Highway and Transit Investments: Flexible Funding Supports State
and Local Transportation Priorities and Multimodal Planning
(26-JUL-07, GAO-07-772).
The Intermodal Surface Transportation Efficiency Act of 1991
introduced two highway programs--the Surface Transportation
Program (STP) and the Congestion Mitigation and Air Quality
Program (CMAQ)--that may be used on both highway and transit
projects and that are referred to as "flexible funding" for the
purposes of this report. GAO was asked to examine (1) the degree
to which STP and CMAQ funding has been used on transit and how
this use varies across states and urbanized areas, and (2) how
states and urbanized areas decide which projects to fund with STP
and CMAQ funding and what the outcomes of these decisions have
been. To address these issues, GAO analyzed data on flexible
funding used on transit projects from the Federal Transit
Administration (FTA) and the Federal Highway Administration
(FHWA) and spoke with officials in selected states and urbanized
areas about their project-selection processes for flexible
funding and the outcomes of these funding decisions. States and
urbanized areas were selected based on their prior use of
flexible funding. GAO is not making recommendations in this
report. The Department of Transportation generally agreed with
the report's findings and provided technical clarifications,
which were incorporated in the report as appropriate.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-772
ACCNO: A73392
TITLE: Highway and Transit Investments: Flexible Funding
Supports State and Local Transportation Priorities and Multimodal
Planning
DATE: 07/26/2007
SUBJECT: Federal aid for highways
Federal aid for transportation
Federal aid to states
Federal funds
Federal/state relations
Fund audits
Mass transit funding
Program evaluation
Public roads or highways
DOT Surface Transportation Program
FHwA Congestion Mitigation and Air
Quality Improvement Program
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GAO-07-772
* [1]Results in Brief
* [2]Background
* [3]The Proportion of Flexible Funding Used on Transit Is Small
* [4]The Proportion of Flexible Funding Used on Transit Projects
* [5]The Proportion and Amounts of Flexible Funding Transferred f
* [6]The Use of Transferred Flexible Funding on Transit Is Concen
* [7]States and Urbanized Areas Used a Formal Process to Select P
* [8]Projects for Flexible Funding Are Often Selected through a C
* [9]Flexible Funding Projects Sometimes Selected Based on Policy
* [10]Flexibility Enables State and Local Officials to Fund Their
* [11]Agency Comments
* [12]Federal, State, and Local Governments Involved in Transfer P
* [13]FHWA and FTA Check Project Eligibility and Have Processes in
* [14]GAO Contact
* [15]Staff Acknowledgments
* [16]Order by Mail or Phone
Report to Congressional Committees
United States Government Accountability Office
GAO
July 2007
HIGHWAY AND TRANSIT INVESTMENTS
Flexible Funding Supports State and Local Transportation Priorities and
Multimodal Planning
GAO-07-772
Contents
Letter 1
Results in Brief 4
Background 7
The Proportion of Flexible Funding Used on Transit Is Small Nationwide,
but It Has Made a Sizable Impact on Transit Programs in Some States and
Urbanized Areas 11
States and Urbanized Areas Used a Formal Process to Select Projects Suited
to Their Priorities and Needs, Resulting in Diverse Uses of Flexible
Funding 21
Agency Comments 28
Appendix I Funding Transfers Involve Multiple Stakeholders and Checks to
Ensure Accuracy 31
Appendix II Objectives, Scope, and Methodology 35
Appendix III GAO Contact and Staff Acknowledgments 39
Tables
Table 1: Eligible Uses and Apportionment Guidelines for STP and CMAQ Funds
9
Table 2: States and Urbanized Areas Selected for Case Studies 37
Figures
Figure 1: Annual Flexible Funding Apportionments and Amounts Transferred
to FTA for Use on Transit Projects, 1992-2006 (in inflation-adjusted
dollars) 5
Figure 2: Flexible Funding: Proportion of the Overall Federal-Aid Highway
Program, Percentages Spent on Transit and Nontransit Projects, and
Percentages of Transit Projects Administered by FHWA and FTA, 1992-2006 12
Figure 3: Annual Flexible Funding Transfers and Average Annual Transfers
by Act, 1992-2006 (in 2007 dollars) 13
Figure 4: Proportion of Apportioned Flexible Funding Transferred to FTA
for Transit Projects, by State, 1992-2006 14
Figure 5: Flexible Funding Transferred to FTA for Transit Projects, by
State, 1992-2006 (in 2007 dollars) 16
Figure 6: Proportion of Total FTA Funding from Flexible Funding, 1992-2006
18
Figure 7: Flexible Funding Transferred to FTA, by Population of Area in
Which Funding Was Used, Fiscal Years 1992-2006 19
Figure 8: Flexible Funding Administered by FTA, by Project Type and
Population of Area in Which Funding Was Used, 1992-2006 20
Figure 9: Steps Required to Transfer Funds from State's FHWA Account to
Transit Agency's FTA Account 33
Abbreviations
Caltrans California Department of Transportation
CMAQ Congestion Mitigation and Air Quality Program
DOT Department of Transportation
FHWA Federal Highway Administration
FMIS Fiscal Management Information System
FTA Federal Transit Administration
ISTEA Intermodal Surface Transportation Efficiency Act of 1991
MPO metropolitan planning organization
PSRC Puget Sound Regional Council
SAFETEA-LU Safe, Accountable, Flexible, Efficient Transportation Act
A Legacy for Users
STIP state transportation improvement program
STP Surface Transportation Program
TEA-21 Transportation Equity Act for the Twenty-First Century
TEAM Transportation Electronic Award Management system
TIP transportation improvement program
This is a work of the U.S. government and is not subject to copyright
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separately.
United States Government Accountability Office
Washington, DC 20548
July 26, 2007
Congressional Committees
Across the country, passenger and freight traffic continues to place
growing demands on the nation's aging highway and transit infrastructure,
heightening the need to maintain the existing system and find solutions to
prevent increased congestion. At a time when revenues at all levels of
government to address these conditions are constrained, it is critical
that state and local governments make efficient use of available
transportation dollars. We have previously reported that broader and,
particularly, multimodal eligibility for federal funding can provide
states and urbanized areas with the latitude to address their most
pressing transportation needs. The Intermodal Surface Transportation
Efficiency Act of 1991 (ISTEA)^1 and subsequent reauthorization acts gave
states and urbanized areas greater flexibility in selecting transportation
projects to be funded with federal-aid highway formula funds, which are
apportioned to the states annually on the basis of statutory formulas. The
act also gave urbanized areas direct responsibility for selecting projects
for certain funds. Several Federal Highway Administration (FHWA) programs
introduced by ISTEA have transit eligibility, in particular, the Surface
Transportation Program (STP) and the Congestion Mitigation and Air Quality
(CMAQ) Program. These two programs are referred to here as "flexible
funding" programs because of their eligibility for use on both highway and
transit projects. When these FHWA funds are used for transit projects,
states have the authority to request transfer of the funds from FHWA to
the Federal Transit Administration (FTA), to be administered as FTA
grants. This flexibility--including the transfer authority--also extends
to certain FTA funds, which under certain circumstances may be transferred
to FHWA for use on highway projects. Today, as federal funding is often
tied to a single mode of transportation, these programs are distinctive in
the flexibility they grant to states and urbanized areas in implementing a
wide variety of transportation projects.
^1Pub. L. No. 102-240 (Dec. 18, 1991).
The conference report accompanying the Safe, Accountable, Flexible,
Efficient Transportation Act: A Legacy for Users (SAFETEA-LU)^2 required
GAO to examine how states and urbanized areas have used the authority to
transfer funds between FHWA and FTA. Although the transfer provisions
apply both to highway funds transferred to FTA for use on transit projects
and transit funds transferred to FHWA for use on highway projects, only a
small amount of transit funds have been transferred for use on highway
projects, according to data from FHWA.^3 Additionally, while a number of
federal-aid highway programs other than STP and CMAQ may be used on
transit projects^4--either directly through FHWA or through transfer to
FTA--the amount of funding from other programs that is spent on transit is
small. Accordingly, we did not consider these programs in our analysis. To
respond to our reporting requirement, we focused our study on STP and CMAQ
funding used on transit projects and addressed the following questions:
o To what degree has STP and CMAQ funding been used on transit,
and how does this use vary across states and urbanized areas?
o How have states and urbanized areas made decisions about what
projects to fund with STP and CMAQ funding, and what have been the
outcomes of these decisions?
