The Texas Department of Transportation (department) adopts amendments to §31.3, concerning definitions, §31.11, concerning formula program, §31.13, concerning discretionary program, and §31.36, concerning Section 5311 Grant Program. Sections 31.3, 31.11 and 31.36 are adopted with changes to the proposed text as published in the May 14, 2004, issue of the Texas Register (29 TexReg 4743). Section 31.13 is adopted without changes to the proposed text as published in the May 14, 2004, issue of the Texas Register (29 TexReg 4743) and will not be republished.

EXPLANATION OF ADOPTED 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House Bill 3184, 78th Legislature, Regular Session, 2003, amended Transportation Code, §456.022, and repealed Transportation Code, §456.024 (effective September 1, 2004) to remove the statutory formula for allocating funds among individual eligible public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 before the rules were proposed. 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 Public Transportation Advisory Committee, at its June 10, 2004, meeting submitted three additional comments. PTAC requested that the department clarify the term "good standing." The department agrees and has added a definition of good standing to §31.3. PTAC indicated that its comments on the formula apply only to fiscal year 2005 and it wishes to revisit the formula allocation for subsequent years. PTAC also recommended to the commission that the allocation of funds for the small urban areas be tied to an earlier draft spreadsheet that contains certain caps for designated recipients located in an urbanized area which includes a transit authority but is not served by that transit authority. Transportation Code, §456.006, capping these areas is still in effect and has not been repealed. The final numbers will approximate the earlier spreadsheet that PTAC mentioned.

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 new 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. Section 31.3 is adopted with changes to add a definition for the term "good standing" for clarification. The definition states that good standing is a status indicating that the department's director of public transportation has not sent a letter to an entity signifying the entity is in noncompliance with any aspect of a program.

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.

Section 31.11 is adopted with changes to correct two typographical errors in the proposed rule. In §31.11(b)(2)(B), which relates to nonurbanized areas, the word "urbanized" has been changed to "nonurbanized" in clause (i). The cross-reference in §31.11(d) has been corrected from subsection (b) to (c).

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) is 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.

Section 31.36 is adopted with changes to correct two typographical errors. In §31.36(g)(2)(B)(i) relating to nonurbanized areas, the word "urbanized" has been changed to "nonurbanized." In §31.36(g)(4) the cross-reference to paragraphs (1) and (2) has been corrected to paragraph (3).

COMMENTS

Hearings on the proposed amendments were held in Austin, El Paso, Lubbock, McAllen and Tyler during May and June. The department received comments from 46 individuals and entities. Four indicated they were in favor of the proposed rules and four indicated that they were opposed.

Several comments were submitted in regards to local transit services and the importance of these services to the residents who rely on these services. Comments varied from issues with local bus service routes and fares, to the impact that would be realized if services were cut due to funding reductions. Oral comments were received from: four individuals; a social service coordinator of the William Booth Apartments; the Salvation Army; the East Texas Workforce Center; The United Mounted Peace Officers of Texas; and a social worker at a dialysis center.

Comments: Several individuals commented in favor of the rules. The Alamo Area Council of Governments submitted oral comments expressing thanks to the department and PTAC for developing a fair and equitable formula for the entire state. The commenter spoke in support of the formulas and stated he looked forward to the changes.

Greater East Texas Transit Association submitted oral and written comments thanking the department and members of PTAC for their work on the rules. The commenter expressed his support for the proposed formula. He noted the negative impact the proposed formula would have on Tyler Transit, but the positive impact it would bring to North East Texas rural areas. The commenter also expressed appreciation to the department for its work in attempting to reach consensus for anomalies in the funding formula, and a need to increase the current state investment in public transportation.

Rusk County Transportation Committee submitted oral and written comments that support the proposed formula and encourage the department to continue working with the development of transportation systems. They stated that the department should aggressively seek new and innovative ways of funding and recommended that the department monitor the performance measures to ensure their effectiveness as the formula is utilized today and in the future.

Response: The department will continue to look for ways in which it can assist transit systems, especially in concert with appropriated funding levels.

Comment: Just Transportation Alliances (JTA) submitted oral comments. JTA suggested the department develop a mechanism to provide feedback to the comments it receives. JTA stated the formula change is fair in regards to distribution, but places caps for systems in transition. JTA recommended the department base formulas on the market for public transportation. JTA also expressed a need for more flexibility in the formula, stating that standard performance measures are static and do not accurately reflect what happens on the ground by individual operators. JTA stated that there is a need to start multi-tasking by lining up multiple funding with the formula. JTA encouraged the Public Transportation Division to take a leadership role and model performance measures for themselves to gauge how they can do better.

