Q = Question; A = Answer
A. FTA Circular 5010.1D, “Grant Management Requirements, October 1, 2008, Chapter IV, subsection 3, discusses disposition of equipment that has reached the end of its service life. If the unit has a fair market value (FMV) of $5000 or more, then the grantee must reimburse FTA’s share of the fair market value of the FTA assisted equipment, even though the grantee’s contractor removed some parts of that equipment. Any unit of the equipment with a FMV of $5000 or more that experienced a decrease in its FMV due to removal of the parts would require reimbursement of FTA’s share of that decrease caused by the cannibalization. The amount of decrease would be determined by an evaluation based on sales of other comparable rolling stock that is beyond its useful life. Because there is no Federal interest in any unit of grant assisted property with a FMV of $5,000 or less, the grantee may do what it wishes with that property, including removing parts as it sees fit. (Revised: July 2010)
A. The Federal Transit Administration’s (FTA) enabling legislation, Department of Transportation (DOT) Common Grant Rules, and FTA Grant Management and Third Party Contracting Circulars, and FTA Master Agreement, all discuss disposition of project property.
DOT’s enabling legislation at 49 U.S.C. § 5334(h) permits the transfer and the sale of FTA assisted property provided FTA approval is obtained.
If a grantee is instructed to sell its unneeded FTA assisted property the DOT Common Grant Rules at 49 C.F.R. § 18.32(d)(5) and 49 C.F.R. § 19.34(f)(6) direct the grantee to sell that property for the highest return. Accordingly, if a private individual were to offer the highest return, the grantee could sell its unneeded buses to that individual.
See FTA Circular 4220.1F, “Third Party Contracting Guidance” for competitive procurement procedures to use in offering FTA assisted property for sale. A grantee with adequate e-commerce procedures may use those procedures in offering FTA assisted property for sale.
FTA Circular 5010.1D, “Grant Management Requirements,” October 1, 2008, provides guidance on property disposition requirements. Upon sale of FTA assisted property, especially if the useful life of that property has not expired, the grantee will need to return to FTA’s proportionate share of the remaining Federal interest in that property. Also, even if the “useful life” of the property has expired, if a unit of that property has sold for $5,000 or more, FTA would be entitled to its proportionate share of the proceeds of that sale. In this case, it appears that the buses being sold would not be replaced because the grantee is downsizing. If that is the case, FTA’s proportionate share of the sales proceeds should be returned to FTA in cash. For many years, the FTA Master Agreement (PDF) has included Property Management provisions in Section 19. (Revised: July 2010)
A. If the Project Mobility vehicles to be donated have fulfilled their service life and have a current unit market value of less than $5,000 or less, which may be likely, the grantee may dispose of them no further obligation to FTA. 49 C.F.R. § 18.32(e)(1) and 49 C.F.R. § 19.34. See, FTA Circular 5010.1D, “Grant Management Requirements,” Chapter IV, subsection 3.l, dated October 1, 2008. (Revised: July 2010)
A. Provided the grantee and its third party contractor comply with FTA’s Third Party Contracting requirements, the grantee may use a third party contractor to conduct the auctions. Because the DOT Common Grant Rules at 49 C.F.R. § 18.32(d)(5) and 49 C.F.R. § 19.34(f)(6) direct the grantee to sell that property for the highest return, FTA suggests that the auction contract include a requirement to place an advertisement in the local paper in advance of the sale and/or put a notice on the agency’s internet page saying that on “x” date the vehicles are being auctioned on behalf of the grantee and telling interested people how to contact the auctioneer (We assume the auctioneer would accept a bid from a private party). Either option would make the buying opportunities more generally available, increasing the possibility of a higher return. (Revised: July 2010)
A. A grantee may use competitive bidding that complies with FTA requirements to acquire the services of a fleet management company to manage the sale of FTA assisted vehicles. Nevertheless, whether the grantee sells its FTA assisted vehicles or a fleet management company sells the FTA assisted vehicles, the Common Grant Rule requires that “proper sales procedures must be established to ensure “the highest possible return” through competition. 49 C.F.R. § 18.32(d)(5) and 49 C.F.R. § 19.34(f)(6). To achieve a fair competitive process, there would need to be a sufficient number of wholesalers likely to be interested in acquiring the vehicles, and objective evaluation and selection standards would need to be established. We would be concerned if the grantee’s third party contracts were only for a sales service that limits competition to selected wholesalers. We would need more information to be assured that Federal requirements could be met.