In response to the conference report's direction, this report also
addresses the procedures used to transfer funding and budget
authority from FHWA to FTA. This information is provided in
appendix I.
To answer these questions, we analyzed data from FTA and FHWA
databases on the use of STP and CMAQ funding, which, for the
purposes of this report, we refer to as flexible funding. We
focused particularly on the use of flexible funding transferred
from FHWA to FTA.^5 We determined the data to be sufficiently
reliable for the purposes of this report due to the presence of
internal controls on the data systems, such as those to ensure
accuracy of data and prevent data loss. We reviewed prior reports
on state and local experiences using flexible funding and federal
guidance and regulations related to state and metropolitan
transportation planning and flexible funding. We also interviewed
associations representing transportation stakeholders, including
metropolitan planning organizations, transit providers, state
transportation officials, transportation construction firms, and
highway users. We selected 9 states and 12 urbanized areas within
these states to be subjects of case studies; these areas were
selected based on the extent to which they had previously used
flexible funding on transit projects. We selected 5 states that
had used significant amounts of flexible funding on transit
projects in the past, and within these states we selected
urbanized areas that accounted for a high proportion of the
states' flexible funding used on transit. We selected 4 other
states that previously used either little or no flexible funding
on transit, and within these states--because no urbanized areas
had used a significant amount of flexible funding on transit--we
selected the largest urbanized areas. Because we used a judgmental
sampling technique to select these states and urbanized areas, the
results are not generalizable to all states and urbanized areas.
As part of our case-study review, we interviewed federal, state,
and metropolitan transportation officials and reviewed relevant
documentation on state and metropolitan transportation planning
processes, projects financed with flexible funding, and processes
for selecting flexible-funded projects. We interviewed FHWA and
FTA staff in Washington, D.C., and in regional and division field
offices and reviewed guidance from these agencies on the
procedures for transferring flexible funding. We performed our
work from May 2006 through May 2007 in accordance with generally
accepted government auditing standards.
^2House Report 109-203, "Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users Report of the Committee of
Conference on H.R. 3" (July 28, 2005).
^3FHWA data show that since ISTEA was enacted, about $55 million of FTA
funding has been transferred to FHWA for use on highway projects.
^4See, for example, 23 U.S.C. 103(b)(6), 23 U.S.C. 147, and 23 U.S.C. 204.
^5Prior to enactment of the Transportation Equity Act for the Twenty-First
Century (TEA-21), FHWA did not have the authority to transfer budget
authority or funds for STP and CMAQ funds to FTA. When requested, FHWA
allocated the funds to FTA for use on eligible transit projects, but the
funds remained on FHWA's books. TEA-21 authorized the transfer of funds to
FTA, and FHWA and FTA began using this authority in 2000. For the purposes
of this report, we use the term "transfer" to refer to FHWA funds
administered by FTA, both before and after FHWA had the authority to
transfer budget authority and funding to FTA.
Results in Brief
The amount of flexible funding used on transit projects accounts
for a relatively small proportion of the overall federal-aid
highway program, but some states and urbanized areas have used
these funds to significantly augment the other federal funding
they use for transit. Since the creation of the STP and CMAQ
programs with the enactment of ISTEA in December 1991, $12 billion
of these funds have been spent on transit projects administered
either by FTA or FHWA; this is about 13 percent of the apportioned
flexible funding and about 3 percent of the total amount of
federal-aid highway funds apportioned to states during this time
period. Remaining flexible funding was spent on other eligible
purposes, such as roadway improvements. Nearly all of the flexible
funding used on transit projects was transferred from FHWA to FTA
at the discretion of state officials. Figure 1 shows flexible
funding apportionments from 1992 through 2006^6 and the amount of
these funds transferred to FTA for transit projects. Individual
states have varied in the extent to which they have transferred
flexible funding to FTA for use on transit projects, with three
states collectively accounting for more than half of the
transferred funds and three states having transferred none. The
states that transferred large amounts of their apportioned
flexible funding were likely to contain large urban areas. The
amount of flexible funding transferred to FTA for use on transit
projects has been significant for several states, accounting for
20 percent or more of the overall FTA spending in four states.
Nearly 80 percent of transferred funds have been used in urbanized
areas with populations over 1 million, while the rest has been
used in smaller urbanized or rural areas. FTA data show that more
than half of all flexible funding transferred to FTA from 1992
through 2006 has been used to purchases vehicles--both rail cars
and motor vehicles such as buses--or for projects related to rail
lines or bus lanes. Other transit projects commonly funded include
parking garages, passenger facilities such as bus stops and rail
stations, and operating costs for new services.
^6Data from FTA and FHWA regarding amounts apportioned or spent for
transit projects reflect fiscal year values throughout this report.
Figure 1: Annual Flexible Funding Apportionments and Amounts Transferred
to FTA for Use on Transit Projects, 1992-2006 (in inflation-adjusted
dollars)
The states and urbanized areas reviewed in our case studies used a formal
process to select projects to receive flexible funding. Of the urbanized
areas that have decision-making authority for flexible funding, 7 out of
10 used a competitive process for project selection that considers both
highway and transit projects. Although competitions differed somewhat from
place to place, we found that most included elements such as
o a call for projects during which project sponsors submit formal
applications,
o a set of established criteria used to evaluate projects, and
o participation of transportation stakeholders--typically
representing various transportation modes as well as
jurisdictions--from throughout the region in evaluating and
selecting projects.
Some of the urbanized areas that used competitions had also
established project categories to allocate funds among different
modes of transportation, such as roadway construction, bikeway and
pedestrian facilities, or transit capital improvements. Some
urbanized areas selected projects and programs based on local
policy goals and priorities, including both those related to
highways and to transit. Regarding state processes for selecting
projects, four of the states included in our case-study review
also used a competitive process for at least some of their
flexible funding. Other states selected projects for these funds
through the state's transportation planning process, which takes
into consideration transportation priorities, conditions, and
needs throughout the state. Flexible funding transferred to FTA
has been used to meet a variety of needs. Some urbanized areas
used the flexible funding that they transferred to FTA to provide
new or expanded transit services, while others used it to perform
rehabilitation and preventive maintenance on existing services.
Regarding the impact of flexible funding on overall state and
local transportation programs, almost all the officials we spoke
with said that flexibility is beneficial, particularly because it
enables multimodal planning and makes more funding available for
transit. In terms of the effect that using flexible funding on
transit has on highway investments, most state and local officials
who commented on this said that the proportion of highway funding
used on transit is too small to have an impact on their highway
programs, and the larger problem is that of too little funding in
general for transportation.
In addition to determining the extent to which states and
urbanized areas have used flexible funding on transit and how
transportation stakeholders have made decisions about the use of
these funds, we also examined the procedures used to transfer
flexible funding from FHWA to FTA. Funding transfers--which
involve the movement between the two agencies of budget authority
and the funds needed to reimburse grantees--occur at the request
of state transportation departments and are carried out jointly by
FTA and FHWA. The transfer procedures include checks to ensure
that projects are eligible for funding and that the correct
amounts of budget authority and funds are transferred. The U.S.
Department of Transportation (DOT) recently implemented an
accounting change whereby the funds necessary to reimburse
grantees is transferred from the highway account to the mass
transit account of the Highway Trust Fund as grantees incur costs,
rather than all at once when the transfer is approved. According
to DOT officials, this change is intended to slow the decline of
the highway account's balance.
