The Texas Department of Transportation (department) proposes amendments to §31.3, concerning definitions, §31.11, concerning state formula program, §31.13, concerning discretionary program, and §31.36, concerning Section 5311 Grant Program.

EXPLANATION OF PROPOSED AMENDMENTS

House Bill 3184, 78th Legislature, Regular Session, 2003, amended Transportation Code, §456.022, and repealed Transportation Code, §456.024 (effective September 1, 2004) to remove the statutory formula for allocating funds among individual eligible public transportation providers. The amendment authorized the Texas Transportation Commission (commission) to adopt rules to establish a formula that may take into account a transportation provider's performance, the number of its riders, the need of residents in its service area for public transportation, population, population density, land area, and other factors established by the commission.

Extensive public input was received considering the changes to this formula which will take effect September 1, 2004. Public meetings were held in Sugar Land, Waco, Tyler, San Angelo, Fort Worth, Edinburg, and Austin. The Austin meeting, held via videoconference, was accessible to the public at the department’s downtown location, and the 24 statewide department district offices, not including Austin. Comments were also accepted by the department via the Internet and mail. The final report, summarizing those meetings, is available at:

http://www.dot.state.tx.us/ptn/geninfo.htm

The Public Transportation Advisory Committee (PTAC) met several times to discuss the proposed formula and rules. PTAC provides a forum for the exchange of information between the department, the commission, and committee members.

Four PTAC committee members represent a diverse cross-section of public transportation providers; three members represent a diverse cross-section of public transportation users; and two members represent the general public. Advice and recommendations expressed by the committee provide the department and the commission with a broader perspective regarding public transportation matters that will be considered in formulating department policies.

PTAC’s duties include advising the commission on the needs and problems of the state's public transportation providers, including recommending methods for allocating state public transportation funds, and commenting on proposed rules or rule changes involving public transportation matters during their development and prior to final adoption. PTAC recommended that the funds be allocated between urban and nonurbanized areas with 75% of the funding based on population and 25% of the funding based on land area; that after the urban and nonurbanized areas receive their allocation, that those areas be allocated funding on an 80%/20% basis with 80% based on general population (nonurbanized formula also includes land area) and 20% based on local funds per capita, operating expenses per mile (inverted), ridership per capita, and vehicle revenue miles. PTAC recommended that operating expenses per mile (inverted), ridership per capita, and vehicle revenue miles be calculated comparing a transit agency against its previous performance. PTAC also recommended that a five year transition plan be adopted which would cap reductions for an agency at 10% of the previous year and additions in funding to 120% of the previous year.

The amendments to §31.3 update the terms "local funds" and "operating expense," to clarify the types of funding that would be considered in the allocation formula and to include more examples of what are considered operating expenses. The amendments also remove the term "service expansion" which is no longer used since the proposed formula addresses service needs, including expansion, by considering a systems base need of its geographical service boundary. The term "state data center," was removed because the new formulas rely on the United States Federal Census as does the original federal apportionment. Marketing expenses are deleted as part of the definition of administrative expenses. In following the federal regulations and the uniform system of accounts, marketing is not always considered an administrative expense, but may also be categorized as an operating or planning expense. This change does not shift any funds or change the manner in which the transit systems do business. It clarifies and allows for a proper place to budget or expend. A definition for "strategic priorities" has been added to describe the types of projects that the commission may approve using the discretionary 20% of the formula.

The amendments to §31.11, Formula Program, create a new formula. The funds will be allocated between small urban and nonurbanized areas with 75% of the funding based on population and 25% of the funding based on land area. Currently, this would result in approximately 35% of the funding allocated to urban and 65% of the funding allocated to nonurbanized areas. This approximately matches the urban/nonurbanized appropriation for fiscal years 2004- 2005.

The commission will distribute the allocation to recipients operating public transportation services in urbanized areas. Eighty percent will be awarded giving consideration to population relative to the sum of all urbanized areas. The commission may elect to use all or part of the remaining 20% to address strategic priorities to be awarded on a competitive basis or to address funding anomalies in the formula. If the commission does not utilize all or part of the 20%, then the remainder will be awarded giving equal consideration to local funds per capita, and the following three criteria as compared to the system performance from the previous year: operating expenses per mile (inverted), ridership per capita, and vehicle revenue miles. These criteria may be calculated using the subrecipient's annual audit for the previously completed fiscal year, data from other sources, or from the department's records. A transit district will not be awarded any of the 20% if it is not in good standing with the department.

The current formula grants all funding based on a calculation of need. The revision, an 80%/20% allocation, takes into consideration the performance indicators required by House Bill 3184. PTAC and many of the commenters at the meeting suggested that the formula should take into consideration the general population. The performance measures were suggested by PTAC. These measures are based on verifiable criteria so that a fair comparison can be made, and take into consideration the industry’s need for standard data reporting. Three of the four measures compare each system to itself in order to compensate for the diverse systems and geographic areas. The formula gives incentives for local governments to contribute to transit agencies, for transit agencies to be more efficient and economical, and to encourage full use of their service while addressing the needs of underfunded systems.