You should consult the regional office about how the Federal interest in the proceeds of the sale should be treated. (Revised July 2010)
A. FTA policies regarding the disposition of property, equipment, etc. may be found in FTA Circular 5010.1D, “Grant Management Requirements,” October 1, 2008.
Chapter IV, paragraph 3.l(5) states specifically that rolling stock and equipment that has a unit market value of less than $5,000 may be retained, sold, or otherwise disposed of with no obligation to reimburse FTA. Records of any action of that type must be retained. (Reviewed: July 2010)
A. FTA Circular 5010.1D, “Grant Management Requirements,” November 1, 2008, Chapter IV, Paragraphs 3.l(4) and (5) provide guidance on the disposition of vehicles that have passed the end of their service life, both in years and miles. The grantee has no obligation to FTA for any vehicle having a fair market value of less than $5,000. FTA, however, does have a Federal interest in the proceeds of any disposition of a vehicle having a value of $5,000 or more.(Revised: July 2010)
“When project property is lost or damaged by fire, casualty, or natural disaster, the fair market value shall be calculated on the basis of the condition of the equipment or supplies immediately before the fire, casualty, or natural disaster, irrespective of the extent of insurance coverage. If any damage to project property results from abuse or misuse occurring with the grantee’s knowledge and consent, the grantee agrees to restore the project property to its original condition or refund the value of the Federal interest in that property.”
Could I interpret this to mean that if the grantee removes the FTA-funded vehicle from revenue service life before its minimum normal service life due to collision and the damage to the vehicle did not result from abuse or misuse occurring with the grantee’s knowledge and consent, the grantee is not liable to the FTA for the federal share of the vehicle's remaining value at the time of the accident?
Our situation in our agency is that we have a federally-funded bus that was removed from revenue service due to collision resulting in a total loss of approximately $280K (the difference between our acquisition cost and remaining book value at the time of the accident). Our agency received a small amount of insurance proceeds. If my interpretation of Circular 5010.1D is correct, our agency is not liable to the FTA for its share of the remaining value of the vehicle at the time of the accident.
A. FTA Circular 5010.1D, “Grant Management Requirements,” November 1, 2008, expressly states in Chapter IV, Paragraph 3.l(12) that “The Federal interest [in damaged project property] is not dependent on the extent of insurance coverage or on the insurance adjustment received.” In effect, the grantee either insures or self-insures the Federal interest in a vehicle. FTA’s position is that if the grantee purchases another vehicle, the grantee need not refund any of the insurance proceeds to FTA if the grantee uses those proceed to acquire the new vehicle. When the grantee needs to add from its own funds sufficient funding to compensate for the balance of the Federal interest lost, the grantee must subtract the entire amount of the remaining Federal interest, along with the attributable Federal share thereof, from the cost of the new vehicle, and confine its request for Federal funding of that new vehicle to the balance remaining.
If the grantee elects not to buy a new vehicle, the grantee will owe FTA the Federal share of both the insurance proceeds and a payment equal to the Federal share of the remaining Federal interest in the vehicle that it has self-insured. The actual basis for the requirement is found in 49 U.S.C. § 5334(h).
FTA’s Master Agreement accompanying the underlying grant for the project has long held that FTA’s Federal interest in FTA assisted property is based on the fair market value of that property immediately before the fire, casualty, or natural disaster, although FTA reserves the right to consider another method of valuation in exceptional circumstances. (Revised: July 2010)
A. The disposition of property and equipment that was acquired with Federal grant funds is covered in FTA Circular C 5010.1D, "Grant Management Requirements,” dated November 1, 2008. Disposition of equipment is covered in Chapter IV, paragraph 3.l(4), which reads as follows:
(4) Fair Market Value of Less than $5,000 Value. Fair Market Value of Over $5,000. After the service life of project property is reached, rolling stock and equipment with a current market value exceeding $5,000 per unit, or unused supplies with a total aggregate fair market value of more than $5,000, may be retained or sold. Reimbursement to FTA shall be an amount calculated by multiplying the total aggregate fair market value at the time of disposition, or the net sale proceeds, by the percentage of FTA’s participation in the original grant. The grantee’s transmittal letter should state whether the equipment will be retained or sold. Use of sales proceeds are discussed elsewhere in Chapter IV of this circular.