We provided a draft of this report to DOT for review and comment.
DOT generally agreed with the report's findings and provided
technical clarifications, which we incorporated in the report as
appropriate. We also provided the state and local officials with
whom we spoke an opportunity to review selected portions of the
draft report. These officials provided technical clarifications,
which we incorporated in the report as appropriate.
Background
State departments of transportation and local governments are
responsible for building and improving highways and other road
infrastructure in the United States. The federal-aid highway
program, which is administered by FHWA, provides funding for this
purpose from the highway account of the federal Highway Trust
Fund. FHWA distributes highway funds to the states through annual
apportionments established by statutory formulas and by allocation
of discretionary grants; in 2006, about $31 billion in federal-aid
highway funding was available to states. Funds come through
several different programs, each with specific uses and
eligibility requirements, but states generally have broad
discretion to choose the projects that will be funded with these
moneys. After determining that projects meet federal requirements
and that funds are available, FHWA enters into obligations for the
projects selected by states.^7 After states make expenditures on
the projects, they apply to FHWA for reimbursement of the federal
share of eligible costs. States supplement federal funds for
highway programs--and provide required matching funds--with
nonfederal revenues such as taxes and user fees.
Constructing, maintaining, and operating public transportation
systems are generally the responsibilities of local agencies, such
as transit authorities or transit operators.^8 Federal funds for
public transportation are generally administered by FTA and are
funded through a combination of general fund revenues and the mass
transit account of the Highway Trust Fund. Recipients such as
transit operators and states^9 are apportioned annual formula
program funds that may be used for capital expenses and, in the
case of areas with populations under 200,000, for operating
expenses. Transit operators and other recipients may also receive
discretionary grants for capital expenditures such as vehicle
purchases and system construction or expansion. In 2006, FTA
provided about $8 billion in funding to transit agencies and
states through its formula and discretionary grant programs.
Federal transit funds generally remain with FTA until the transit
operator is ready to use them. Additional funding for transit
comes from state or local taxes and operating revenue such as
passenger fares and parking fees.
^7An obligation is a commitment that creates a legal liability of the
government for the payment of goods and services ordered or received.
Payment may be made immediately or in the future. An agency incurs an
obligation, for example, when it awards a grant.
^8Public transportation is regular and continuing general or special
transportation service provided to the public. It includes service by
buses, subways, rail, trolleys and ferryboats. It also includes
paratransit services for seniors and persons with disabilities as well as
vanpool and taxi services operated under contract to a public
transportation agency.
^9States are recipients of FTA grants for areas under 200,000 in
population.
In the early 1990s, Congress decided that a flexible, intermodal
approach to transportation programs was needed to address growing
transportation needs in the face of budgetary constraints and the
diversity of transportation priorities in different parts of the
country. Enacted in December 1991, ISTEA sought to provide
flexible, comprehensive solutions to transportation problems and
focused more on intermodal approaches than previous acts had. Two
of the programs created by this legislation were STP and
CMAQ--also referred to here as flexible funding because they may
be used on a range of projects including transit and highways. A
portion of flexible funding is allocated to localities rather than
states, allowing local authorities to select projects within their
jurisdictions. The responsibility for project selection at this
level usually falls to regional bodies such as metropolitan
planning organizations (MPO), which are composed of
representatives of local governments, transit operators, and other
transportation stakeholders who collaborate on transportation
planning. Federal law suballocates a portion of STP funds to
urbanized areas 200,000 or greater in population; some states have
chosen to further allocate flexible funding to these areas. Table
1 provides details on eligible uses for STP and CMAQ funds--which
in 2006 constituted about one-quarter of the total federal-aid
highway program--as well as guidelines on how these funds are
apportioned.
Table 1: Eligible Uses and Apportionment Guidelines for STP and CMAQ Funds
Program (2006
funding levels) Eligible uses Apportionment guidelines
Surface o Construction, STP funds are apportioned
Transportation rehabilitation, and to states based on a
Program ($6 billion) operational improvements state's number of lane
for highways and miles and vehicle miles
bridges, including to traveled on federal-aid
accommodate other modes highways, and other
o Capital costs for factors. More than half
transit projects, is distributed throughout
including vehicles and the state based on
facilities population.
o Highway and transit
safety infrastructure
improvements and
programs
o Rehabilitation and
operation of historic
transportation
facilities
o Pedestrian and bicycle
facilities
o Scenic or historic
highway programs
o Historic preservation
and archeological
research
o Landscaping and other
scenic beautification
Congestion o Pedestrian and bicycle CMAQ funds are
Mitigation and Air facilities apportioned to states
Quality ($1.6 o Transit (new based on the size of
billion) system/service expansion population residing
or operations) within counties that do
o Alternative fuel not meet, or have in the
projects, including past not met, federal air
programs to convert quality standards. CMAQ
fleets to run on funds must be used in
alternative fuels these areas.
o Travel demand
management and public
education and outreach
activities
Source: GAO analysis of FHWA data.
When states or urbanized areas use flexible funding on transit projects,
they may leave the funds in the state's FHWA account, in which case the
state receives reimbursement from FHWA as costs are incurred.
Alternatively, the state--usually in conjunction with the MPO or the local
agency implementing the project--may request that these funds be
transferred to FTA to be administered through one of several eligible FTA
programs. Once funds are transferred to FTA, a transit operator or other
recipient becomes the grantee for these funds. FTA funds apportioned
directly to transit operators or states may be used for operating costs in
areas under 200,000 in population; however, FHWA funds transferred into
FTA formula programs may not be used for operating costs, except for CMAQ
funds used for new or expanded services.
Although state and local authorities have considerable discretion when
choosing which transportation projects to fund with federal-aid program
funds, federal laws and regulations require that projects proposed for
highway and transit funding be based on comprehensive metropolitan and
statewide transportation planning processes.^10 State, regional, and local
government agencies and transit operators must operate within these
requirements to receive federal funds. The various planning tasks that
states and MPOs must carry out include the following:
o involving stakeholders such as elected officials, public transit
operators, environmental and historic preservation agencies,
freight shippers, and others in the planning and project-selection
processes.
o identifying overall goals and objectives to support
transportation investment choices that consider factors such as
projected population growth and economic changes, current and
future transportation needs, maintenance and operation of existing
transportation facilities, and preservation of the human and
natural environments.
o evaluating different transportation alternatives through the
collection and analysis of data.
o documenting future transportation needs through long-range
transportation plans and short-range programs. Short-range
programs, known as transportation improvement programs (TIP), at
the local level, and state transportation improvement programs
(STIP) at the state level, must include the scope of projects,
estimated costs, and the source of funding. In order to receive
federal funding, projects must be included in a STIP that
demonstrates sufficient funds are available to implement the
program.
o ensuring that the process for transportation planning and
decision-making reflects a variety of planning factors such as
environmental compliance, safety, security, system management and
operations, and land use, among others.
To help ensure that metropolitan transportation planning processes
are being carried out in full compliance with federal laws and
regulations, FHWA and FTA jointly review the planning process
every 4 years in areas with populations of 200,000 or greater.
^1023 U.S.C. 134-135, 49 U.S.C. 5303-5304, 23 CFR Parts 450 and 500, and
49 CFR Part 613.
The Proportion of Flexible Funding Used on Transit Is Small
Nationwide, but It Has Made a Sizable Impact on Transit Programs
in Some States and Urbanized Areas
While states have varied in the extent to which they have used STP
and CMAQ funds for transit, some states have augmented their
transit budgets significantly or made major transit investments
using flexible funding. As part of our review, we looked both at
the overall impact on federal highway and transit spending
nationwide and at the types of transit projects on which flexible
funding is most commonly used.