The amount allocated to recipients in nonurbanized areas will be determined by using the same formula as the urban areas with one exception as recommended by PTAC. The 80% in the 80%/20% allocation will be determined by the commission giving a 75% weight to population and a 25% weight to land area for each nonurbanized area relative to the sum of all nonurbanized areas. The land area consideration is added to recognize that the land areas for the nonurbanized areas differ greatly and to encourage all areas to extend their service to the greatest land mass possible.

The amendments include a five-year phase-in process whereby no entity will receive less than 90% or more than 120% of the award that it received for the previous fiscal year. This will guarantee that an entity will have five years of planning before it will be affected by a significant reduction and will not grow so fast that it cannot accommodate the additional funding.

In order to accommodate a change in service area, if a transit district’s service area is altered, the department and the transit district shall negotiate an appropriate adjustment to its funding award.

The amendments to §31.13, concerning the discretionary program, are technical corrections affecting cross-references.

The amendments to §31.36, concerning the Section 5311 Grant Program, contain technical corrections and clarifications. Subsection (e)(1) had been changed to allow the department to use up to 15% of 5311 apportionment to defray administrative expenses instead of requiring the department to do so which may allow more funds to be available for transit. The amendments also revise the formula for the distribution of funds to rural transportation providers using the same formula described for nonurbanized areas in §31.11 of this subchapter, taking into consideration the same five-year phase-in period, and the same change in service adjustment. The formula for intercity buses remains unchanged.

FISCAL NOTE

James Bass, Director, Finance Division, has determined that for each of the first five years the amendments as proposed are in effect, there will be fiscal implications for state or local governments as a result of enforcing or administering the amendments. There will be anticipated economic costs for transit agencies required to comply with the sections as proposed due to some entities receiving a reduction in funds. For the first five fiscal years the maximum growth realized by individual recipients will be approximately 20% for each funding program. For the urban systems that receive state funds, the maximum reduction for the first five years is 0.9%, 6.88%, 6.0%, 3.73%, and 4.18% respectively. For the nonurbanized systems that receive state funding, the maximum reduction for the first five years is 9.68%, 9.48%, 9.21%, 6.71% and 7.95% respectively. For nonurbanized systems that receive federal funds, the maximum reduction is 10%, 9.02%, 8.52%, 6.38% and 7.81% respectively. Since the future performance of individual transit systems cannot be predicted, the basis of calculation was held constant. Individual systems performing at a level better then their current level may realize a higher percentage level. In addition, future appropriations at the state and federal level cannot be predicted.

Susan Bryant, Director, Public Transportation Division, has certified that there will be no significant impact on local economies or overall employment as a result of enforcing or administering the amendments.

PUBLIC BENEFIT

Ms. Bryant has also determined that for each year of the first five years the sections are in effect, the public benefit anticipated as a result of enforcing or administering the amendments will be a fair and equitable distribution of public transportation funds that will encourage transportation providers to be efficient and economical. There will be no adverse economic effect on small businesses.

PUBLIC HEARING

Pursuant to the Administrative Procedure Act, Government Code, Chapter 2001, the Texas Department of Transportation will conduct five statewide public hearings to receive comments concerning the proposed rules. Public hearings will be held at: 4:00 p.m. on May 24, 2004, in the first floor hearing room of the Dewitt C. Greer State Highway Building, 125 East 11th Street, Austin, Texas; 5:00 p.m. on May 25, 2004, in the County Commissioner’s Court meeting room, 500 E. San Antonio, El Paso, Texas; 4:00 p.m. on June 1, 2004, at the Palmview Community Center, 3401 Jordan, McAllen, Texas; 5:00 p.m. on June 3, 2004, in the Assembly Room of the Texas Department of Transportation Tyler District Office, 2709 West Front Street, Tyler, Texas; and 4:00 p.m. on June 4, 2004, at Citibus Transfer Plaza, 801 Broadway, Lubbock, Texas.

These hearings will be conducted in accordance with the procedures specified in 43 TAC §1.5. Those desiring to make comments or presentations may register starting a half hour before the scheduled hearing time. Any interested persons may appear and offer comments, either orally or in writing; however, questioning of those making presentations will be reserved exclusively to the presiding officer as may be necessary to ensure a complete record. While any person with pertinent comments will be granted an opportunity to present them during the course of the hearings, the presiding officer reserves the right to restrict testimony in terms of time and repetitive content. Organizations, associations, or groups are encouraged to present their commonly held views and identical or similar comments through a representative member when possible. Comments on the proposed text should include appropriate citations to sections, subsections, paragraphs, etc. for proper reference. Any suggestions or requests for alternative language or other revisions to the proposed text should be submitted in written form. Presentations must remain pertinent to the issues being discussed. A person may not assign a portion of his or her time to another speaker. Persons with disabilities who plan to attend this meeting and who may need auxiliary aids or services such as interpreters for persons who are deaf or hearing impaired, readers, large print or Braille, are requested to contact Randall Dillard, Director, Public Information Office, 125 East 11th Street, Austin, Texas 78701-2483, 512/463-8588 at least two working days prior to the hearings so that appropriate services can be provided.

SUBMITTAL OF COMMENTS

Written comments on the proposed amendments may be submitted to Susan Bryant, Director, Public Transportation Division, 125 East 11th Street, Austin, Texas 78701-2483. The deadline for receipt of comments is 5:00 p.m. on June 14, 2004.

Subchapter A. GENERAL