Urbanized Area Formula Program: Grant Application Instructions

Gordon J. Linton
Administrator

400 Seventh St. S.W.
    Washington, D.C. 20590

Chapter I: General Overview

1. AUTHORIZING LEGISLATION

1. Authorizing Legislation. Authorizing legislation is substantive legislation enacted by Congress that sets up or continues the legal operation of a Federal program or agency. Congress amends FTA's authorizing legislation every four to six years. FTA's most recent authorizing legislation is the Transportation Equity Act for the 21st Century ("TEA-21") Public Law 105-178, enacted June 9, 1998. TEA-21 was subsequently amended by the TEA-21 Restoration Act, Public Law 105-206. TEA-21 authorizes FTA programs from Federal Fiscal Year (Fy) 1998 through Fiscal Year 2003. Changes have been added to this circular to reflect the TEA-21 changes to Federal transit law and to reflect other laws that have come into effect since the circular was last published in 1996.
2. Codification of Federal Transit Laws. The Urbanized Area Formula Program was established by the Surface Transportation Assistance Act of l982. That statute and related transit laws are now codified at 49 U.S.C. Chapter 53. The statutory citation for the Urbanized Area Formula Program is 49 U.S.C. Section 5307.

   Listed below are the citations within Chapter 53 that are most commonly referred to in this circular. Also listed are citations within TEA-21 that may also be of interest to a grant applicant applying for Urbanized Area Formula Program funds.

   Subject	Citation
   	49 U.S.C.
   Metropolitan Planning Program	Section 5303
   Urbanized Area Formula Program	Section 5307
   Clean Fuels Formula Program	Section 5308
   Capital Program	Section 5309
   Elderly and Persons with Disabilities Program	Section 5310
   Nonurbanized Area Formula Program	Section 5311
   State Planning and Research Program	Section 5313(b)
   Subject	Citation
   Transit Employee Protective Certification	Section 5333(b)
   National Transit Database	Section 5335
   	TEA-21
   Job Access and Reverse Commute Program	TEA-21, Section 3037
   Over-the-Road Bus Accessibility Program	TEA-21, Section 3038
   Transportation and Community and System Preservation Pilot Program	TEA-21, Section 1221

    

2. DEFINITION OF TRANSIT. The terms "transit" and "mass transportation" are used interchangeably in transit law. The term "mass transportation" is defined as "transportation by a conveyance that provides regular and continuing general or special transportation to the public, but does not include school bus, charter, or sightseeing transportation." (Sections 5302 (a)(7) and (a)(14))
3. THE URBANIZED AREA FORMULA PROGRAM. The Urbanized Area Formula Program makes Federal resources available to urbanized areas and to the Governors for transit capital and operating assistance in urbanized areas and for transportation-related planning. An urbanized area is an incorporated area with a population of 50,000 or more that is designated as such by the Bureau of the Census.

For urbanized areas with 200,000 in population and over, Urbanized Area Formula Program funds are apportioned and flow directly to a designated recipient(s) selected locally to apply for and receive Federal funds. For urbanized areas under 200,000 in population, the funds are apportioned to the Governor of each state for distribution. A few areas with under 200,000 in population have been designated as transportation management areas and receive apportionments directly. See Chapter II, paragraph 2, "Designated Transportation Management Areas." Chapter IV describes the apportionment process.

Under this formula program, state and local agencies are permitted to:

1. allocate program resources among recipients in an urbanized area without Federal involvement;
2. identify and select the projects (capital, operating, or planning) to be included in a metropolitan and a statewide transportation improvement program;
3. self-certify that various statutory requirements have been or will be met; and
4. submit a single grant application and one budget for the Section 5307 program in lieu of many individual project applications and budgets.

The Federal role in program management activities is, to the maximum extent feasible, limited and non-intrusive. At the grant application stage, the application review focuses on two aspects: whether the grant applicant provided the information qualifying it as eligible to receive and administer funds from the FTA, and whether the activities in the grant applicant's proposed budget are eligible under 49 U.S.C. Chapter 53. Many of the eligibility issues are met by the grant applicant's certification that it does qualify or that it will comply with requirements. FTA follows up with checks of the self-certifications after the grant has been awarded. FTA legislation requires the FTA to conduct audits or have recipients of FTA grants to have independent audits conducted on an annual basis. Legislation also requires the Secretary of Transportation to conduct post-grant reviews and evaluations of the grantee's compliance with certifications and other requirements at least once every three years. When deficiencies in complying with Federal requirements are identified through FTA evaluations or through independent audits, FTA is authorized to provide technical assistance to aid a grant recipient in complying with Federal requirements.

In recent years there has been increased emphasis on metropolitan and statewide planning as the basis for project selection. Projects to be funded by FTA must have been part of a local planning process that included clear identification of needs and the sources of funds supporting a project and a well-publicized opportunity for the public to comment on the plans. FTA provides technical assistance through the presence of 10 Regional Offices, training courses, and regional meetings to assist the grantee in complying with administrative and legislative requirements. The Regional Office addresses and telephone numbers and the states they serve are listed in Chapter VIII.

4. APPROPRIATIONS. Congress appropriates funds for FTA programs annually, and Urbanized Area Formula Program funds are apportioned annually by FTA. Funds apportioned by FTA under the Urbanized Area Formula Program remain available to the recipient for four fiscal years--the year of the apportionment plus three additional years. Agencies submit grant applications to FTA for funds apportioned to their respective urbanized areas. Upon approval by FTA of the grant application and execution of the grant agreement, FTA obligates the funds to the grant applicant. After four years, funds apportioned but not obligated in grants by FTA will no longer be available for obligation to the urbanized area to which they were originally apportioned. These funds will be added to the amount available to FTA for re-apportionment nationally in the next fiscal year.
5. AVAILABILITY OF "FLEXIBLE" FUNDS. Flexible funding categories are those programs authorized under Title 23 U.S.C. (the Federal-Aid Highway program) whose funds may be used for either transit or highway projects.

   Flexible fund programs include the Surface Transportation Program (STP) (23 U.S.C. Section 133); Donor State Bonus (Section 157); Interstate Maintenance (Section 119); Bridge Replacement and Rehabilitation (Section 144); National Highway System (Section 104(c)); Substitute Highway (Section 103(e)(4)(B)); and the Congestion Mitigation and Air Quality Improvement (CMAQ) program (Section 149). Although these Federal Highway Administration (FHWA) programs have intermodal flexibility, there are limitations on the use of at least some portions of some programs. (As an example, there are funds in some programs available only to rural and only to urbanized areas.)

   The flexible funds may be used for any non-operating purpose eligible under the Urbanized Area Formula Program, the Elderly and Persons with Disabilities Program (49 U.S.C. Section 5310), and the Nonurbanized Area Formula Program (49 U.S.C. Section 5311). However, the CMAQ funds may also be used for start-up implementation of new transit services.

   Flexible funds transferred to FTA require the same non-Federal matching share that such funds would require if they were used for highway purposes and administered by the FHWA. When the flexible funds transferred are to be used for transit projects in urbanized areas under the Urbanized Area Formula Program, the funds are administered under the requirements guiding the Urbanized Area Formula Program.

   More information about these flexible funds and procedures for transferring and administering them appears in Appendix E, "Procedures Related to Flexible Funding."

6. FEDERAL SHARE OF PROJECT COSTS.

1. Planning and Capital Projects. The Federal share for planning and capital assistance projects under the Urbanized Area Formula Program is 80 percent of the net project cost, but a grant applicant is permitted to provide additional local funds at the grant applicant's option. Net project cost is that portion of the cost of a project that cannot be reasonably financed from revenues. After the Federal share is established, the remainder of the net project cost must be provided from sources other than Federal funds, unless another Federal statute permits the use of specific Federal funds for local share. ( See paragraph 7 below concerning local share.)
2. Exceptions. There are exceptions to the 80 percent Federal share for capital projects when FTA funds are providing assistance, as described below. There are also exceptions to the 80 percent Federal share when flexible funds from certain of the Federal Highway Administration programs are being used. (See Appendix E, "Procedures Related to Flexible Funding.")

The exceptions in the FTA share ratio are as follows:

1. Americans with Disabilities Act (ADA). The Federal share is 90 percent for the cost of vehicle-related equipment attributable to compliance with the Americans with Disabilities Act of 1990 (49 U.S.C. Section 5323(i)); also, see paragraph (2) below).
2. Clean Air Act (CAA). The Federal share is 90 percent for the cost of vehicle-related equipment attributable to compliance with the Clean Air Act Amendments of 1990 (49 U.S.C. Section 5323(i)).

   Grantees may choose from two options in calculating the Federal and local shares for vehicle-related equipment purchased to be in compliance with the ADA and CAA. In one option--applicable to the purchase of buses, vans, and rail vehicles and the purchase of equipment for such vehicles--the grant applicant may itemize the cost of specific, discrete, vehicle-related equipment being purchased to be in compliance with the ADA and CAA. The Federal share is 90 percent of the cost for these itemized elements.

   In the other option, applicable for the purchase of buses and vans, the grant applicant may apply for an 83 percent Federal share of the total vehicle cost. The 83 percent is a blended figure representing 80 percent of the vehicle and 90 percent of the vehicle-related equipment to be acquired in compliance with the ADA and CAA.

   FTA considers vehicle-related equipment to be equipment located on the vehicle.

