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