(Reviewed: July 2010)
I understand that rolling stock that was purchased in whole or part with FTA funds is subject to reimbursement to the FTA. What does not make any sense is why any agency would encourage auctioning a bus for anything over $5000, since once that amount is exceeded, the agency would owe the percentage of the entire auction price back to the FTA. Please consider the example that follows:
A. The Common Grant Rules require grantees to establish the fair market value of the equipment. This may be done by obtaining an appraisal or by soliciting bids. In either case the expectation is that the method used would be an objective one where the grantee would not "predetermine" the outcome of the valuation based on the $5,000 threshold. The requirements to dispose at fair market value and the $5,000 thresholds are imposed by DOT regulations at 49 C.F.R. § 18.32(e) and 49 C.F.R. § 19.34(g).
On the other hand, 49 U.S.C. § 5334(h)(4) provides an alternative to the disposition process contained in the Common Grant Rules by permitting the grantee to retain the sale proceeds of any assets acquired with grant funds and using those proceeds to reduce the gross project cost of a future grant. If this alternative appeals to your agency, you should discuss it with your regional FTA office. (Revised: July 2010)
A. If the fair market value of equipment requested by a private nonprofit organization is less than $5,000 and the useful life of that equipment as calculated under FTA standards has expired, a grantee may donate the equipment to the requesting organization or otherwise as it chooses.
FTA is not authorized under 49 U.S.C. § 5334(h)(1) to permit the transfer of project equipment to a private nonprofit organization that does not also qualify as a “local governmental authority.” Except in the very unusual circumstance that a church mission were to qualify as a “local governmental authority,” a transfer of FTA assisted equipment having a fair market value of $5,000 or more to a church mission would not be authorized under 49 U.S.C. § 5334(h)(1).
However, a grantee may donate the equipment to a State agency that manages FTA’s Elderly Individuals and Individuals with Disabilities Program or FTA’s New Freedom Program. The State agency, then, could make the bus available to a church mission if the church mission were pursuing activities in support of either of those programs.(Revised: July 2010)
A. The FTA Master Agreement (PDF), FTA MA(16), Subsection 19.h. contains the disposition requirements for FTA grants. Within that subsection, subparagraph (2)(b) addresses disposition requirements for property that is prematurely withdrawn from use. The common grant rules require a grantee that sells grant financed equipment to obtain “the highest possible return” when that equipment is sold. 49 C.F.R. § 18.32(d)(5) and 49 C.F.R. § 19.34(f)(6). Offering a right of first refusal to the original seller would be contrary to these requirements unless there were some consideration for doing so. Furthermore, such a right would, in effect, encumber the property, with the result that FTA would be needed, as stated in Section 19.f. of the Master Agreement, In this case, however, it is possible that FTA could approve such a right of first refusal if properly justified and documented, particularly if the equipment were especially needed for the project and the condition were essential to the vendor.
FTA Circular 5010.1D, “Grant Management Requirements,” November 1, 2008, Chapter IV, subsection 3.l, also contains guidance on the disposition of equipment. (Revised: July 2010)
A. In many cases there is no need to offer the grantee the first opportunity to buy surplus assets because the common grant rules permit grantees liberal uses of project property. For example, the common grant rules provide that the grantee may use the equipment in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by Federal funds. When the equipment no longer needed for the original program or project, it may be used in other activities currently or previously supported by a Federal agency. 49 C.F.R. § 18.32(c)(1) and 49 C.F.R. § 19.34(c). The grantee may also use the real property for the originally authorized purposes as long as needed for those purposes, 49 C.F.R. § 18.31(b) and 49 C.F.R. § 19.32(a). Nongovernmental grantees, with FTA approval, may also use real property for other federally projects or programs when the recipient determines that the property is no longer needed for the purpose of the original project and those projects or programs have purposes consistent with those authorized for support by DOT.