3. Bicycle Facilities. The Federal share is 90 percent for those projects or portions of projects designed to:
1. provide access for bicycles to transit facilities;
2. provide shelters and parking facilities for bicycles in or around transit facilities; or
3. install racks or other equipment for transporting bicycles on transit vehicles (49 U.S.C. Section 5319).

When the project involves bicycle access to transit and the access is made with funds required to be expended as a "transit enhancement," the Federal share will be 95 percent, as provided by TEA-21 at Section 3019. (See the discussion of transit enhancements at Chapter V, paragraph 5q.)

3. Operating Assistance.

1. Federal Share for FY 1998 Funds. With regard to FY 1998 funds--which are available through FY 2001, the year in which the funds lapse--for areas with populations 200,000 and over, the Federal share may not exceed 50 percent of the net project cost, and the amount of FTA assistance must be within the urbanized area's apportionment limitation. For areas with populations under 200,000, the Federal share for an operating assistance grant providing FY 1998 funds may not exceed 50 percent of the net project cost, and the assistance must be within the apportionment limitation; the Federal share may also be 80 percent of the net project cost, with no limitation, or both, depending upon the choice of the small urbanized area.
2. Federal Share for FY 1999 Funds, and Thereafter . With regard to FY 1999 funds, and funds appropriated thereafter, operating assistance is available only to urbanized areas with populations under 200,000, and the Federal share may not exceed 50 percent of the net project cost, with no limitation on the amount of the apportionment that may be expended for operating assistance.

   Exception. In addition, TEA-21 (at Section 3027(c)) provides an exception to the nonavailability of operating assistance in urbanized areas with populations 200,000 and over. Please see Appendix D, "Operating Assistance Projects."

7. LOCAL SHARE. The local share of the net project cost must be provided by the grant applicant in cash (or in kind) from sources other than Federal funds, or from non-farebox revenues from the operation of transit service, such as advertising and concession revenues. Any public or private transit system funds provided must be solely from undistributed cash surpluses, replacement or depreciation funds, or reserves available in cash, or new capital. The market value of real property integral to the project can be counted as a contribution toward local share, as can other in-kind contributions. Detailed rules for eligibility, valuation, and accounting for the local matching share are described in 49 C.F.R. Section 18.24, "Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments." This document is referred to as the "Common Rule."

1. Revenue Bond Proceeds as Local Share. For FY 1999 through 2003, TEA-21 authorized a grant applicant requesting assistance under the Urbanized Area Formula Program or the FTA Capital Program ( 49 U.S.C. Section 5309) to use the proceeds from the issuance of revenue bonds as the local share for a capital project, with prior FTA approval. Farebox receipts are one type of revenue that may be used to secure the bonds. Under this TEA-21 provision, using proceeds of the revenue bonds as local share will be approved only if the aggregate amount of financial support from the state and affected local governmental authorities in the urbanized area during the next three fiscal years is not less than the aggregate amount provided by the state and affected local governmental authorities in the urbanized area during the preceding three fiscal years (as is made evident in the State Transportation Improvement Program).
2. Credit for Toll Revenue Expenditures. Section 1111 of TEA-21 made permanent earlier statutory provisions that permit a state to count as a credit toward a project's local share certain expenditures the state makes with toll revenues (Section 1111 amended Section 120(j) of Title 23 U.S.C.). The amount of credit toward local share to be earned by a state, is based on revenue generated by toll authorities within the state that are used by the authorities to build, improve, or maintain highways, bridges, or tunnels that serve interstate commerce. The state has four fiscal years to use the credit. A grant applicant wishing to apply the provisions of Section 120(j) should discuss with its state Department of Transportation the availability of toll credits for use as local share to match FTA grants. The Federal Highway Administration (FHWA) oversees the determination of toll revenue credit within each state.
3. Use of Program Income as Local Share. Program income generated by an earlier grant can be used as the local share in a subsequent eligible transit project. Program income means revenue generated directly or indirectly from grant-supported activities (i.e., income generated by grant funds after they have been applied to authorized grant purposes). In general, program income includes income from fees for services performed, from the use or rental of real or personal property acquired with grant funds, from advertising and concessions, and from the sale of commodities or items fabricated under a grant agreement. Except as otherwise provided in regulations, program income does not include interest on grant funds; nor does program income include rebates, credits, discounts, refunds, etc., and interest earned on any of them. FTA Circular 5010.1C, "Grant Management Guidelines," discusses program income in some depth, as does the Common Rule (49 C.F.R. Part 18) at Section 18.25. FTA Circular 5010.1C notes that a grantee may retain program income so long as it is used for transit purposes, that is, for allowable planning, capital, and operating expenses. Accordingly, FTA considers the use of program income as local share for an FTA grant an allowable expense. Program income cannot be used as the local share for the grant from which it was derived.

   The grantee's accounting system must be capable of identifying program income and the purpose for which it was used. The grantee must account for program income in its accounting system, which is subject to audit.

   Farebox revenue is a special form of program income. In a grant application requesting operating assistance, farebox revenue must be applied to operating costs to reduce the figure for total operating cost of the project, in order to arrive at the net project cost. See Appendix D, "Operating Assistance Projects," for assistance in calculating the net project cost of a grant requesting operating assistance. In no event may farebox revenue be used as local share, although farebox revenue may be used as noted earlier in paragraph 7a to back bonds issued in support of capital projects, and the bond proceeds may be used as local share.

   The unique treatment of certain advertising and concession revenues should be noted. While all revenues from these sources may be used as local share, the revenues a grantee earns from these sources in excess of the amounts earned from the same sources in (the grantee's) Fiscal Year 1985 may be used as local share or for any other purpose the grantee elects, including non-transit activities. That is to say, these excess revenues are a special form of program income recognized by Federal transit law.

4. Not Program Income. Revenue generated by activities that are not grant supported is not program income (e.g., operation of charter or school buses when these activities are permissible).

   Sales proceeds from the disposition of FTA-funded equipment and excess real property generally are not considered program income and may be retained as program income only if the purpose of the grant is achieved by the sale of the asset, as in some joint development activities. Sales proceeds may be retained to undertake a like-kind exchange also (see Appendix F), but the sales proceeds are not program income and are not to be used as local share; they may be used to reduce the gross project cost.

   TEA-21 provides an additional option for handling proceeds from the sale of federally-funded assets. The new provision, amending 49 U.S.C. Section 5334(g), allows a grant recipient, with prior FTA approval, to use the net proceeds of the transaction to reduce the gross project cost of subsequent federally-assisted capital transit projects. Thus, such proceeds are not for use as local share. An example grant application applying the proceeds appears in Appendix F as "Proceeds from Sale of Assets." Also, see FTA Circular 5010.1C, "Grant Management Guidelines," for a discussion of the provision of TEA-21 regarding use of such proceeds.

5. Use of Federal Funds as Local Share. In a very limited number of situations, Federal funds may be eligible for inclusion in the local match. Such use is dependent upon agreement by the Federal agency. As an example, Community Development Block Grant funds administered by the Department of Housing and Urban Development (HUD) may be used to provide the local share for Federal transit projects so long as the transit activities are eligible for assistance under the Community Development Program, and in compliance with HUD regulations, "Community Development Block Grants" 24 C.F.R. Part 570. (See 42 U.S.C. Section 5305(a)(9) and 24 C.F.R. Section 570.201(g)).
6. Deferral of Payment of Local Share. A grant applicant may request that the local share for a project be deferred until 100 percent of the Federal funds have been drawn down. A request for the deferral should accompany the grant application. If a grant has already been approved, a written request to FTA must be made. Approval is contingent upon the deferral's resulting in benefits to transit and upon the grant applicant's demonstrating that the grant applicant has the financial capacity to complete the project. The deferred local share policy is not applicable to projects with Full Funding Grant Agreements. A grant applicant wishing to apply the Deferred Local Share initiative to a project should refer to 57 Fed. Reg., 30880, "Policy Statements on Local Share Issues," July 10, 1992.

8. GRANT APPLICATION PROCESS

1. Complete Application. Chapter VI lists the specific grant application information that must be submitted in order to present a complete grant application under the Urbanized Area Formula Program. For a grant application to be complete, there must be a planning basis for every project or group of projects. All planning, programming, and ancillary activities must be completed. All requisite certifications and documentation must be completed, and the application must be in approvable form with all required information and submissions on hand, except for the labor protection certification, which is issued by DOL. All intergovernmental reviews and all applicable civil rights and anti-drug requirements must have been met. Some portions of a grant application require attention well before an actual application is submitted to FTA. Items that require early attention include appearance of the capital or operating assistance project in a metropolitan Transportation Improvement Program (TIP) that has been approved by the Metropolitan Planning Organization (MPO) and the Governor and in a state transportation improvement program (STIP) that has been approved jointly by FTA and FHWA; appearance of a planning project in a Unified Planning Work Program; environmental reviews; applicable civil rights requirements; and clean air program requirements for conformity with the State Implementation Plan (SIP), for non-attainment and maintenance areas.
2. QUARTERLY RELEASE CYCLE. FTA employs a quarterly release cycle for the Urbanized Area Formula Program. If a complete grant application is submitted to the FTA Regional Office by the first business day of the calendar quarter, FTA will approve and release the grant by the last business day of the quarter. The Federal fiscal year begins on October 1; thus, October begins the first quarter of the Federal fiscal year. The other first days of a quarter are, therefore, January 1, April 1, and July 1, or, in the event of a holiday or weekend, the first business days thereafter. Sometimes the enactment date of the Department of Transportation's annual appropriation requires adjustments in the application submission and processing dates for the first quarter.

