Full Funding Grant Agreement Guidance

Number C-02-16
12/5/2002

U.S. Department
of Transportation
Federal Transit
Administration

Administrator

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

Dear Colleague:

Over the past five years of the Transportation Equity Act for the 21st Century (TEA-21), we have witnessed tremendous growth in both the resources available to fund major transit fixed guideway projects and the number of areas competing for the Federal Transit Administration's (FTA) discretionary New Starts funding. As we enter the last year of the current authorization, we can contemplate the nearly one hundred New Starts successes funded by FTA since the program's inception, and reflect upon how we can continue to support the development of such beneficial transportation investments. Clearly, an important factor in the successful implementation of New Starts projects is the reliable stream of capital funding established by FTA's Full Funding Grant Agreement (FFGA) mechanism. I am, therefore, pleased to provide you with a copy of FTA's revised guidance on FFGAs, and to share our intention to work closely with you to use this guidance as a tool for preparing to enter into this very special agreement.

The FFGA is a unique contractual obligation that FTA employs when investing a significant amount of New Starts funding into a locally-developed fixed guideway transit project. In exchange for FTA's commitment to provide multi-year Federal funds under the 49 USC 5309 New Starts program, the project sponsor commits to completing the project on time, within budget, and in compliance with all applicable Federal requirements. Additionally, the FFGA "locks" the maximum Federal participation in the project, meaning that any cost increases that might occur subsequent to issuance of the agreement must be borne by the project sponsor. Of course, the annual pay-out of funds established by the terms of the FFGA is subject to Congressional appropriations. Nevertheless, Congress well understands the purpose and value of the FFGA, and history shows its strong financial support for projects under these agreements.

This revised guidance describes FTA procedures for the development and execution of an FFGA. It outlines FFGA requirements, standard terms and conditions, supporting analyses and documentation, and FTA and grantee roles and responsibilities in the preparation of the agreement. The guidance further reviews the New Starts planning and project development process from which major transit capital investments are generated, and summarizes FTA's expectations for establishing the "readiness" of candidate projects to enter into an FFGA. Indeed, project readiness - as demonstrated by sound capital cost estimates, firm local funding commitments, and a strong project management team - is a key factor to the success of the FFGA in meeting its intended outcome. As this guidance makes clear, FTA will strongly enforce these principles as a way of ensuring optimal Federal investment in major capital transit projects which best meet local goals and objectives for mobility, clean air, community development, and quality of life.

The FFGA is FTA's most important funding instrument for supporting local efforts to implement the fixed guideway transit systems and extensions which meet such goals. Dozens of areas across the country are contemplating an FFGA as the backbone of their plan to finance such investments; we expect that figure to increase dramatically over the next several years. At the same time, FTA strives to execute FFGAs for only the most meritorious and cost effective of major capital transit projects. As part of our continuing efforts to enhance our stewardship of the New Starts program (which include issuance of this circular), FTA intends to put additional emphasis on the cost effectiveness of candidate projects as a measure of their worthiness to receive an FFGA. In so doing, FTA will demonstrate to the public - and Congress - our commitment to maximizing return on the Federal investment in transit, and our unwavering support of the prudent planning, design, and construction management necessary to achieve this outcome.

Sincerely,
Jennifer L. Dorn