Response: Concerning the suggestion that the department develop a mechanism to provide feedback to comments, the department publishes its responses to comments on proposed rules in the Texas Register as well as the department's website. The department did not base its formula on the market for public transportation since the need for public transportation far outpaces the available funding. There has not been any indication that Texas has any areas that are overserved by public transportation. The department designed flexibility into the formula by allowing the commission to allocate funding for strategic priorities and to address funding anomalies. It is not clear what is meant by multiple funding, but the department is receptive to ideas that would create additional funding. The department has performance measures, including measures for public transportation.

Comment: East Texas Just Transportation Alliance (ETJTA) submitted oral comments expressing appreciation to the commissioners and staff for their support and efforts to make changes to the existing funding formulas. ETJTA stated a need for the department to provide leadership and consider coordination as a key feature in funding allocation and that coordination must be a key performance factor based on a consumer model to get people where they need to go, not where they want to go. ETJTA also expressed difficulties with matching federal funds and the need for cities and counties to "pony up" funding to match federal dollars. It suggested that local elected officials be notified in regards to funding needs.

Response: The department is committed to working with local entities to enhance coordination and will continue to do so.

Comment: Texarkana Urban Transit District (TUTD) submitted written and oral comments regarding the data used for Texarkana as the system exists both in Texas and Arkansas. TUTD expressed its thanks to PTAC and the department for using performance measures and suggested greater emphasis on the use of performance measures as it would lessen the impending reduction in operating assistance. TUTD gave a cautionary comment regarding using operating costs as a performance measure since systems will be penalized for increases in certain operating costs such as insurance. TUTD suggested utilizing toll credits.

Response: PTAC did discuss giving a gradually greater emphasis to performance measures. PTAC did not adopt a graduation, but did express its intent to discuss this possibility in future changes to the rules. PTAC and the department considered various measures. Under the definitions, insurance may be considered as either an administrative or operating cost depending on the type of insurance. These rules are designed to address the disbursal of funds only. The department will continue to review the value of innovative financing options such as toll credits which are not part of this rule promulgation.

Comments: Several individuals commented against the rules. The Brazos Transit District (the District) submitted oral and written comments that detailed areas in which the District believes the formula is flawed including the allocated funding as viewed on a per capita basis as well as on a per square mile basis. The District also commented on the performance portion of the formula stating that a reduction in funding would have a negative reflection in its transit system's performance creating additional funding penalties to the system and its patrons in their access to needed goods and services. The District further expressed disappointment of the locations for the public hearings since, in its view, the hearings were located in areas that precluded the negatively affected transit districts, as well as their elected officials and patrons, from providing comment.

Another commenter from the District provided copies of, and indicated written support for, testimony given by the District's original commenter.

Texoma Area Paratransit System (TAPS) made numerous comments regarding the proposed rules. TAPS was pleased to see a five-year transition period complimented with the use of 20% commission discretionary funds. TAPS addressed the availability of Health and Human Service transportation program funds to transit districts, and stated that their introduction would not offset the realized decrease in state and federal funds under the proposed formula. TAPS expressed concern in the system's inability to match federal Section 5307 funds due to the loss of toll credits and now the loss of state funds under the proposed rules. TAPS expressed its support for the revised definition of local funds and also supports measuring performance against the same transit agency; however, TAPS expressed concern regarding the data used in calculation of the performance measures, opposes adoption of the rules as written in that many transit systems would realize a decrease in funding; expressed concern that overall funding levels were held constant in regard to the first five-year fiscal note calculation as a political move by the department; opposed the proposed rules as they would result in a disruption of service as presently being provided to residents of Texas; suggested there are alternatives not examined by the department; and recommended that the department keep funding at its current levels. TAPS expressed its concern that the department not cause a decrease in funding for a rural provider that is one of the largest and most coordinated in the state.

The Caprock Community Action Agency commented that it does not support the new formula because the agency stands to lose a great deal of money under the formula and rural systems cannot stand any cut at this time.