   Two factors would delay FTA's approval of a complete application beyond the end of the quarter. First is a failure by the Department of Labor to issue a certification of the labor protective arrangements where such certification is a prerequisite to a grant approval, and second is the failure of FHWA to actually transfer flexible funds.

   Incomplete grant applications will not be processed, but if the missing components are supplied, the grant applications will be processed in the next quarter.

   In order to expedite the grant approval process within the quarterly approval structure, grant applications that are complete and have received the required Department of Labor certification may be approved before the end of a quarter.

   It is the policy of FTA to expedite grant application reviews and speed program delivery by reducing the number of grant applications. To this end, FTA strongly encourages grant applicants to submit only one application per fiscal year for each formula program, i.e., a single application per year for all the grant applicant's Section 5307 activities. The single application should contain the fiscal year's capital (including flexible funds), planning, and operating elements.

3. Electronic Award and Management. FTA is implementing a series of automation improvements in the grant award and management process that is designed to improve customer service and efficiency of program delivery. FTA provides a streamlined electronic interface between grantees and FTA that allows complete electronic grant application submission, review, approval, and management of all grants. Grantees may inquire about the status of grants, file their required quarterly financial status and narrative progress reports, and make annual certifications and assurances through the system. The Department of Labor, also participating in the program, receives requests electronically for Transit Employee Protective Certification of projects. DOL will electronically issue the Transit Employee Protective Certifications.
4. Certifications and Assurances. The FTA is required to obtain specific certifications and assurances pertaining to the Urbanized Area Formula Program (as well as to other FTA programs). As noted in paragraph c above, grantees now are able to provide electronically each certification and assurance that will apply to the applicant's grants for the particular year. Certifications and assurances are discussed in Chapter V at paragraph 3.

9. PROGRAMMING OF ALL URBANIZED AREA FORMULA FUNDS. If there are Urbanized Area Formula Program funds that remain unprogrammed in an urbanized area (that is, are not yet in an approved STIP), FTA will not allocate discretionary bus and bus related funds under the FTA Capital Program (49 U.S.C. Section 5309) to the area until all the available Urbanized Area Formula Program funds have been programmed.
10. OTHER FUNDS AVAILABLE FOR TRANSIT PROJECTS. TEA-21 established several new transit-related programs. Funds from these programs may be available to support projects assisted with Urbanized Area Formula Program funds and Urbanized Area Formula Program funds may complement the use of funds from the newly established programs. A brief discussion of the new programs follows.

1. Clean Fuels Formula Program. The Clean Fuels Formula Program was authorized by TEA-21 to support the purchase or lease of clean fuel buses and facilities and the improvement of existing facilities to accommodate clean fuel buses. Eligible grant recipients are transit operators that are public bodies providing transit service in either urbanized or non-urbanized non-attainment or maintenance areas as defined by the Clean Air Act. (42 U.S.C. §§ 7401 et seq. and scattered sections of 29 U.S.C.)

   A clean fuel vehicle means a vehicle powered by compressed natural gas, liquefied natural gas, biodiesel fuels, batteries, alchohol-based fuels, hybrid electric, fuel cell and certain clean diesel, or other low or zero emissions technology, and which the Environmental Protection Agency (EPA) has certified sufficiently reduces harmful emissions.

   This is a formula program. The formula is applied on the basis of the grant applications submitted. Grant applications must be submitted by January 1 of each fiscal year. By February 1 of each fiscal year, FTA must apportion funds to the grant applicants. Two-thirds of the funds available are to be apportioned to grantees in urbanized areas with populations of a million and over, and one-third is to be apportioned to grantees in urbanized areas with populations under a million. Formula weighting factors, distinguished between the over-a-million and under-a-million populations, include proportion of the grant applicant's bus fleet to the total number of vehicles of all grant applicants in the population division, severity of non-attainment for the urbanized area in which the project is located, and proportion of bus passenger miles of the total bus passenger miles of all grant applicants in the population division. There are limitations within the program on amounts that may be awarded for single grants and for some types of projects.

   The Clean Fuels Formula Program begins with FY 1999 and is authorized at $200 million a year for the remaining five years of TEA-21. (A subsequent Congressional appropriation may result in an amount available to a program that is less than the amount authorized.) Funds are available to a project for the year of appropriation, plus one year more. FTA will develop regulations and guidance for the program's administration.

2. Job Access and Reverse Commute Program. This program is to develop additional transportation services needed to connect welfare recipients and other persons of low income to jobs and needed support services. The program is authorized in Section 3037 of TEA-21. TEA-21 authorizes $150 million annually, beginning with FY 1999. (A subsequent Congressional appropriation may result in an amount available to a program that is less than the amount authorized.) A "job access" project is a project designed to transport welfare recipients and eligible individuals with low income to and from jobs and activities related to their employment. A "reverse commute" project is a project related to the development of transportation services designed to transport residents from urban areas, urbanized areas, and nonurbanized areas to opportunities for employment in suburbs. Reverse commute projects are not tied to the income of the commuter, although the number of welfare recipients in the area to be serviced by the project is to be taken into account. Up to $10 million a year is authorized for reverse commute projects.

   The program has a 50 percent Federal share. There will be a competitive grant selection process. The portion of the total project cost that is not funded by the Job Access and Reverse Commute Program may be derived from amounts appropriated or made available to another department or agency of the Federal Government (not the Department of Transportation), if the funds are eligible to be expended for transportation. The requirements of the Urbanized Area Formula Program and all planning requirements under Sections 5303 through 5306 apply to the grants awarded for the Job Access and Reverse Commute Program. FTA will issue guidance and application instructions.

3. Over-the-Road Bus Accessibility Program. TEA-21 established the Rural Transportation Accessibility Incentive Program, hereinafter referred to as the Over-the-Road Bus Accessibility Program. This program is designed to assist operators of over-the-road buses to finance the incremental capital and training costs of complying with the Department of Transportation's anticipated final rule regarding accessibility of over-the-road buses required by the Americans with Disabilities Act. The Federal share of these projects is 50 percent of the project cost.

   Beginning in FY 1999, funding will be available for operators of over-the-road buses in intercity fixed route service, starting with $2 million in FY 1999 and increasing to $5.25 million in FY 2003. In addition, beginning in fiscal year 2000, an additional $6.8 million will be available for FY 2000 through FY 2003 for operators of other over-the-road bus service, including local commuter service and charter or tour service. Total funding authorized through FY 2003 is $17,500,000 for fixed route over-the-road bus operators and $6,800,000 for operators of other over-the road bus services. A national solicitation for applications will be conducted, and grant recipients will be selected on a competitive basis. FTA will issue implementing guidance.

4. Transportation and Community and System Preservation Pilot Program. TEA-21 at Section 1221 established a pilot program in the Highway program "to investigate and address the relationships between transportation and community and system preservation and identify private sector-based initiatives." The allocation of funds is available for obligation for any project eligible for funding under title 23, the highway program, or under chapter 53 of title 49, U.S.C., the transit program. States, local governments, and Metropolitan Planning Organizations (MPOs) are eligible for the funds.

   The purposes of this new program are to improve the efficiency of the transportation system; reduce transportation's impacts on the environment; reduce the need for costly future investments in public infrastructure; provide efficient access to jobs, services, and centers of trade; and examine development patterns and identify strategies to encourage private sector development patterns that achieve the first four purposes. The initiative includes a research program to investigate these relationships; funds for states, MPOs, and local governments to create strategies to integrate transportation and community and system preservation plans and practices; and funds to address transportation efficiency and community and system preservation. Types of projects listed as eligible for funding include "corridor preservation activities . . . necessary to implement transit-oriented development plans."

   TEA-21 authorizes an apportionment from the Highway Trust Fund of $20 million for FY 1999 and $25 million for each of fiscal years 2000 through 2003. The Federal Highway Administration issued implementing guidelines in the Federal Register on September 16, 1998 (63 Fed. Reg. 49632 et seq.)(1998).

Chapter II: Applicant Eligibility

1. DESIGNATED RECIPIENTS. A primary eligibility requirement for funding under the Urbanized Area Formula Program is the designation of a grant recipient. The recipient (or recipients) so designated in each urbanized area must be a public body and have the legal authority to receive and dispense Federal funds in the urbanized area. Designations submitted to FTA are one-time submissions and need not be resubmitted. More specific information regarding designated recipients follows.
   1. The Governor, responsible local officials, and publicly owned operators of transit services jointly will designate a recipient to apply for, receive, and dispense funds for "transportation management areas," pursuant to 49 U.S.C. Section 5307(a)(2). Generally, a transportation management area is an urbanized area with a population of 200,000 and over. Please see paragraph 2 for a discussion of transportation management areas. When an urbanized area extends into more than one state and the transit providers are also located in more than one state, more than one Governor will participate in the designation of the designated recipient(s).
      1. To the extent possible, a single recipient should be designated for each Transportation Management Area or for contiguous areas; and
      2. Any statewide or regional agency responsible under state law for financing, construction, or operation directly, by lease, contract, or otherwise of public transit services will be named a designated recipient by the Governor, responsible local officials, and providers of publicly owned transit services.
   2. The Governor or the Governor's designee(s) is (are) the designated recipient(s) for urbanized areas under 200,000 in population, except for designated Transportation Management Areas that are under 200,000. See paragraph 2 below for information about Transportation Management Areas.
   3. Designations remain in effect until they are amended or rescinded.
   4. If the documentation needed to designate a recipient has not been submitted, or if an amendment or rescision requires that new documents be submitted, the new documentation must include the following:
      1. For areas 200,000 and over in population
         1. a letter expressing the Governor's concurrence, and
         2. concurrence in the designated recipient by the providers of publicly owned transit service in the urbanized area, and an appropriately certified resolution of the Metropolitan Planning Organization (MPO) concurring in the designation.
      2. For areas under 200,000 in population, if the Governor chooses to retain designated recipient status, no documentation need be submitted. Alternatively, the Governor may choose to designate one or more local recipients for each of these areas or may delegate authority to another state agency. That agency may, in turn, retain its designation or redesignate individual local recipients for each area. In each instance, such designations must be documented by letter from the Governor to FTA.
      3. For each designated recipient, an Opinion of Counsel must be submitted certifying the entity's legal capacity to perform the functions of a designated recipient.