The Proportion of Flexible Funding Used on Transit Projects Has
Been Relatively Low
Overall, from the enactment of ISTEA in late 1991 through 2006,
the relative amount of flexible funding used for transit projects,
either directly through FHWA or through transfer to FTA, has been
low, averaging less than 3 percent of the total federal-aid
highway program and 13 percent of available flexible funding. From
1992 through 2006, a total of $12 billion of flexible funding has
been used for transit projects. The vast majority--more than 96
percent--of this funding was transferred from FHWA to FTA; the
remaining amount was used for transit projects administered
directly by FHWA. Flexible funding not used on transit was used on
other eligible projects such as construction and operational
improvement of roadways. Figure 2 shows the amount of flexible
funding used on transit projects--including funds that were
transferred to FTA and those that were administered directly by
FHWA--in relation to the overall federal-aid highway program and
to available flexible funding from 1992 to 2006.
Figure 2: Flexible Funding: Proportion of the Overall Federal-Aid Highway
Program, Percentages Spent on Transit and Nontransit Projects, and
Percentages of Transit Projects Administered by FHWA and FTA, 1992-2006
Note: Values were not adjusted for inflation and may not total to 100
percent due to rounding.
The amount of flexible funding transferred to FTA increased markedly with
passage of the Transportation Equity Act for the Twenty-First Century
(TEA-21)^11 in 1998, primarily because the act increased overall highway
funding levels, according to DOT officials. The average annual amount of
transferred funding increased from $630 million under ISTEA to $1.1
billion under TEA-21, when measured in inflation-adjusted 2007 dollars,
and increased further to $1.2 billion during the first two years of
SAFETEA-LU. Likewise, the proportion of available flexible funding
transferred to FTA increased from about 11 percent during ISTEA to 14
percent and 15 percent under TEA-21 and SAFETEA-LU, respectively. Figure 3
shows both the annual transfer amount in nominal actual dollars and
inflation-adjusted 2007 dollars to allow for comparison across time. The
figure also shows the average transfer amount for each transportation
authorization act in inflation-adjusted dollars.
^11Pub. L. No. 105-178 (June 9, 1998).
Figure 3: Annual Flexible Funding Transfers and Average Annual Transfers
by Act, 1992-2006 (in 2007 dollars)
Note: Data include flexible funding transfers by states and the District
of Columbia.
The Proportion and Amounts of Flexible Funding Transferred for Use on Transit
Vary by State
Individual states have transferred flexible funding to FTA for transit
projects at varying rates. For example, while California transferred
nearly 40 percent of its apportioned flexible funding for transit projects
administered by FTA between 1992 and 2006, and 3 other states and the
District of Columbia transferred at least 25 percent, 19 states
transferred less than 2 percent of this flexible funding during the same
period. Figure 4 illustrates the state-by-state proportion of flexible
funding transferred to FTA for transit projects.
Figure 4: Proportion of Apportioned Flexible Funding Transferred to FTA
for Transit Projects, by State, 1992-2006
Among the nine states included in our case-study review, we found that
factors such as demographics, infrastructure, geography, and the
availability of other funding sources had an effect on how much flexible
funding the states used on transit. In states such as Wyoming and parts of
Iowa and Kentucky, for example, population is dispersed over a wide area,
and services such as shopping and health care facilities are often far
from one another and from residential areas. Officials in these states
said that such conditions do not lend themselves to efficient use of
transit. Thus, Iowa state transportation officials noted, the population
in Iowa is largely reliant on the automobile for transportation, and
counties, which have discretion about how to use certain state
transportation funds, lean heavily toward building roads. Another reason
for states using a small proportion of flexible funding on transit can be
that the state uses other revenues to support transit. For example, state
transportation officials in Delaware, which has not transferred flexible
funding for use on transit, told us that they believe state revenue
sources--including the state's gasoline tax--are sufficient to meet the
needs of the state's transit operators. Conversely, states that use a
higher proportion of their flexible funding on transit tend to have large,
congested urban areas that are served extensively by transit. Of the 8
urbanized areas included in our case-study review that are in states that
use relatively more flexible funding on transit, 5 of them have transit
operators that are among the largest 25 in the nation.^12 One notable
exception to this trend is the largely rural state of Vermont, which,
because of the state's commitment to providing bus services in communities
throughout the state, spends a high proportion of its flexible funding on
transit.
The dollar amount of flexible funding transferred by states for use on
FTA-administered transit projects varied, with 3 states--California, New
York, and Pennsylvania--collectively accounting for more than half of the
amount transferred from 1992 through 2006.^13 In contrast, 3
states--Delaware, North Dakota, and South Dakota--had never transferred
flexible funding for use on transit projects, and 10 other states
transferred less than $1 million per year, on average. Figure 5 provides
information on the amounts of flexible funding states have transferred
from FHWA to FTA for use on transit projects since the enactment of ISTEA.
^12San Francisco's Bay Area Rapid Transit and Municipal Railway, Los
Angeles's Metropolitan Transportation Authority, Seattle's King County
Metro and Sound Transit, Philadelphia's Southeastern Pennsylvania
Transportation Authority, and Pittsburgh's Port Authority all rank among
the largest 25 transit agencies in the nation. Rankings are based on
agencies' 2003 capital and operating budgets.
^13Values are in inflation-adjusted 2007 dollars to allow for comparison
across time.
Figure 5: Flexible Funding Transferred to FTA for Transit Projects, by
State, 1992-2006 (in 2007 dollars)
Just as the amount of flexible funding transferred for transit projects
varied by state, the effect those funds had on the amount of federal
funding used on transit varied as well. For example, from 1992 to 2006,
Vermont transferred a relatively small amount of flexible funding to FTA
for use on transit projects, but those funds accounted for over 40 percent
of the FTA funding used in Vermont. Similarly, in 3 other states,
transferred flexible funding made up at least 20 percent of the total FTA
funds used in each state, while, in contrast, this figure was less than 5
percent in 17 states. These latter states tended to have fewer large urban
areas and lower population densities. Figure 6 shows the proportion of FTA
funding in each state that came from transferred STP and CMAQ funds.
Figure 6: Proportion of Total FTA Funding from Flexible Funding, 1992-2006
The Use of Transferred Flexible Funding on Transit Is Concentrated in Large
Urbanized Areas
From 1992 through 2006, nearly 80 percent--or $9.1 billion--of the
flexible funding transferred to FTA was used by urbanized areas with
populations of over 1 million (see fig. 7). For the flexible funding that
remained with FHWA for use on transit projects, 45 percent was used in
urbanized areas with a population of over 1 million, with the remaining
portion used in smaller areas or on state-administered projects.
Figure 7: Flexible Funding Transferred to FTA, by Population of Area in
Which Funding Was Used, 1992-2006
Of the flexible funding transferred to FTA from 1992 through 2006, more
than half was used on purchases of vehicles--both rail cars and motor
vehicles such as buses--and on projects related to rail lines or bus
lanes. The heaviest users of transferred flexible funding on
transit--urbanized areas with populations of over 1 million--spent 55
percent on these types of projects. For example, in the Seattle area,
flexible funding was used to purchase diesel-electric hybrid buses and for
the development of the Sound Transit light rail line. Similarly, in the
Northern Virginia region of the Washington, D.C., area, a regional transit
operator used flexible funding for annual purchases of new buses to expand
its fleet. Nationally, urbanized areas over 1 million in population used
14 percent of transferred flexible funding on passenger facilities such as
pedestrian walkways, bus stops, and rail stations. Smaller urbanized and
rural areas also used a significant amount--about 40 percent--of their
transferred flexible funding on motor vehicle purchases and an additional
6 percent on bus and rail lines. For example, the transit agency in Des
Moines, Iowa, has relied on flexible funding to pay for bus replacements,
transferring approximately $2.5 million of its STP funds to FTA for this
purpose over the last 10 years. Figure 8 provides detailed information
about how large urbanized areas and smaller urbanized or rural areas used
the flexible funding that they transferred to FTA. Regarding the "other"
category, shown in figure 8, a substantial portion of this category is
preventive maintenance and contracted services (i.e., transportation
service provided to a public transit agency by a public or private
transportation provider under contract).
