Flexible Funding for Highway and Transit

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Program Summary

Flexible funds are certain legislatively specified funds that may be used either for transit or highway purposes. This provision was first included in the Intermodal Surface Transportation Efficiency Act of 1999 (ISTEA) and was continued with the Transportation Equity Act for the 21st Century (TEA-21). The idea of flexible funds is that a local area can choose to use certain Federal surface transportation funds based on local planning priorities, not on a restrictive definition of program eligibility. Flexible funds include Federal Highway Administration (FHWA) Surface Transportation Program (STP) funds and Congestion Mitigation and Air Quality Improvement Program (CMAQ) and Federal Transit Administration (FTA) Urban Formula Funds.

Since the enactment of ISTEA, FHWA funds transferred to the FTA have provided a substantial new source of funds for transit projects. When FHWA funds are transferred to FTA, they can be used for a variety of transit improvements such as new fixed guideway projects, bus purchases, construction and rehabilitation of rail stations, maintenance facility construction and renovations, alternatively-fueled bus purchases, bus transfer facilities, mulitimodal transportation centers, and advanced technology fare collection systems

When FHWA funds are transferred to FTA they are transferred to one of the following three programs:

  • Urbanized Area Formula Program (5307),
  • Nonurbanized Area Formula Program (Section 5311 program);
  • Elderly and Persons with Disabilities Program (Section 5310 program).

Once they are transferred to FTA for a transit project, the funds are administered as FTA funds and take on all the requirements of the FTA program. Transferred funds may use the same non-Federal matching share that the funds would have if they were used for highway purposes and administered by FHWA.

In urbanized areas over 200,000 population, the decision on the transfer of flexible funds is made by the Metropolitan Planning Organization (MPO). In areas under 200,000 population the decision is made by the MPO in cooperation with the State DOT. In rural areas, the transfer decision is made by the State DOT. The decision to transfer funds should flow from the transportation planning process and the priorities established for an area as part of the planning process.

Surface Transportation Program

The Surface Transportation Program (STP) (23 U.S.C. 133) provides the greatest flexibility in the use of funds. These funds may be used (as capital funding) for public transportation capital improvements, car and vanpool projects, fringe and corridor parking facilities, bicycle and pedestrian facilities, and intercity or intracity bus terminals and bus facilities. As funding for planning, these funds can be used for surface transportation planning activities, wetland mitigation, transit research and development, and environmental analysis. Other eligible projects under STP include transit safety improvements and most transportation control measures.

STP funds are distributed among various population and programmatic categories within a State. Some program funds are made available to metropolitan planning areas containing urbanized areas over 200,000 population; STP funds are also set aside to areas under 200,000 and 50,000 population. The largest portion of STP funds may be used anywhere within the State to which they are apportioned.

Congestion Mitigation and Air Quality Improvement Program

The Congestion Mitigation and Air Quality Improvement Program (CMAQ) (23 U.S.C. 149) has the objective of improving the Nationís air quality and managing traffic congestion. CMAQ projects and programs are often innovative solutions to common mobility problems and are driven by Clean Air Act mandates to attain national ambient air quality standards. Eligible activities under CMAQ include transit system capital expansion and improvements that are projected to realize an increase in ridership; travel demand management strategies and shared ride services; pedestrian and bicycle facilities and promotional activities that encourage bicycle commuting. Programs and projects are funded in air quality nonattainment and maintenance areas for ozone, carbon monoxide (CO), and small particulate matter (PM-10) that reduce transportation-related emissions.

Funds are apportioned to States based on a formula that considers the severity of their air quality problems.

National Highway System

The National Highway System (NHS), established in 1995, provides funding for a wide range of transportation activities (23 U.S.C. 103(b)). Eligible transit projects under the NHS program include fringe and corridor parking facilities, bicycle and pedestrian facilities, carpool and vanpool projects, and public transportation facilities in NHS corridors, where they would be cost effective and improve the level of service on a particular NHS limited access facility.

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For More Information...

about the Program, contact the Office of Resource Management and State Programs (202) 366-2053