2. DESIGNATED TRANSPORTATION MANAGEMENT AREAS. All urbanized areas with populations of 200,000 and over have been designated as transportation management areas (TMAs) in accordance with 49 U.S.C. Section 5305(a). These designations were made in 57 Fed. Reg. 21160, May 18, 1992. Additional areas may be designated as TMAs by the Secretary of Transportation upon the request of the Governor and the Metropolitan Planning Organization (MPO) designated for such area or the affected local officials.

   Guidance for setting the boundaries of TMAs is contained in the joint transportation planning regulations contained in 23 C.F.R. Part 450. In some cases, the TMA boundaries that have been established by the MPO for the designated TMA also include one or more urbanized areas with populations under 200,000. Where this situation exists, the discretion of the Governor to allocate "Governor's Apportionment" funds for urbanized areas under 200,000 in population is restricted to those areas with populations under 200,000 that are not located within the boundaries of a TMA.

   A recipient or recipients must be designated to dispense the Urbanized Area Formula Program funds attributable to TMAs. Those areas that do not already have a designated recipient must name one and notify the appropriate FTA Regional Office of the designation. This would include those urbanized areas under 200,000 in population that may receive TMA designation independently, or those under 200,000 that are included within the boundaries of a larger designated TMA.

   In order for the FTA and Governors to know which urbanized areas under 200,000 in population are included within the boundaries of an existing TMA, so the areas can be identified in future notices of apportionment published by the FTA, each MPO whose TMA planning boundaries include smaller urbanized areas has been asked to identify these urbanized areas to the FTA. Governors' apportionment funds allocated to these smaller urbanized areas may not be redistributed by the Governor without the concurrence of the small urbanized area involved. However, if these funds are remaining available for obligation at the beginning of the 90-day period before the expiration of the period of availability of such amounts, they shall be available to the Governor for use throughout the state.

3. APPLICANTS OTHER THAN DESIGNATED RECIPIENTS. A designated recipient may authorize another public agency to be the direct applicant for Urbanized Area Formula Program funds. This authorization may be made on a one-time basis or at the time of each application submission, at the option of the designated recipient. FTA must be informed of the arrangement at the time the grant application is submitted. A public agency, other than the designated recipient, may apply for some or all of the urbanized area's Urbanized Area Formula Program apportionment if:

1. The designated recipient authorizes the public agency to do so;
2. The public agency submits its own grant application; and
3. Upon award of the grant, the designated recipient and the public agency execute a supplemental agreement, which releases the designated recipient from any liability under the grant agreement. The language FTA uses for a supplemental agreement appears in Appendix  F.

4. PASS-THROUGH ARRANGEMENTS. An Urbanized Area Formula Program grantee, whether a designated recipient or not, may choose to pass its grant funds through to another agency to carry out the purposes of the grantee's agreement with FTA. To do this, the grantee must enter into a written agreement with the subrecipient that assures FTA that the grantee will be able to comply with its obligation to satisfy the requirements of the grant agreement. A grantee choosing to pass through funds must inform the FTA Regional Office of the arrangement in the grant application or through other documentation. The grantee must also inform the FTA of any changes in that arrangement during the life of the grant. A pass-through arrangement does not relieve the grantee of its responsibilities to carry out the terms and conditions of the grant agreement.

Chapter III: Eligible Grant Activities

1. GENERAL. Grants under the Urbanized Area Formula Program are available to finance planning projects and to finance capital projects. Capital projects entail acquisition, construction, improvement, and maintenance of facilities and equipment for use in transit. Grants are also available in urbanized areas under 200,000 in population to finance transit-related operating costs. A discussion of the many types of projects for which FTA provides assistance pursuant to the Urbanized Area Formula Program follows. Operating assistance projects and planning projects are described first; the remainder of the chapter addresses eligible capital projects.

   Every capital and operating project for which assistance is requested from FTA must first be included in a metropolitan transportation improvement program (TIP) approved by the Metropolitan Planning Organization (MPO) and in a statewide transportation improvement program (STIP) approved by the Governor and approved jointly by the FTA and the FHWA. A planning project need not be programmed in the TIP and STIP, but must be programmed in the appropriate Unified Planning Work Program endorsed by the MPO. A planning study assisted with capital funds administered by the FHWA (for example, funds under the Surface Transportation Program (STP), Congestion Mitigation and Air Quality (CMAQ), or National Highway Systems (NHS) programs), must be programmed both in the Unified Planning Work Program and the TIP.

2. OPERATING ASSISTANCE. Effective with FY 1999 funds, the Urbanized Area Formula Program provides operating assistance only for urbanized areas with populations under 200,000. There is no limitation on the amount of a grant recipient's apportionment that may be used for operating costs. In general, operating assistance is no longer available to urbanized areas with populations of 200,000 and over.

   Appendix D. Further discussion of operating assistance procedures appears in Appendix D, "Operating Assistance Projects."

3. PLANNING ASSISTANCE.

1. Eligible Projects. Urbanized Area Formula Program funds are available for contracts and grants for the planning, engineering design and evaluation of transit projects and for other technical transportation-related studies. Eligible activities include, but are not limited to, studies relating to management, operations, capital requirements and economic feasibility; preparation of engineering and architectural surveys, plans and specifications; evaluation of previously funded projects; and other similar or related activities prior to and in preparation for the construction, acquisition, or improved operation of transit systems, facilities, and equipment. Planning assistance is available at the 80/20 Federal/local share ratio.
2. Funding. The basic comprehensive transportation planning program--including pass-through to transit operators for work activities best performed by the operators--should continue to be funded through the FTA formula planning program, Metropolitan Planning, authorized by 49 U.S.C. Section 5303. However, Urbanized Area Formula Program funds may be used to supplement these planning activities. Use of Urbanized Area Formula Program funds is encouraged for technical studies of special interest to the operator, such as maintenance plan development, operational service planning, and management and operation planning studies; for example, the public transportation management system, when the planning resource authorized by 49 U.S.C. Section 5303 is insufficient to meet such needs. Similarly, where a high-cost study is proposed, such as one for major capital investments, Urbanized Area Formula Program funds may be used to supplement available separate formula planning funds and FHWA planning ("PL") funds.
3. Planning Emphasis Areas. FTA, cooperatively with FHWA, develops Planning Emphasis Areas (PEA's), which identify national areas of strategic focus that warrant consideration in the metropolitan and statewide transportation planning processes. PEA's are suggested to state and local officials and transit operators as a guide to considering national emphasis areas during statewide and metropolitan planning. As PEA's are identified and promoted for use in planning processes, they are typically published in FTA's Annual Apportionment Notice; this is posted on the FTA Home Page at www.fta.dot.gov. The last set of PEA's issued before this circular's publication appeared in the FTA 1998 Notice of Apportionments and Allocations, in the Federal Register on December 5, 1997 (62 Fed. Reg., 64456,(1997)). In addition to periodically updating PEA's, FTA also works with FHWA and stakeholders in preparing guidance and resource materials for relating the PEAS's to statewide and metropolitan planning.

4. CAPITAL PROJECTS. Urbanized Area Formula Program funds are available for a wide range of capital assistance activities. Examples of eligible activities that indicate the breadth of the program are provided in paragraphs a and b below. In addition, funds may be used to support the cost of "preventive maintenance," discussed in paragraph 4c, and "transit enhancements," discussed in Chapter V in paragraph 5q. Urbanized Area Formula Program funds may be used to acquire "associated capital maintenance items" (spare parts) as outlined in paragraph 4g. As noted in Chapter I, capital funding is available at an 80 percent Federal share. Additionally, capital funding at a Federal share of 90 percent is available for vehicle-related equipment purchased to be in compliance with the Americans with Disabilities Act of 1990 and the Clean Air Act Amendments of 1990, and for projects improving access for bicycles to transit facilities. Bicycle access to transit, when the project is a transit enhancement project, is assisted with a Federal share of 95 percent. The Federal share may differ for some flexible funds transferred from FHWA; see Appendix E, "Procedures Related to Flexible Funding."