Absent these circumstances, there is no requirement that the grantee be given the first opportunity to buy its surplus assets before they are offered for sale to the general public. In lieu of a sale of the surplus property, 49 U.S.C. § 5334(h) authorizes FTA to permit the transfer of that property to a local governmental authority to be used for a public purpose.
You should contact your regional FTA program office for property disposition instructions. (Revised: July 2010)
A. For certain assets, FTA calculates its Federal interest on the basis of straight-line depreciation; the fair market value of other assets is determined on market surveys. For real property, FTA determines the fair market value on appraisals. Acceptable methodologies are described in FTA Circular 5010.1D, “Grant Management Requirements,” November 1, 2008,Chapter IV. (Revised: July 2010)
A. FTA Circular 9300.1B addresses the disposition of FTA assisted vehicles, whose useful life has expired.
FTA does not require transit agencies to immediately dispose of assets upon the expiration of their stated service lives. Instead, FTA permits grantees to keep those vehicles in service, and to use FTA assistance for their vehicle's capital maintenance costs, including rebuilding and overhauls. FTA does require that vehicles in a grantee’s contingency fleet be properly stored, maintained, and identified in the grantee’s contingency plan.
If you have any additional questions regarding the availability and use of FTA funds for this program, please feel free to contact your grant representative in FTA's regional office. (Revised: July 2010)
A. FTA awards its direct Section 5310 grants to States, which in turn, make subawards to various subrecipients, as stated in documentation it provides to FTA. The merger described would require an amendment to the Program of Projects for its 5310 grant that the State or States involved have filed with FTA.
In addition, the State or States would need to obtain new subagreements with the nonprofit organizations involved. Please review FTA Circular 9070.1F, “Elderly Individuals and Individuals with Disabilities Program Guidance and Application Instructions,” March 29, 2007, and contact the FTA Regional Office for State or States involved for additional guidance. (Revised: July 2010)
A. Much depends on the facts-involved. FTA’s Master Agreement at Subsections 19.h and i. have long provided, as a general rule, that in the case of a fire, the “fair market value shall be calculated on the basis of the condition of the equipment . . . immediately before the fire . . . , irrespective of the extent of the insurance coverage.” In addition, if the grantee receives insurance coverage, the grantee will apply those proceeds to the cost of replacement equipment of return the unused Federal interest to FTA. FTA’s standard practice is to retain the Federal interest in the damaged vehicle, so that its investment in the replacement vehicle is subtracted by the value of that Federal interest. Nevertheless, FTA is willing to consider another method of valuation in exceptional circumstances. Because we are unable offer a blanket answer due to these case-specific nuances involved therefore, we refer grant-specific questions to the appropriate regional office. (Revised: July 2010)
A. You will need to communicate with the FTA regional office that managed the original grant for this transit station. They will advise you whether any reimbursement of FTA is required under these circumstances. (Reviewed: July 2010)
A. It is very important that you first request disposition instructions from the FTA Regional Office, and an important part of the disposition issue is to discuss how you would like to utilize the funds. FTA does not want the money back. FTA prefers that the proceeds from the disposition be applied to another transit project. (Posted: December, 2011)
Background: One of our buses was recently involved in an accident. The bus has exceeded its useful and was scheduled for replacement. At this time we are uncertain if the bus will be repaired or deemed non-repairable by the insurance company. Is there an obligation due to FTA and if so how do we calculate it? Is it based on the fair market value prior to the accident?
A. FTA Circular 5010.1D, "Grant Management Requirements, October 1, 2008, Chapter IV, subsection 3, discusses disposition of equipment that has reached the end of its service life. In light of the particular circumstances affecting this bus we would recommend that you contact your FTA Regional Office and resolve the issues with the FTA grant representative. (Posted: June, 2012)