Figure 8: Flexible Funding Administered by FTA, by Project Type and
Population of Area in Which Funding Was Used, 1992-2006
Notes: Population category is based on the categorization of the urbanized
area at the time of obligation.
aVehicle purchases: Includes purchases of buses, vans, ferry boats, and
rail cars.
bNew service: Includes projects that pay for operating costs of new
transit services, such as new bus routes or expanded service on existing
routes.
cVehicle facilities/equipment: Includes projects related to vehicle or
transit office facilities, such as maintenance and storage facilities, bus
garages, and service centers. Also includes the acquisition and
rehabilitation of equipment for fare collection, communication, security,
and signalization.
^dPassenger/parking facilities: Includes transit projects to acquire,
design, lease, construct, and rehabilitate parking facilities, such as
park and rides, and passenger facilities, such as bus stops and shelters.
^eOther: Includes acquiring real property, passenger amenities, marketing,
leasing vehicles (including rail), rehabilitating vehicles (including
rail), bikeways, bicycle storage facility, contracted service, vehicle
overhaul, signalization priority projects, installing bicycle racks and
other bicycle equipment, environmental assessments, preliminary
engineering, major investment studies, administration, preventive
maintenance, and other projects.
^fBusway/rail line: Includes projects to build bus lanes or roadways
designed for exclusive bus use. Also includes projects to design,
construct and rehabilitate rail lines and rail yards, and the purchase of
rail line right-of-way, among other things.
States and Urbanized Areas Used a Formal Process to Select Projects Suited to
Their Priorities and Needs, Resulting in Diverse Uses of Flexible Funding
A competitive process was often used to select projects, particularly at
the local level, and projects not selected this way were chosen based on
state or local transportation plans and priorities. An advantage of
flexible funding cited by officials in our case-study review was that
because of its broad eligibility, it enables multimodal transportation
planning and thereby allows states and localities to select projects best
suited to their diverse needs.
Projects for Flexible Funding Are Often Selected through a Competitive Process,
Particularly at the Local Level
Of the 10 urbanized areas included in our case-study review that have
decision-making authority for flexible funding, 7 selected projects for at
least some of these funds using competitive processes^14 in which all
eligible project types were considered, including highway, transit,
bikeway and pedestrian, and others. While the competitions varied somewhat
from place to place, we found that common elements of most of these
competitions included the following:
o a call for projects, during which potential project
sponsors--such as transit operators, city or county governments,
or nonprofit groups--submit formal project applications to the
competition coordinator, typically the region's MPO.
^14One of these 10 urbanized areas, Philadelphia, periodically sets aside
CMAQ funds for a competitive selection process. The most recent
competition was completed in 2003. The two other urbanized areas included
in our case-study review--Burlington, Vermont, and Wilmington,
Delaware--do not have decision-making authority for flexible funds.
o project applications that consist of basic information on the
project, including title, sponsor, summary description, location
or service area, cost, and funding sources.
o an initial screening of project applications in which basic
eligibility determinations are made, such as eligibility to
receive federal funds, project readiness, availability of local
matching funds, and compatibility with or inclusion in the
region's long-range transportation plans.
o a technical evaluation of the projects found to be basically
eligible, typically carried out by a technical committee of the
MPO using criteria established by the MPO. Some of the most common
criteria are
o air quality impact, measured by the estimated
emissions reductions of the project;^15
o traffic flow improvement or congestion reduction;
o cost effectiveness; and
o potential to enhance continuity of the
transportation system or regional connectivity.
o a recommendation of projects based on the technical committee's
evaluation submitted to the MPO's board of directors.
In addition, according to federal requirements, all projects
included in a region's TIP, regardless of how they are selected,
are subject to a public notification and comment period.^16
Some of the urbanized areas included in our case study review also
established project categories based on the needs and priorities
of the region to allocate funds among certain uses such as road
maintenance or capacity enhancement, bikeway and pedestrian
facilities, or transit capital improvements. These categories
tended to have specific eligibility and application requirements
and evaluation criteria, as can be seen in the following examples:
^15According to federal CMAQ guidance, projects in air quality
nonattainment and maintenance areas that receive CMAQ funding must reduce
emissions of at least one of several air quality pollutants, such as
particulate matter or carbon monoxide. Project proposals should include
quantitative estimates of the emissions impact for all the pollutants for
which the area is in nonattainment or maintenance status. See Publication
of Interim Guidance on the Congestion Mitigation and Air Quality
Improvement (CMAQ) Program, 71 Fed. Reg. 76038 (Dec. 19, 2006).
^16See 23 CFR 450.316.
o In the Virginia Beach, Virginia, area, six categories were used
in the MPO's competition for STP funds.^17 The projects competing
in the intermodal transportation category were evaluated on
whether the project would establish opportunities for linkages
between transportation modes and improve rail or vehicular access
to freight facilities, among other criteria. In contrast, projects
competing in the highway capacity category were evaluated on
criteria such as potential impact on congestion levels, system
continuity, and safety improvements.
o In Des Moines, Iowa, STP projects were awarded in four
categories.^18 Projects competing in the major construction
category were evaluated based on their potential to increase
future traffic volumes and their functional classification (e.g.,
principal arterial roads ranked higher than small, feeder roads),
among other things. Projects competing in the alternative
transportation category were evaluated based on congestion
reduction, air quality benefit, and the fuel efficiency of the
mode of transportation.
On the state level, of the nine states included in our case-study
review, four--Iowa, Kentucky, Vermont, and Virginia--awarded a
portion of their flexible funding through a competitive
process.^19 Statewide competitions--typically sponsored by state
departments of transportation--were similar to local competitions,
although some of them required projects to be vetted at the local
level before being submitted to the statewide competition.
^17The six categories are highway capacity, accessibility and operational
improvements; intermodal transportation projects; transit projects;
planning studies; transportation demand management projects; and
intelligent transportation systems.
^18The four categories are major construction projects, minor construction
projects, preservation projects, and alternative transportation projects.
^19Until recently, Washington also used a competitive process for a
portion of its flexible funds.
Flexible Funding Projects Sometimes Selected Based on Policy
Goals, Priorities, or Long-Range Plans
Although most of the urbanized areas included in our case-study
review that have decision-making authority for flexible funding
used competitions for at least some of these funds, they also
selected some projects and programs based on local policy goals
and priorities. Some examples of locally established priorities
that we found in the urbanized areas included in our case-study
review include the following:
o In the San Francisco area, transportation stakeholders projected
a significant shortfall for transit capital expenditures over a
25-year period. The region's MPO board of directors decided to
make this a priority use for STP funds, allocating the funds to
each transit operator based on its portion of the projected
shortfall.
o In Pittsburgh, due to the age of the region's roadways and
transit systems, there was a heavy emphasis on the preventive
maintenance of this infrastructure, with about 80 percent of all
available funding--including flexible funding--being used for this
purpose. Specific projects were selected based on continuous
analysis of transportation infrastructure needs, the region's
long-range plan, and input from the public and the state's
transportation department.
For most of the states in our case-study review, flexible funding
that was neither suballocated to urbanized areas nor awarded
competitively was, along with most other federal and state funding
sources, used on projects identified through state transportation
planning processes; these processes typically considered
transportation priorities, conditions, and needs throughout the
state. Because state departments of transportation are primarily
responsible for building and maintaining roads, project selection
at the state level tends to focus on roads, including construction
of roadways and related projects to manage road usage such as
intelligent transportation systems. For example, Kentucky's
transportation department uses STP funds and other available
funding sources for priority road projects that the state
identifies based on a number of factors, such as transportation
problems across the state, need (based on a statewide needs
analysis), and project eligibility. Looking at these
considerations, the transportation department develops a list of
projects and evaluates them alongside available funding sources,
including both FHWA and state sources, to determine which projects
will be funded with which sources. Similarly, Caltrans, the
California state transportation department, applies statewide STP
funding, along with other federal and state funding sources, to
projects in its State Highway Operation and Protection Program,
which is developed to address state priorities such as traffic
safety and highway and bridge preservation.