1. Bus and Bus-Related Activities:
1. Public buy-out of private operators;
2. Replacement of buses;
3. Overhaul of buses (includes paratransit vehicles);
4. Rebuilding of buses;
5. Expansion of bus fleets;
6. Crime prevention and security equipment;
7. Purchase and installation of service and support equipment;
8. Accessory and miscellaneous equipment such as mobile radio units, bus stop signs, supervisory vehicles, fareboxes, computers, and shop and garage equipment;
9. Construction of maintenance facilities, including land acquisition, design, engineering, demolition;
10. Rehabilitation of maintenance facilities, including design and engineering, land acquisition, and relocation;
11. Construction of other facilities, e.g., transfer facilities, intermodal terminals and bus shelters, including design and engineering, land acquisition, etc.; and
12. Capital support equipment, including computer hardware, software, bus diagnostic equipment, and other equipment that enhances operating efficiency.
2. Fixed-Guideway Systems
1. Rolling stock, including rail cars, locomotives, work trains, ferryboats;
2. Overhaul of vehicles;
3. Rebuilding of vehicles;
4. Track;
5. Line equipment;
6. Line structures;
7. Passenger stations, depots and terminals, including ferry terminals;
8. Signals and communications;
9. Power equipment and substations;
10. Projects to improve safety and security;
11. Operational support, including computer hardware and software;
12. Systems extensions or new system construction, including engineering, demolition, etc.; and
13. Land acquisition, design, and construction for fixed guideways.

The lists above are representative of eligible projects, but are not all-inclusive. Please contact the appropriate FTA Regional Office regarding the eligibility of other projects.

If a program category represents an individual project, it should include all of its associated costs, including land acquisition, relocation, demolition, engineering, construction, construction management, equipment acquisition, force account, and administration.

3. Preventive Maintenance. Preventive maintenance, an expense that became eligible for FTA capital assistance for one year with the DOT 1998 Appropriations Act, was established as eligible for FTA capital assistance under TEA-21, so FY 1998 funds and subsequent fiscal year appropriations may be used for preventive maintenance. Preventive maintenance costs are defined as all maintenance costs. For general guidance regarding eligible maintenance costs, the grantee should refer to the definition of "maintenance" in the most recent National Transit Database reporting manual. A grantee may continue to request assistance for capital expenses under the FTA policies governing associated capital maintenance items (spare parts), maintenance of vehicles leased under contract, vehicle overhauls (major re-work), mid-life rebuilds (rail), and end-of-life rebuilds; or a grantee may choose to capture all maintenance under preventive maintenance. If a grantee purchases service instead of operating service directly, and maintenance is included in the contract for that purchased service, then the grantee may apply for preventive maintenance capital assistance under the capital cost of contracting policy.

   For accounting purposes, the grantee is cautioned not to confuse the fact that an item generally considered to be an operating expense is eligible for FTA capital assistance. Generally accepted accounting principles and the grantee's accounting system determine those costs that are to be accounted for as operating costs. The National Transit Database Reporting System (NTD) follows generally accepted accounting principles, and so a grant recipient reporting to the NTD must report the operating costs the grant recipient has incurred as operating costs regardless of the costs' eligibility for FTA capital assistance. Nevertheless, under provisions of the fiscal year 1998 Appropriations Act, and subsequently under provisions of TEA-21, some of those operating costs, while continuing to be accounted for as operating costs in the grant recipient's accounting records, are now eligible for FTA capital assistance. Grantees may not count the same costs twice.

4. ADA Complementary Paratransit Service. TEA-21 expanded the definition of an eligible capital project to include the operating cost of providing ADA complementary paratransit service, under certain limitations. The 80/20 Federal/local funding ratio is applicable for such projects. ADA complementary paratransit service means service provided complementary to existing fixed-route service.

   Under the new provision, a capital project now includes "...the provision of nonfixed route paratransit transportation in accordance with Section 223 of the Americans with Disabilities Act of 1990 (42 U.S.C. 12143), but only for grant recipients that are in compliance with the applicable requirements of that Act, including both fixed route and demand responsive service, and only for amounts not to exceed 10 percent of such recipient's annual formula apportionment under section 5307 and 5311."

   With this change, transit systems may use up to 10 percent of their annual formula apportionment to pay for ADA paratransit operating costs. Section 223 of the ADA defines the specific type of paratransit service that is eligible for this new provision and corresponds to Subpart F of the Department of Transportation's ADA regulation, which ( at 49 C.F.R. Part 37) explains the ADA paratransit eligibility process, the service criteria (service area, response time, fares, trip purpose restrictions, hours and days of service and capacity constraints), and the ADA paratransit plan process.

   1. ADA Compliance. Eligibility for using this expanded definition of capital is dependent upon compliance with ADA requirements. Currently, FTA grantees are required to certify compliance with ADA on an annual basis. Non-compliance with ADA is the result of a formal determination by FTA. Transit systems determined as being in non-compliance are not eligible to use this provision. Grantees who do not make satisfactory progress in negotiating voluntary compliance agreements or who do not achieve milestones within signed agreements will lose their eligibility for this ADA complementary paratransit benefit.
   2. Non-ADA Paratransit. Costs associated with non-ADA paratransit programs are not eligible for this funding option. Such costs include the provision of demand responsive services that are not ADA-complementary paratransit.
   3. Time of Costs Incurred. FTA reimbursement at the 80 percent Federal share for ADA paratransit costs related to this provision must be by means of a grant awarded after June 9, 1998, the date of enactment of TEA-21, and costs must have been incurred in a local fiscal year ending after June 9, 1998.
   4. UZA's with More than One Grantee. For those urbanized areas with more than one grantee, it will be the responsibility of the Metropolitan Planning Office, working with transit operators, to allocate the 10 percent of the urbanized area's apportionment that may be used for ADA paratransit purposes.
5. Leasing Capital Assets. Transit equipment and facilities may be acquired by lease, purchase, or construction. When a grantee leases tangible capital assets from another party, leasing costs are eligible for capital assistance, provided leasing is more cost- effective than purchase or construction. Leasing costs eligible for capital assistance include finance charges, including interest; ancillary costs such as delivery and installation charges; and maintenance costs. The FTA leasing policy is at 49 C.F.R. Part 639, "Capital Leases." Section 639.17 of that policy was amended in May 1996 to make maintenance costs under a commercial lease of a capital asset an eligible capital expense, and to make clear that any asset leased under 49 C.F.R. Part 639 must be eligible for capital assistance under a traditional purchase or construction grant (61 Fed. Reg. 25088, May 17, 1996).
6. Capital Cost of Contracting. Some FTA grantees turn to an outside source to obtain transit service, or maintenance service, or vehicles that the grantee will use in transit service. When grantees contract for such service, FTA will provide assistance with the capital consumed in the course of the contract. In the case of a contractor's providing vehicles for transit service, the capital consumed is equivalent to the depreciation of the vehicles in use in the transit service during the period of the contract. In the case of a maintenance contract, the capital consumed may be, for example, depreciation of the maintenance garage, or depreciation of the machine that lifts the vehicle. Capital consumed may also include a proportionate share of the interest the contractor might pay out as the contractor purchases and makes available to the grantee these capital assets. The concept of assisting with capital consumed is referred to as the "capital cost of contracting." FTA will provide assistance at the 80/20 FTA/local share ratio for the capital cost of contracting.

   Only the costs attributable to privately owned assets are eligible under this policy. Items purchased with Federal, state, or local government assistance are not eligible. Capital consumed for service or maintenance in the provision of service outside the transit portion of the contract, such as for charter or school bus service, is not an eligible cost.

   In addition, FTA provides assistance for preventive maintenance, which has been defined as all maintenance and which is discussed in paragraph a above. In some instances, grantees contract with outside sources both for maintenance and for transit service, with the contractor providing both maintenance and vehicles. In such cases, both the capital cost of contracting concept and preventive maintenance will apply.

   In order to avoid imposing burdensome accounting rules, with regard to contracts for bus- and paratransit-related services, FTA will allow a percentage of leased service or contracted maintenance to be considered capital costs without further justification and will provide assistance for 80 percent of the resultant amount. The percentages and the corresponding type of contract service are shown in EXHIBIT III-1 for bus and paratransit-related services. The percentages are calculations using data from the National Transit Database. Presented by type of contract, the calculations represent industry averages in counting capital-eligible activities as a share of total cost. The percentages apply whether the service is local, express, shuttle, or paratransit.

   The table of Exhibit III-1 is based on the assumption that the contractor provides the assets. Thus, for example, if a contractor provides maintenance, it is assumed in the calculations that the contractor does so in a facility provided by the contractor.

   A grant applicant may request FTA participation in a higher percentage of the contract than is shown in the table, but must provide actual costs. Rail-related contracts will be evaluated on a case-by-case basis.

   A grant applicant applying for assistance with costs that contain any of the capital costs of contracting permutations listed in Exhibit III-1 may list costs for the contracted service all in the capital cost of contracting budget category, or the grantee may use both that category and another appropriate category such as preventive maintenance or leasing.

