 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix IV

Appendix IV Survey Responses of State DOTs* Sales or Leases of Real
Property

Page 28 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix IV Survey Responses of State DOTs* Sales or Leases of Real
Property

Page 29 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix IV Survey Responses of State DOTs* Sales or Leases of Real
Property

Page 30 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix IV Survey Responses of State DOTs* Sales or Leases of Real
Property

Page 31 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix IV Survey Responses of State DOTs* Sales or Leases of Real
Property

Page 32 GAO- 03- 207 States' Sales or Leases of Real Property

Page 33 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix V

Appendix V Fiscal Year 1999 Proceeds Information

Page 34 GAO- 03- 207 States' Sales or Leases of Real Property

Page 35 GAO- 03- 207 States' Sales or Leases of Real Property

Appendix VI

Appendix VI Fiscal Year 2000 Proceeds Information

Page 36 GAO- 03- 207 States' Sales or Leases of Real Property

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