In contrast, some states in our case-study review set aside a
portion of their flexible funding to be used for specific projects
or programs. Following are three examples:
o Wyoming and Virginia both use statewide STP funds on specific
categories of roads. Wyoming allocates these funds among county
roads, roads in the state's urban areas, and industrial and
commercial roads such as those leading to mines. Virginia divides
statewide STP funds among primary, urban, and secondary roads.^20
The decisions about which projects to fund for these categories of
roads are made by Virginia's Commonwealth Transportation Board,
the city or town, and the county board of supervisors,
respectively.
o Pennsylvania's transportation financial guidance designates $25
million of the state's flexible funding to be set aside each year
for use by the state's transit agencies. (In 2006, the state's
total flexible funding apportionment was about $290 million.) The
majority of the $25 million goes to the state's two largest
transit operators, Philadelphia's Southeast Pennsylvania
Transportation Authority and Pittsburgh's Port Authority of
Allegheny County.
o Virginia state law mandates that a percentage of its flexible
funding--amounting to about $22 million each year, according to
state officials--be used for public transportation. (In 2006,
Virginia's total flexible funding apportionment was about $196
million.) A portion of the $22 million must be used for track
lease payments for a Northern Virginia commuter rail system; the
remaining funds are spent on transit projects selected by the
state, usually in rural and small urban areas.
Flexibility Enables State and Local Officials to Fund Their
Highest Priorities, Which Is Advantageous Due to Demand for
Transportation Funding
As a result of the broad eligibility of STP and CMAQ funds, states
and urbanized areas can use a multimodal approach to
transportation planning, selecting projects that they believe best
address their transportation priorities--whether a road project, a
transit project, or projects such as intelligent transportation
systems or traffic demand management strategies. Accordingly, the
transportation priorities that states and urbanized areas choose
to address vary based on their differing needs and circumstances.
Among the urbanized areas and states included in our case-study
review that use a high proportion of flexible funding on transit,
we found the following distinctive uses of these funds,
illustrating how outcomes vary with state and local priorities:
^20Primary roads are those that connect cities and towns with each other
and with interstates. Secondary roads serve inter-regional and localized
traffic.
o Constructing the Sound Transit System in Seattle. Sound Transit,
established in 1995 to build a mass transit system serving the
three counties in the Seattle region, is still in a
capital-intensive phase, as it continues to complete the
infrastructure for the fixed-route portion of the system,
including construction of a light-rail line connecting Seattle
with the Seattle-Tacoma airport and extending its commuter-rail
service south of Tacoma. It has used more than $112 million in
flexible funding for rail car purchases and rail line
construction, among other things. In 2007, it was awarded $9
million in flexible funding to purchase the right-of-way for two
light-rail stations.
o Providing new services in Virginia Beach. The Virginia Beach
area, an urbanized area of about 1.3 million people in
southeastern Virginia, has significant traffic congestion due to
the northern and southern halves of the area being divided by the
confluence of the Elizabeth and James Rivers, which is crossed by
seven bridges and tunnels. The regional transit operator, Hampton
Roads Transit, uses flexible funding to provide new services to
help relieve traffic congestion. According to Hampton Roads
Transit officials, obtaining local funding for regional projects
can be difficult because cities within in the region are sometimes
reluctant to pay for services in another city. In this way,
officials said, flexible funding can better benefit the community
by making new services possible.
o Rehabilitating Pennsylvania's rail systems. At the end of 2004,
transit systems in Pennsylvania were facing operating budget
shortfalls because transit growth had outstripped the existing
revenue sources. The state's legislature adjourned before taking
action to provide either long- or short-term transit funding. In
light of this, a number of transit agencies began considering
measures to reduce their costs by decreasing service and laying
off staff and to increase income by raising fares. In an effort to
avoid service cuts and fare increases, Pennsylvania's governor
proposed transferring more than $400 million of federal highway
funds to FTA to be used on transit. For the transit agencies in
Philadelphia, Pittsburgh, and other parts of the state to receive
the funding, the MPOs in these areas had to vote to allocate the
funds to transit. In Philadelphia and Pittsburgh, these additional
funds were used on eligible capital expenses such as preventative
maintenance, allowing other state funds to be used to cover
operating deficits.
o Subsidizing rural transit services in Vermont. Vermont is a
largely rural state with a small population, and, according to the
transit officials we spoke with, has a small tax base on which to
draw for funding services such as transit. The state, however, is
committed to preserving its current quality of life--which
includes low levels of pollution and congestion--and allowing its
elderly population to "age in place," meaning that senior citizens
can remain in their homes and still have access to transportation
for medical appointments, shopping, and other necessities. To
further these goals, the state's transportation department uses a
significant amount of flexible funding on eligible capital
expenses such as preventive maintenance to help support bus
services in communities throughout the state.
In the course of our case-study review, we asked state and local
officials their views on the outcomes of flexible funding.
Officials with the MPOs and state transportation departments we
met with said that due to its broad, multimodal eligibility,
flexible funding considerably benefits their ability to plan and
fund their transportation programs, particularly because of the
challenge of finding sufficient revenues to pay for transportation
improvements. One specific advantage cited by a number of these
officials was that flexible funding can serve as an additional
funding source for transit. State officials in Vermont and
Virginia noted that flexible funding makes it possible to provide
bus service in small towns and rural areas through the funding of
expenses such as bus purchases, bus facilities construction, and
preventive maintenance. State and local officials in several
states also pointed out that flexible funding is particularly
beneficial for regional projects. For example, in Seattle,
flexible funding is especially well-suited to meeting the region's
goal of connecting transportation hubs. Although there was wide
agreement among these state and local officials that flexible
funding is beneficial, officials from two states--California and
Pennsylvania--also said that in the context of pressing needs on
both the highway and transit sides, using flexible funding on
transit may impact highway programs. In the words of one MPO
official in Pennsylvania, using flexible funding on transit is "a
zero-sum equation," because, even though it provides much-needed
resources for transit projects, it means that resources for the
highway program are reduced an equal amount. Similarly, an
official with the MPO in the Los Angeles area noted that many area
freeways are in poor condition--a function of inadequate funding
for transportation in general, and, to a small degree, the use of
flexible funding on transit. Other state and local officials,
however, said they did not believe using this funding for transit
had negatively impacted roads, and that the larger problem is
insufficient revenues for both highways and transit. Officials
with Vermont's state transportation department, for example, said
that although there are insufficient funds for road maintenance in
the state, they attributed this condition to a lack of state
funding rather than the use of flexible funding on transit.
Agency Comments
We provided a draft of this report to DOT for review. DOT
generally agreed with the report's findings. We received comments
and technical clarifications from FTA's Office of Budget and
Policy, Office of Program Management, and Office and Planning and
Environment, and from FHWA's Office of Planning, Environment, and
Realty, which we incorporated in the report as appropriate. We
also provided officials from the states and localities included in
our case studies with an opportunity to review segments of the
report pertaining to their jurisdictions. These officials provided
technical clarifications, which we incorporated in the report as
appropriate.
We are sending copies of this report to the appropriate
congressional committees, the Secretary of Transportation, and the
state and local officials with whom we spoke. We will also make
copies available to others on request. In addition, the report
will be available at no charge on the GAO Web site at
http://www.gao.gov.
If you or your staff have any questions about this report, please
contact me at (202) 512-2843 or [email protected]. Contact points
for our Offices of Congressional Relations and Public Affairs may
be found on the last page of this report. GAO staff who made key
contributions to this report are listed in appendix III.