   EXHIBIT III-1

   percent of contract allowed for capital

   assistance without further justification*

   (*Based on assumption that contractor provides the assets)

Type of Contract	Percent of Contract Eligible for 80 Percent Federal Share
1. Service Contract (contractor provides maintenance and transit service; grantee provides vehicles)	40 percent
2. Service Contract (contractor provides transit service only; grantee provides vehicles and maintenance)	0 percent
3. Vehicle Maintenance Contract (contractor provides maintenance; grantee provides vehicles and transit service)	100 percent
4. Vehicle Lease Contract (contractor provides vehicles; grantee provides maintenance and transit service)	100 percent
5. Maintenance/Lease Contract (contractor provides vehicles and maintenance; grantee provides transit service)	100 percent
6. Turnkey Contract (contractor provides vehicles, maintenance, and transit service)	50 percent
7. Vehicle/Service Contract (contractor provides vehicles and transit service; grantee provides maintenance)	10 percent

 

7. Associated Capital Maintenance Items (spare parts). Certain spare parts are to be considered an eligible capital expense if the spare parts qualify as "associated capital maintenance items." Associated capital maintenance items are defined as those items that cost at least one-half of one percent of the current fair market value of the rolling stock on which the item is to be used. Associated capital maintenance items include, for example, tires, tubes, and repair kits. As administered by FTA, to be eligible for capital assistance under this category, an item must cost no less than one-half of one percent of the value of the grant applicant's average fleet vehicle (using the type of fleet for which the equipment or material is being acquired) when that average vehicle has been depreciated by the straight-line depreciation method. Further discussion of associated capital maintenance items and a sample calculation appear in Chapter V.
8. Education and Training. Title 49 U.S.C. Section 5315(d) permits up to one-half of one percent of Urbanized Area Formula Program and Capital Program ( 49 U.S.C. Section 5309) funds available to a state or public transit agency grantee in a fiscal year to be used for tuition and direct educational expenses for transportation employees for educational and training programs relating to transit, at a Federal share not to exceed 80 percent. Proposed training activities to be supported with Urbanized Area Formula Program funds should be included in the grantee's Urbanized Area Formula Program application. In addition, proposed training must be reflected in the TIP and STIP.
9. Design and Art in Transit. Capital funds may be used to incorporate design and artistic considerations into transit projects. See FTA Circular 9400.1A, "Design and Art in Public Transit Projects."
10. Innovative Financing. Grant applicants--especially applicants wishing to undertake major projects--are encouraged to explore alternative and innovative methods of financing transit projects. Alternative financing can involve combining multiple, nontraditional sources of funding--Federal, state, local, and private--in support of transit capital and operating needs. Some approaches grant applicants might investigate include leasing arrangements, joint development, state economic development or revolving loan funds, exchanges of real property, and in-kind contributions. For projects exceeding $100 million in cost, grantees may wish to consider a loan or loan guarantee, as provided under the Transportation Infrastructure Financing and Innovation Act (TIFIA), Section 1501 of TEA-21 (23 U.S.C. § 181 et seq.). Such loans or loan guarantees would be repaid with local dedicated funds or user fees.
11. Rail Trackage Agreements. Capital portions of rail trackage rights agreements are also eligible for Urbanized Area Formula Program capital assistance (a provision of the Department of Transportation and Related Agencies Appropriations Act, 1995, Public Law 103-331).
12. Joint Development Projects. Urbanized Area Formula Program funds may be used to support joint development projects. Joint development projects are commercial, residential, industrial, or mixed-use developments that are induced by or enhance the effectiveness of transit projects. Joint development projects have historically most often been assisted through the FTA Capital Program (authorized by 49 U.S.C. Section. 5309). TEA-21 provides that all FTA grant programs may provide assistance for joint development projects. TEA-21 also introduced additional activities that may be eligible costs in a joint development project; these are facilities of a joint development project that incorporate community services such as day care or health care. Guidelines attendant to joint development projects are provided in FTA Circular 9300.1A, "Capital Program: Grant Application Instructions," in Appendix B.
13. Livable Communities. FTA also has established "initiatives" on which it encourages grantees to focus. In 1994, for example, FTA established the "livable communities initiative" to emphasize the FTA goal of strengthening the link between transit and communities. This initiative promotes customer-friendly, community-oriented, and well-designed transit facilities and services. Projects that are physically or functionally related to transit and support the concept of livable communities by enhancing personal mobility, increasing transit patronage, and improving the quality of community life are eligible for funding under the Urbanized Area Formula Program. Community-sensitive transit projects are ones that support mixed-use development and incorporate on-site services to help foster livable communities. It is important that the transit investments reinforce land-use policies that encourage transit-oriented development. Other examples of transit projects that enhance community livability are those that contain pedestrian-oriented physical improvements and enhance the convenience and security of transit customers.
14. Technology Introduction. Urbanized Area Formula Program funds may be used for capital projects that introduce new technology. FTA encourages suppliers to produce and transit providers to introduce new technology in transit service, in the form of innovative and improved products. Eligibility criteria for capital projects that introduce new technology are provided in Chapter V, paragraph 22 .
15. Intelligent Transportation Systems. TEA-21 expanded the definition of a capital project to include transit-related intelligent transportation systems (ITS). ITS refers to the use of electronics, communications, or information processing used singly or in combination to improve efficiency or safety of a transit or highway system. Examples of transit-related ITS projects include automatic vehicle location, automated passenger counters, vehicle component monitoring (diagnostics), advanced fare payment methods, computer-aided dispatching, real-time ridesharing, and automated information for travelers using more than one mode of transportation.
16. Interest. Interest is an eligible capital cost. Please see Appendix H for discussion of the six areas in which interest is an eligible project cost.

5. ELIGIBLE PROJECT COSTS IN ADVANCE OF AWARD. FTA uses three mechanisms that allow a grant applicant to incur project costs without first receiving formal FTA project approval. By means of these mechanisms a grant applicant may spend local funds for project activities and be reimbursed by FTA if and when a project is approved. The three are discussed below.

   It is important to note that a grant applicant with the requisite authority to proceed with project activities must take care to avoid prejudicing the legal and administrative findings FTA must make before approving financial assistance. That is, the grant applicant must comply with all applicable Federal statutory, procedural, and contractual requirements in carrying out its project, in order for FTA to be able later to provide financial assistance or the project.

   1. Blanket Authority Under Formula Programs to Incur Pre-award Costs. Authority to incur costs for FY 1998 Urbanized Area Formula Program funds in advance of possible future Federal participation was provided in the Federal Register Notice of December 5, 1997 ("FTA Fiscal Year 1998 Apportionments, Allocations and Program Information." 62 Fed. Reg. 64456 (1997)). In the June 24, 1998 Federal Register Notice on FTA Transit Program Changes (63 Fed. Reg. 34506 (1998)), pre-award authority was extended to future formula funds to be apportioned during the authorization period of TEA-21, 1998-2003. This pre-award authority also applies to projects intended to be funded with STP or CMAQ funds transferred to the Urbanized Area Formula Program for the 1998-2003 authorization period of TEA-21. Pre-award authority applies to FTA funds and flexible funds provided the conditions in paragraphs (1) and (2) below are met. Pre-award authority also applies to preventive maintenance costs incurred within a locally defined fiscal year ending during calendar year 1997, or thereafter.
   1. Conditions. FTA specified the following conditions under which the blanket pre-award authority may be used:
      1. This pre-award authority is not a legal or moral commitment that the project(s) will be approved for FTA assistance or that FTA will obligate Federal funds. Furthermore, it is not a legal or moral commitment that all items undertaken by the applicant will be eligible for inclusion in the project(s).
      2. All FTA statutory, procedural, and contractual requirements must be met at the appropriate time.
      3. No action will be taken by the grantee that prejudices the legal and administrative findings which the Federal Transit Administrator must make in order to approve a project.
      4. Local funds expended by the grantee pursuant to and after the date of this authority will be eligible for credit toward local match or reimbursement if FTA later makes a grant for the project(s) or project amendment(s).
      5. The Federal amount of any future FTA assistance to the grantee for the project will be determined on the basis of the overall scope of activities and the prevailing statutory provisions with respect to the Federal-local match ratio at the time the funds are obligated.
      6. The blanket authority to undertake projects in advance of award runs concurrent with the period of availability of the funds to which the authority applies. Thus, for example, for fiscal year 1999 Urbanized Area Formula Program funds, pre-award authority is available in the year the 1999 funds are appropriated, plus three years.
   2. Environmental, Planning, and Other Requirements. FTA emphasizes that all of the Federal grant requirements must be met for the project to remain eligible for Federal funding. Some of these requirements must be met before pre-award costs are incurred, notably requirements of the National Environmental Policy Act (NEPA) and the planning requirements. Compliance with NEPA and other environmental laws or executive orders (e.g., protection of park lands, wetlands, historic properties) must be completed before state or local funds are spent on implementing activities such as final design, construction, and acquisition for a project that is expected to be subsequently funded with FTA funds. Depending on which class the project is included under in FTA environmental regulations (23 C.F.R. part 771), the grantee may not advance the project beyond planning and preliminary engineering before FTA has approved either a categorical exclusion (refer to 23 C.F.R. part 771.117(d)), a finding of no significant impact, or a final environmental impact statement.

      The conformity requirements of the Clean Air Act (40 C.F.R. Part 93) also must be fully met before a project for which Federal funds will be requested may be advanced with non-Federal funds.

      Similarly, the requirement that a project be included in a locally adopted metropolitan transportation improvement program and a federally approved statewide transportation improvement program must be met before the project may be advanced with non-Federal funds. In addition, Federal procurement procedures, as well as the whole range of Federal requirements, must be followed for projects in which Federal funding will be sought in the future. Failure to follow any such requirements could make the project ineligible for Federal funding. In short, the increased administrative flexibility allowed by the pre-award authority requires a grantee to make certain that no Federal requirements are circumvented through its use.

      The U.S. Department of Labor certification of the labor protective arrangements does not have to be in place before costs are incurred under this blanket authority, but does have to be in place before Federal funds can be awarded.

      If a grant applicant has questions or concerns regarding the environmental requirements, or any other Federal requirements that must be met before incurring costs, the grant applicant should contact the appropriate Regional Office.