Katherine A. Siggerud
Director, Physical Infrastructure Issues
List of Committees
The Honorable Christopher J. Dodd
Chairman
The Honorable Richard C. Shelby
Ranking Member
Committee on Banking, Housing, and Urban Affairs
United States Senate
The Honorable Barbara Boxer
Chairman
The Honorable James M. Inhofe
Ranking Member
Committee on Environment and Public Works
United States Senate
The Honorable Charles Schumer
Chairman
The Honorable Mike Crapo
Ranking Member
Subcommittee on Housing, Transportation, and Community
Development
Committee on Banking, Housing, and Urban Affairs
United States Senate
The Honorable Max Baucus
Chairman
The Honorable Johnny Isakson
Ranking Member
Subcommittee on Transportation and Infrastructure
Committee on Environment and Public Works
United States Senate
The Honorable James L. Oberstar
Chairman
The Honorable John L. Mica
Ranking Republican Member
Committee on Transportation and Infrastructure
House of Representatives
The Honorable Peter DeFazio
Chairman
The Honorable John J. Duncan Jr.
Ranking Republican Member
Subcommittee on Highways and Transit
Committee on Transportation and Infrastructure
House of Representatives
Appendix I: Funding Transfers Involve Multiple Stakeholders and
Checks to Ensure Accuracy
To examine the procedures used to transfer flexible funding from
the Federal Highway Administration (FHWA) to the Federal Transit
Administration (FTA) we spoke with officials from FHWA and FTA,
both in their Washington, D.C., headquarters and in field offices.
We also reviewed guidance on the transfer process issued jointly
by FHWA and FTA and examples of documentation used to process
requests for transfers.
Federal, State, and Local Governments Involved in Transfer Process
When states or local planning bodies fund transit projects with
funds from the Surface Transportation Program (STP) or the
Congestion Mitigation and Air Quality Program (CMAQ), they have
the option to transfer these funds to FTA for project
administration or leave them with FHWA. The transit agency
officials we spoke with said that when they are awarded STP or
CMAQ funds for a project they are implementing, they generally
prefer to transfer these funds to FTA for administration because
of their familiarity with FTA's personnel, grantmaking procedures,
and requirements and because of FTA's expertise in administering
transit projects. Requests to transfer FHWA funding to FTA are
submitted by state departments of transportation because the
funding comes from state federal-aid highway apportionments. In
deciding whether to approve transfer requests, FHWA checks to see
if projects are eligible for flexible funding, if states have
funding available for the transfer, and if the projects for which
funding is being requested are included in the statewide
transportation improvement program (a requirement for all projects
receiving federal-aid highway or transit funds).
When the transfer is carried out, budget authority--which permits
an agency to incur financial obligations such as the awarding of
grants--is transferred from FHWA to FTA, and the funds necessary
to reimburse grantees for costs incurred is transferred from the
highway account to the mass transit account of the Highway Trust
Fund. DOT recently implemented an accounting change whereby the
funds necessary to reimburse grantees are transferred to the mass
transit account as grantees incur costs, rather than all at once
when the transfer is approved. According to DOT officials, this
change is intended to slow the decline of the highway account's
balance. After the budget authority has been transferred to FTA,
FTA makes an apportionment in the grantee's account using the
grants management system. To obtain the transferred funds,
grantees must have a grant application approved by FTA.^1 The
procedures for transferring funds were detailed in joint guidance
issued by FHWA and FTA in 1999; the agencies are in the process of
preparing updated joint guidance. Figure 1 provides more detail on
the steps in the transfer process.
^1To help ensure that FHWA funds transferred to FTA can be clearly
identified, FTA no longer allows grantees to add transferred funds into
existing grants with FTA formula funds, as was the practice in some
states. FTA grantees are now required to submit a new grant application
specifically for funds that have been transferred to FTA. FTA officials
said this change will allow better tracking of flexible funding used on
transit. This change is reflected in updated FTA guidance on grant
applications.
Figure 9: Steps Required to Transfer Funds from State's FHWA Account to
Transit Agency's FTA Account
^aOther stakeholders, including the state department of transportation,
the FTA Region, and the FHWA Division take part in the transportation
planning process.
^bThe Fiscal Management Information System (FMIS) is FHWA's major
financial information system for tracking federal-aid highway projects on
a project-by-project basis.
^cThe Transportation Electronic Award Management system (TEAM) is FTA's
grants management system.
FHWA and FTA Check Project Eligibility and Have Processes in Place to Help
Ensure Accurate Transfers
Eligibility checks of projects receiving flexible funding occur before,
during, and after the transfer process. Prior to states' submitting
transfer requests, FTA and FHWA participate in the statewide and
metropolitan transportation planning processes and provide technical
assistance on issues such as funding eligibility. After states submit
requests to transfer funds, checks on project eligibility occur at FHWA
division offices when state transfer requests are received, and at the
FHWA Financial Management Office to ensure funds are available and
requests meet transferability requirements. FTA's subsequent review of
grant applications includes checking project eligibility in greater
detail.
According to FHWA and FTA officials, the following checks occur to help
ensure that the correct amount of funding and budget authority is
transferred from FHWA to FTA:
o Recording of steps in the transfer process. FHWA records
information on the amount of funds being requested, the type of
funds (such as CMAQ or STP) and the state requesting the transfer,
as well as dates of key steps in the transfer process. FTA also
tracks key information on transfer requests, including the date of
the letter requesting the transfer, the grantee receiving the
funds, the description and FTA project number of the transit
project receiving funds, the type of FHWA funding to be
transferred, and the amount to be transferred.
o Reconciliation process. Before transfers are finalized, FHWA and
FTA follow procedures to ensure the correct amounts are
transferred. The FHWA Office of Budget reconciles transfer
requests with a report generated by FMIS that documents the
amounts and the program codes to be transferred, then provides
this and other supporting information to the FTA Office of Budget.
The FTA Office of Budget also reconciles transfer requests with
information generated by FMIS. Before the FHWA Office of Budget
requests that the FHWA Office of Finance move the funding through
the Department of the Treasury, the amount to be transferred is
agreed upon by FHWA and FTA.
o Records retention. Hard copy files for each transfer request
received are maintained by FTA for 5 years and then archived;
files are maintained by FHWA for 20 years.
Appendix II: Objectives, Scope, and Methodology
To determine the degree to which flexible funding has been used on
transit and how this use varies across states and urbanized areas,
we analyzed data from FTA and FHWA. We assessed the reliability of
the data and found it was sufficiently reliable for the purposes
of this report. These data included information about the funds
transferred to FTA for project administration, funds remaining at
FHWA for use on transit projects, the overall federal-aid highway
program apportionments, and apportionments for the CMAQ and STP
programs. We obtained information from FTA's grants management
system, called the Transportation Electronic Award Management
(TEAM) system, regarding the amount of STP and CMAQ funds
transferred to FTA for project administration. These data were
provided on an annual basis, from fiscal years 1992 through
2006,^1 allowing us to calculate the amounts transferred by year
and the annual averages for each transportation authorization
bill. Additional information was provided about the population of
jurisdictions using these funds; the purpose for which funds were
spent, such as vehicle purchases, busways, rail lines, or new
service; and the proportion of FTA funding in each state that came
from flexed funds. To identify transit spending remaining under
FHWA administration, we requested that FHWA provide data from the
Fiscal Management Information System (FMIS)--its project-tracking
information system--for projects that state officials had coded as
being transit related. We used additional documentation provided
by FHWA officials to determine the source of federal funding
(i.e., the appropriation bill) and information about spending by
individual urbanized areas for the FHWA-administered transit
projects. Using these data, we calculated the total amount of
flexible funding spent on transit-related projects administered by
FHWA during ISTEA, TEA-21, and SAFETEA-LU. We did not
independently verify that all projects that states coded as having
a transit component in FMIS in fact had a transit component. We
also analyzed FHWA's spending for transit projects by the
population of the area implementing the project. In order to
determine the total amount of flexible funding used on transit
projects since 1992, we analyzed funding for transit projects
administered by FHWA and funding transferred to FTA for project
administration. We also compared the unadjusted total amounts with
the overall federal-aid highway apportionments for fiscal years
1992 through 2006 to calculate the proportion of highway funding
spent for transit projects during this period. To calculate the
proportion of flexible funding spent on transit projects under FTA
administration, we compared annual apportionment amounts for the
programs to the amount transferred. Comparisons were done both on
the national level and by state. We also used information from our
case-study interviews (see below) to provide context for
differences in the use of flexible funding among states and to
identify examples of types of projects commonly using these funds.