   2. Letter of No Prejudice. Letter of No Prejudice authority allows an applicant to incur costs on a future project using non-Federal resources with the understanding that the costs incurred after the LONP is issued may be reimbursable as eligible expenses or eligible for credit toward the local match should the FTA approve the project at a later date. LONPs are applicable to projects not covered by automatic pre-award authority. The majority of LONPs will be for New Starts not covered under a full funding grant agreement or for Capital Program (49 U.S.C. Section 5309) bus funds not yet appropriated by Congress. At the end of an authorization period, there may be LONPs for formula funds beyond the life of the current authorization.

      Under most circumstances the LONP will cover the total project. Under certain circumstances the LONP may be issued for local match only. In such cases the local match would be to permit real estate to be used for match for the project at a later date.

      1. Conditions. The following conditions apply to all LONPs.
      1. LONP pre-award authority is not a legal or moral commitment that the project(s) will be approved for FTA assistance or that FTA will obligate Federal funds. Furthermore, it is not a legal or moral commitment that all items undertaken by the applicant will be eligible for inclusion in the project(s).
      2. All FTA statutory, procedural, and contractual requirements must be met.
      3. No action will be taken by the grantee that prejudices the legal and administrative findings which the Federal Transit Administrator must make in order to approve a project.
      4. Local funds expended by the grantee pursuant to and after the date of the LONP will be eligible for credit toward local match or reimbursement if FTA later makes a grant for the project(s) or project amendments(s).
      5. The Federal amount of any future FTA assistance to the grantee for the project will be determined on the basis of the overall scope of activities and the prevailing statutory provisions with respect to the Federal/local match ratio at the time the funds are obligated.
      2. Environmental, Planning, and Other Federal Requirements. As with automatic pre-award authority, FTA emphasizes that all of the Federal grant requirements must be met for the project to remain eligible for Federal funding. Some of these requirements must be met before pre-award costs are incurred, notably the requirements of the National Environmental Policy Act (NEPA), and the planning requirements. Compliance with NEPA and other environmental laws or executive orders (e.g., protection of parklands, wetlands, historic properties) must be completed before state or local funds are spent on implementation activities such as final design, construction, or acquisition for a project expected to be subsequently funded with FTA funds. Depending on which class the project is included under in FTA's environmental regulations (23 CFR part 771), the grantee may not advance the project beyond planning and preliminary engineering before FTA has approved either a categorical exclusion (refer to 23 CFR part 771.117(d)), a finding of no significant impact, or a final environmental impact statement. The conformity requirements of the Clean Air Act (40 CFR part 93) also must be fully met before the project may be advanced with non-Federal funds.

         Similarly, the requirement that a project be included in a locally adopted metropolitan transportation improvement program and federally approved statewide transportation improvement program must be followed before the project may be advanced with non-Federal funds. In addition, Federal procurement procedures, as well as the whole range of Federal requirements, must be followed for projects in which Federal funding will be sought in the future. Failure to follow any such requirements could make the project ineligible for Federal funding. In short, this pre-award authority requires a grantee to make certain that no Federal requirements are circumvented. If a grantee has questions or concerns regarding the environmental requirements, or any other Federal requirements that must be met before incurring costs, it should contact the appropriate regional office.

      3. Request for LONP. Before a grant applicant may incur costs for a project not covered by automatic pre-award authority, it must first submit a written request for an LONP to the appropriate regional office. This written request must include a description of the project for which pre-award authority is desired and a justification for the request.
   3. Advance Capital Project Authority (formerly Advance Construction Authority). When a grantee has obligated all amounts apportioned to it under the Urbanized Area Formula Program and seeks to proceed with a TRANSIT project before Federal funds become available to it, the grantee may request advance capital project authority pursuant to 49 U.S.C. Section. 5307(g), formerly referred to as advance construction authority. Advance capital project authority permits a grant applicant to incur project and financing (e.g., bond interest) costs before FTA awards a grant for the project and reserve the right to be reimbursed after FTA has approved the project.

      Advance capital project authority may be issued for urbanized area formula Program grants (49 U.S.C. Section 5307(g)) and capital program grants (49 U.S.C. Section 5309(n)). The requirements for capital project authority under the two programs are similar, but differ slightly. The main features of advanced capital project authority under the Urbanized Area Formula Program are as follows:

      1. A complete grant application must be on file with FTA, and all applicable Federal procedures and requirements must have been met, including the DOL certification of labor protective arrangements. That is, FTA must have approved the project even though funding is not available.
      2. Interest earned and payable in bonds issued by the recipient to the extent proceeds of the bonds are expended is eligible for reimbursement.
      3. A Congressional authorization for the Urbanized Area Formula Program must be in effect for the fiscal year for which the advance capital project authority is sought by the grant applicant. That is to say, advance capital project authority cannot be awarded by FTA for a year for which there is no authorization for the Urbanized Area Formula Program.
      4. No grant application can be approved under the Urbanized Area Formula Program that exceeds the grant applicant's reasonably anticipated share for the year at issue. The reasonably anticipated share is calculated by first calculating the applicant's expected apportionment, based on the authorization, and subtracting from that apportionment the maximum amount that could be made available to the grant applicant for projects for operating expenses.

      Advance capital project authority is generally employed for major projects such as facility construction projects or large bus purchases that would require multiple-year funding. Advance capital project authority does not constitute a commitment of Federal funds until the project is converted to a regularly financed FTA project. The grant applicant should make contact with the appropriate regional office for specific instructions in applying for advance capital project authority.

   4. Grant Application Information. If the grant applicant is using pre-award authority, it should include in its grant application a statement to that effect and describe the purpose for which the pre-award authority is being used. Moreover, where appropriate, the project milestone schedule to be submitted with the grant application should provide dates and activities that occurred prior to FTA grant approval.

Chapter IV: Apportionments

1. GENERAL. By statute, FTA must apportion funds appropriated for the Urbanized Area Formula Program for any fiscal year within 10 days following enactment of the annual Department of Transportation Appropriations Act or on October 1, whichever is later. These apportionments are published in the Federal Register along with the one percent minimum expenditure for transit enhancements for areas with populations of 200,000 and over.
2. FORMULA. Apportionments to urbanized areas under the Urbanized Area Formula Program are made on the basis of a statutory formula, which is summarized in Appendix B. An urbanized area is an area designated by the Bureau of the Census that has a population of at least 50,000. In general, FTA formula funds are apportioned on the basis of population and population density for urbanized areas with populations from 50,000 to 200,000; and population, population density, fixed-guideway route miles, bus and fixed-guideway vehicle revenue miles, and bus and fixed-guideway vehicle passenger miles traveled for urbanized areas with populations of 200,000 and over. Ferryboat services operated either by a grantee or under contract to a grantee are included, by statute, as fixed-guideway systems for purposes of calculation (49 U.S.C. Section 5336(b)(1)), as are electric trolley buses using overhead catenary for power distribution (49 U.S.C. Section 5302(a)(4)(B)).

   Although the formula distinguishes between fixed-guideway systems and bus-transit systems, the amounts apportioned to an urbanized area on the basis of each type of service may be used for any eligible purpose at local discretion. An urbanized area with both bus and rail service, for instance, may elect to spend all of its Urbanized Area Formula Program funds on rail.

   If a grantee of Urbanized Area Formula Program funds that operates fixed-guideway vehicles in an urbanized area with a population of 200,000 and over demonstrates to the satisfaction of the Secretary that energy or operating efficiencies would be achieved by actions that reduce revenue vehicle miles but provide the same frequency of revenue service to the same number of riders, then the grantee's apportionment will not be reduced as a result of such actions (49 U.S.C. Section 5336(b)(2)(D)).

3. DATA. Population and population density data are taken from the most recent decennial census. All other data used for formula apportionments are taken from the latest report year of validated data reported in the National Transit Database (49 U.S.C. Section 5335). Data which is submitted late or which cannot be validated may not be used in the formula. Agencies making data submissions are referred to FTA's Uniform System of Accounts and Annual Reporting Manual and the current National Transit Database Reporting Manual. Copies of these publications and general guidance on the National Transit Database reporting requirements can be obtained from the FTA web site at FTA Home Page address http://www.fta.gov and from the following address: FTA Office of Program Management, Office of Program Guidance and Support, 400 7th Street, S.W. Washington, D.C. 20590; or by telephone at (202) 366-1656. The Office of Program Guidance and Support provides annual workshops on the National Transit Database for grantees' reporters to the database.
4. APPORTIONMENT TO AREAS UNDER 200,000 IN POPULATION. Urbanized Area Formula Program funds for use in urbanized areas under 200,000 in population are apportioned directly to the Governor of each state (49 U.S.C. Section 5336(f)). The announcement of the Federal fiscal year apportionments by FTA lists the amounts attributable to each of the urbanized areas within the state. The Governor may determine the allocation of funds among the urbanized areas under 200,000 in population, with one exception: funds attributed to an urbanized area under 200,000 in population that is located within the planning boundaries of a Transportation Management Area (TMA) must be obligated within the small urbanized area.
5. APPORTIONMENTS TO AREAS WITH POPULATIONS OF 200,000 AND OVER. Urbanized Area Formula Program funds for use in urbanized areas with populations of 200,000 and over are apportioned directly to the urbanized area. These funds may be applied for by the designated recipient(s) for each area. See chapter II for a discussion of designated recipients. Procedures for selecting the designated recipient are described in 49 U.S.C. Sections 5303-5306 and 49 U.S.C. Section 5307 (a)(2) and in 49 C.F.R. Part 613, "Statewide Planning; Metropolitan Planning."
6. TRANSFER OF APPORTIONMENTS.