^1ISTEA was enacted in December 1991. As a result, our analysis began with
fiscal year 1992.
To determine how states and urbanized areas have made decisions
about what projects to fund with flexible funding and what the
outcomes of these decisions have been, we selected 9 states and 12
urbanized areas for case-study reviews. To select states, we used
three measures to determine how states' prior use of flexible
funding on transit compared: (1) the absolute dollar amount of
flexible funding transferred from FHWA to FTA for transit
projects, (2) the proportion of available flexible funding
transferred, and (3) the proportion of FTA funding in the state
that came from transferred funds.^2 We selected five states that
ranked in the top 10 for at least two of these measures for site
visits--California, Pennsylvania, Vermont, Virginia, and
Washington. We also selected two states--Iowa and Kentucky--that
were ranked among the lowest on these measures among states that
had transferred funds at least five times since the enactment of
TEA-21, and two other states--Delaware and Wyoming--that had
either never transferred funds or done so fewer than five times in
the same period. For these states, we conducted telephone
interviews. In each of these states, we chose at least one
urbanized area to include in the case study. In the states that
used a relatively high amount of transferred flexible funding on
transit, we selected urbanized areas that had used the largest
proportion of the state's flexible funding on transit; in states
that transferred relatively little or no flexible funding for use
on transit projects--because there were no urbanized areas that
had used a significant amount of transferred flexible funding on
transit--we selected the largest urbanized area in the state. In
the cases of California, Pennsylvania, and Virginia, we included
two urbanized areas in each state because each of these areas had
used significant amounts of flexible funding for transit. These
cases were selected using a nonprobability sample, and,
consequently, the results cannot be used to make inferences about
the entire population. Table 1 shows the states and urbanized
areas included in our review.
^2We used data from fiscal years 1998 through 2005 to rank states by the
absolute amount of flexible funding transferred and by the proportion of
available funds--STP and CMAQ--transferred. Data from fiscal years 1992
through 2005 were used to determine the proportion of FTA transit funding
that came from transferred flexible funds.
Table 2: States and Urbanized Areas Selected for Case Studies
State Urbanized area
States using relatively more flexible California Los Angeles
funding on transit San Francisco
Pennsylvania Philadelphia
Pittsburgh
Vermont Burlington
Virginia Virginia Beach
Northern Virginia
Washington Seattle
States using relatively less flexible Delaware Wilmington
funding on transit Iowa Des Moines
Wyoming Cheyenne
Kentucky Louisville
Source: GAO.
In each state included in our case-study review, we spoke with
officials at the FHWA division in the state and at the FTA
regional office with jurisdiction over the state, and with
relevant officials in the state department of transportation. In
the urbanized areas included in our case-study review, we spoke
with officials from metropolitan planning organizations and
transit agencies. We asked these officials about the state's or
locality's decision-making process in developing transportation
plans and programs and in choosing projects to receive flexible
funding, the mechanics of transferring funds, specific projects
funded using these funds, and the impact of flexible funding on
transportation as a whole (both transit and nontransit). We
collected and reviewed: (1) documentation from the case-study
states and urbanized areas, including information on state and
metropolitan planning processes, the criteria and procedures used
in project selection competitions, and projects funded using
flexible funding; (2) federal regulations and guidance related to
transportation planning and the CMAQ and STP programs; and (3)
prior reports on the use of flexible funding by states and
urbanized areas. We also interviewed representatives of the
following associations to obtain their views on flexible funding:
the American Association of State Highway and Transportation
Officials, the American Highway Users Alliance, the American
Public Transportation Association, the American Road and
Transportation Builders Association, the Association of
Metropolitan Planning Organizations, and the Surface
Transportation Policy Partnership.
To obtain information on the procedures used to transfer budget
authority and funds from FHWA to FTA, we interviewed officials
involved in overseeing or carrying out the steps in the transfer
process, including those with FTA's Office of Budget, Office of
Program Management, and Office of Planning and Environment; FHWA's
Office of Budget and Office of Financial Management; the Office of
the Secretary of Transportation's Office of Budget; the FTA
regions with jurisdiction over the states included in our
case-study review; and the FHWA divisions in these states. We also
reviewed joint FTA-FHWA guidance on the procedures used to
transfer funds.
Appendix III: GAO Contact and Staff Acknowledgments
GAO Contact
Katherine A. Siggerud, (202) 512-2834 or [email protected]
Staff Acknowledgments
In addition to the contact named above, Ashley Alley, Amber
Edwards, Edda Emmanuelli-Perez, Colin Fallon, Heather Halliwell,
Carol Henn, Molly Laster, Faye Morrison, Joshua Ormond, Robert
Owens, George Quinn, and Terry Richardson made key contributions
to this report.
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[23]www.gao.gov/cgi-bin/getrpt?GAO-07-772 .
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Highlights of [24]GAO-07-772 , a report to congressional committees
July 2007
HIGHWAY AND TRANSIT INVESTMENTS
Flexible Funding Supports State and Local Transportation Priorities and
Multimodal Planning
The Intermodal Surface Transportation Efficiency Act of 1991 introduced
two highway programs--the Surface Transportation Program (STP) and the
Congestion Mitigation and Air Quality Program (CMAQ)--that may be used on
both highway and transit projects and that are referred to as "flexible
funding" for the purposes of this report. GAO was asked to examine (1) the
degree to which STP and CMAQ funding has been used on transit and how this
use varies across states and urbanized areas, and (2) how states and
urbanized areas decide which projects to fund with STP and CMAQ funding
and what the outcomes of these decisions have been.
To address these issues, GAO analyzed data on flexible funding used on
transit projects from the Federal Transit Administration (FTA) and the
Federal Highway Administration (FHWA) and spoke with officials in selected
states and urbanized areas about their project-selection processes for
flexible funding and the outcomes of these funding decisions. States and
urbanized areas were selected based on their prior use of flexible
funding.
GAO is not making recommendations in this report. The Department of
Transportation generally agreed with the report's findings and provided
technical clarifications, which were incorporated in the report as
appropriate.
Since the 1991 creation of the two flexible funding programs this report
examines--STP and CMAQ--$12 billion from these programs has been spent on
transit projects, either directly through FHWA or through transfer to FTA.
This spending on transit represents 13 percent of the apportionments for
these programs since 1992 and 3 percent of the total federal-aid highway
program. However, the amount of FTA funding used in some states has been
augmented significantly by these funds; in four states, funds transferred
from these programs to FTA made up 20 percent or more of total FTA
expenditures. Nearly 80 percent of transferred funds have been used in
urbanized areas with populations over one million, and the most common
uses of these funds include purchases of transit vehicles such as buses
and rail cars, and projects related to rail lines or bus lanes.
Flexible Funding: Proportion of the Total Federal-Aid Highway Program and
Percentages Spent on Transit and Nontransit Projects, Fiscal Years
1992-2006
The 9 states and 12 urbanized areas in our case study review had formal
processes for selecting projects for flexible funding. Of these, 7
urbanized areas and 4 states selected projects for all or some of these
funds through competitive processes in which projects for different
transportation modes were evaluated and selected using established
criteria and input from transportation stakeholders. States and urbanized
areas that did not use competitions selected projects based on
transportation priorities and plans. Regarding the outcomes of decisions
on how to utilize flexible funding, state and local officials told us that
the broad, multimodal eligibility of this funding program enhances their
ability to fund their transportation priorities, particularly in light of
the challenge of finding sufficient revenues to pay for transportation
improvements.
References
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23. http://www.gao.gov/cgi-bin/getrpt?GAO-07-772
24. http://www.gao.gov/cgi-bin/getrpt?GAO-07-772
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