1. From the State's Apportionment. The Governor may allocate amounts of the state's Urbanized Area Formula Program apportionment for urbanized areas under 200,000 in population among those same urbanized areas under 200,000 (49 U.S.C. 5336(g)), unless the urbanized area is a Transportation Management Area. Also, the Governor may transfer amounts of the state's Urbanized Area Formula Program apportionment to nonurbanized areas to supplement funds apportioned to the state under the Nonurbanized Area Formula Program (49 U.S.C. Section 5311). The Governor also may transfer amounts of the state's Urbanized Area Formula Program apportionment to an urbanized area with a population of 200,000 and over. The Governor may make such allocation only after consultation with responsible local officials and providers of publicly owned transit service in each area to which the funding was originally apportioned.

   Funds remaining available for obligation 90 days prior to the expiration of their period of availability (year for which apportioned plus three) may be used by the Governor in any area within the state without prior consultation.

2. From the Nonurbanized Area Formula Program to Supplement the Urbanized Area Formula Program. The Governor may transfer funds from the state's apportionment under the Nonurbanized Area Formula Program to supplement funds apportioned to the state under the Urbanized Area Formula Program for urbanized areas under 200,000 in population. Amounts so transferred may be used for any expenditures eligible under the Urbanized Area Formula Program (49 U.S.C. 5336(g)).
3. From the Elderly and Persons with Disabilities Program to Support the Urbanized Area Formula Program. The Governor also may transfer funds under the Elderly and Persons with Disabilities Program (49 U.S.C. Section 5310, capital assistance for transportation for elderly persons and persons with disabilities): any amount of a state's apportionment under this program that remains available for obligation 90 days before the expiration of these funds' period of availability may be transferred to supplement Urbanized Area Formula Program funds apportioned to the state for areas under 200,000 in population.
4. From Larger Urbanized Areas to the Governor of the State. A designated recipient in an urbanized area with a population of 200,000 and over may transfer its Urbanized Area Formula Program apportionment, or a portion thereof, to the Governor, who must in turn distribute it to urbanized areas of any size in the state pursuant to the requirements of 49 U.S.C. Section 5307 (see also 49 U.S.C. Section 5336(g)(4)). In such cases, the following process is applicable:
1. The designated recipient, after consultation with all potential grantees in the urbanized area, writes to the FTA Regional Office of the designated recipient's intent to transfer its apportionment or a part thereof to the Governor. This letter must identify the amount of the apportionment to be transferred and the fiscal year for which it was appropriated, and confirm that all potential grantees have been consulted. All of the designated recipients in an urbanized area must concur in this letter;
2. The Governor, either together with the designated recipient or separately, advises the FTA Regional Office in writing of the Governor's willingness to accept the apportionment; confirms that the apportionment will be used only in accordance with Urbanized Area Formula Program requirements; and acknowledges that transferred funds will be subject to the capital and operating assistance limitations applicable to the original apportionment of such amounts; and
3. After receipt of these letters and verification that the apportionment is in fact available for transfer (i.e., the funds have been apportioned, have not been otherwise committed, etc.), FTA, in writing, notifies both the designated recipient and the Governor that the apportionment is available to the Governor for distribution in accordance with the Urbanized Area Formula Program upon receipt by FTA of an appropriate grant application.
5. Notification to FTA. Prior FTA approval is not required, but notification to FTA of a transfer must be provided by the Governor for each transaction, so that FTA can accurately reflect this transfer decision in overall program budget levels and urbanized area apportionment records. Further, transfers must be shown in the grant application project budget.

7. TRANSFER OF FTA FUNDS FOR HIGHWAY PROJECTS. In TMA's (200,000 and over in population or as designated by the Governor and responsible local officials) as provided in 49 U.S.C. Section 5307(b)(2), Urbanized Area Formula Program funds that cannot be used for the payment of operating expenses, i.e., capital funds, can be made available for highway projects. There are three conditions governing the use of these capital funds for highway projects:

1. Such use must be approved by the MPO after appropriate notice and opportunity for comment and appeal has been provided to affected transit providers.
2. FTA must determine that the funds are not needed for capital investments required by the Americans with Disabilities Act of 1990.
3. The local funds used for the non-Federal match of the highway project must be eligible to provide assistance for either highway or transit projects.

Procedures for the transfer are provided in Appendix E.

8. SUBAREA ALLOCATION. In those urbanized areas with more than one grantee or designated recipient, FTA expects local officials, operating through the MPO, and designated recipients to determine the allocations together. The subarea allocation should be determined fairly and rationally through a process agreeable to the designated recipients. Documentation showing how the allocation will be split should be provided to FTA. FTA may request a written agreement signed by a representative of each entity involved.

   To assist in making such subarea allocations, any urbanized area may request from the FTA Regional Office serving that urbanized area the disaggregate data used in apportioning the total urbanized area's share of the entire Urbanized Area Formula Program resource.

Chapter V: Requirements Associated with Urbanized Area Formula Grants

1. INTRODUCTION. Federal transit law is codified in chapter 53 of Title 49, United States Code. The section of chapter 53 that authorizes and governs FTA administration of the Urbanized Area Formula Program is Section 5307 (49 U.S.C. Section 5307). Chapter V of this circular describes the requirements for every Urbanized Area Formula Program grant application. The chapter begins with reference to the National Transit Database Reporting System and Uniform System of Accounts, to which every grant applicant for Urbanized Area Formula Program funds must provide reports. The chapter then discusses requirements arising from Section 5307, which apply only to the grant applicant applying for an Urbanized Area Formula Program grant. The discussion broadens to requirements from other sections of Title 49 U.S.C. chapter 53 and continues with discussion of grant application requirements arising from other laws, regulations, and Executive Orders. In addition, the chapter describes FTA procedures that allow a grant applicant to certify once each year to compliance with the various requirements, and discusses the annual audits and triennial reviews of grantee performance that are required of FTA by 49 U.S.C. Section 5307.
2. NATIONAL TRANSIT DATABASE REPORTING SYSTEM. Section 5335(a) of Title 49, U.S.C. prohibits the Secretary of Transportation from making any grants under the Urbanized Area Formula Program unless the grant applicant and any person (entity, organization) to receive benefits directly from that grant are each subject to the National Transit Database Reporting System and Uniform System of Accounts. All recipients and direct beneficiaries under the Urbanized Area Formula Program must maintain and report financial and operating information on an annual basis, as prescribed in FTA regulations (49 C.F.R. Part 630) and the current National Transit Database Reporting Manual. Failure to do so will result in loss of eligibility for assistance under the Urbanized Area Formula Program. Annual workshops on reporting requirements are offered by FTA.
3. CERTIFICATION PROCEDURES. Before FTA may award a Federal grant, the grant applicant must provide to FTA all certifications and assurances required of the applicant--or in regard to the applicant's project--by Federal laws and regulations. The certifications and assurances are consolidated by FTA each Federal fiscal year into a single document that provides the text of the certifications and assurances to be used in connection with all Federal assistance programs administered by FTA during that fiscal year. The certifications and assurances are normally published on the same date that FTA announces the formula apportionments. By statute, FTA must announce the formula apportionments on October 1 or within 10 days of enactment of the DOT Appropriations Act, whichever is later.

1. Action Required. The authorized representative of the grant applicant and the grantee's attorney must make the requisite certifications by:
1. attesting to the certifications and assurances electronically with a personal identification number (PIN); (This is tantamount to submitting the signature page (Appendix A) at the end of the document that appears in the Federal Register, signed by the authorized representative and by the applicant's legal counsel.) and,
2. selecting electronically each assurance or certification category that will apply to the applicant's grants for the fiscal year; (This is tantamount to selecting from a list provided in Appendix A of the document those individual certifications that will apply to the applicant's grants for the fiscal year.) or,
3. selecting instead a "Select all" field that signifies the grant applicant will comply with all categories of certifications and assurances. (This is tantamount to marking an "x" in a line at the top of the first page in Appendix A.)

FTA requires a current attorney's affirmation of the grant applicant's legal authority to certify compliance with that fiscal year's FTA funding assistance. The attorney's affirmation from previous years is not acceptable.

2. Timing. Each year at the beginning of the fiscal year, FTA will prepare the certifications required and publish the collection in the Federal Register, highlighting any changes or additions over the previous year. FTA expects to receive the certifications and assurances electronically anew from each grantee
1. within 90 days from the date of publication of the certifications and assurances; or
2. with the first grant application of the fiscal year, whichever comes first.

The certifications and assurances the grant applicant attests to will remain valid for one year or until FTA publishes the next version.

3. Representation of Certifications. For convenience of the reader, a fair representation of the text of FY 1998 certifications and assurances is provided in Appendix G of the circular. The specific text of a particular certification may change, and new certifications may be added as a result of TEA-21 or other Federal laws; but many of the FY 1999 certifications and assurances will remain substantially as set forth in Appendix G. Category I in Appendix G applies to every applicant for FTA financial assistance. Category XII applies only to applicants requesting assistance from the Urbanized Area Formula Program. Other categories apply if they are or will be pertinent to the project(s) for which the grant applicant will request assistance during the fiscal year.

   If the grant applicant is not able to submit the certifications electronically, the applicant should obtain a copy of the Federal Register Notice containing the current fiscal year's certifications and use the form contained in that Federal Register to submit the actual certifications. The current "Signature Page" shown in the current Fed