Response: The department recognizes that in creating a fair and equitable distribution of funds, some entities may experience a reduction in funding. However, since there are limited funds, there is no way to increase the funds to the agencies that have historically been underfunded without reducing others. The department also recognizes the contributions of all transit providers throughout the state and encourages public input on all of its rule changes. Because of the importance of this issue, the department chose to hold five public hearings in various cities versus the customary single hearing in Austin. While the department would like to be able to hear both citizens and providers from throughout the state, both time and resources make this impossible. Instead, the department provided an avenue by which comments could be submitted to the department via the mail.

The fiscal note funding level calculation was held constant because the department does not have an indication of what the funding will be over these years. The federal transportation bill is still pending and the state legislature had not yet funded the next few fiscal years. Based on historical funding, the funding probably will not be reduced, but there is no guarantee that it will be increased. The department is interested in learning about any other alternative funding that may be available.

Comment: East Texas Council of Governments (ETCOG) spoke in favor of the proposed formula and outlined the enhancements it would allow ETCOG to make. ETCOG further stated the performance measures should not be applied to the rural operators whose funding will be reduced.

Response: The department does not think it would be fair and equitable to apply performance measures to only those agencies that did not receive a reduction in funding. Those agencies may experience an increase in funding because they do well in those measures. The graduated caps and bases are designed to create stability in the funding stream.

Comment: East Texas Center for Independent Living (ETCIL) commented orally that the department should look for innovative ways to bring more federal dollars to the area. ETCIL also stated that it hoped the formula would be available for revision in the future. It suggested that the department and the Federal Transit Administration eliminate geographical and funding barriers.

Response: The department will continue to look for ways in which it can assist transit systems, especially in concert with appropriated funding levels. The department also agrees that further review is appropriate regarding suggested items for possible inclusion in future amendments to the rules.

Comment: An individual submitted written and oral comments stating that a loss of funding for any system would result in reduced services. The commenter asked the department to cover the fiscal year 2005 shortfall for systems that would experience a reduction of funds under the proposed rules, and suggested the use of additional federal funds. The commenter also recommended the department: integrate health and human service programs and funds into a coordinated transportation program; wait to see what the legislature appropriates for public transportation for the next biennium; wait to see how Congress handles reauthorization; and ask PTAC to systematically develop a fully integrated and coordinated public transportation system for Texas. The commenter suggested engaging the services of the Texas Transportation Institute to prepare an inventory of current providers and programs which would most likely illustrate public transportation models in Texas which work well, overlapping services, and the real cost effectiveness of systems across the state.

A commenter from the Brazos Transit District submitted written support for this individual's testimony.

Response: The rules, as proposed, allocate the funds available for these programs. At this time, there is not another funding source to cover the reduction of funds. The department is committed to integrating services into a coordinated transportation program. The department is always available for input concerning efficiency and effectiveness, and also considers PTAC's recommendations concerning public transportation models and services.

Comment: A commenter from the County of El Paso stated that performance criteria vehicle revenue miles should be examined closely so as not to unfairly affect systems with large deadhead mileage.

Response: Upon conclusion of the public hearing in El Paso, this commenter retracted his comment noting that the department had already satisfactorily covered this item.

Comments: A commenter representing Citibus, a transit system in Lubbock, and also representing other properties managed by McDonald Transit, in which he serves as vice president, submitted written and oral comments. The commenter noted that of the seven systems managed by McDonald Transit in Texas, five are losing funding under the proposed formula. The commenter stated that he agreed with a five-year transition; believes in performance measures, specifically local funds; and suggested the comparison and rewarding of systems that perform well as compared to other systems. The commenter proposed that a greater percentage of funding (50%) be directed to performance; stated that local funds are the most important of the performance measures; and recommended the department establish a performance measure to encourage larger local contributions. The commenter also suggested a special award to systems that are in need of funding through no fault of their own. The commenter recommended: that no system receive a state funding reduction for fiscal year 2005; that the state take funds from other sources such as medical transportation or other federal resources to assist systems who need additional funds; the department establish goals and objectives for systems for the next five years; and the state require a local match for state funds for fiscal year 2005. The commenter also suggested the development of a pilot program for coordination and consideration of the use of toll credits by public transportation systems to match planning and capital expenditures to leverage available federal funds for such projects.

The Lubbock Transit Advisory Board commenter orally agreed with the comments provided by Citibus.

A commenter for the Texas Commission for the Blind and member of South Plains Transportation Alliance orally expressed concern with any formula that would reduce funding to the Lubbock area. The commenter supported the recommendations of Citibus and stated that special consideration should be given to Lubbock and other cities that have gone over 200,000 in population.

Response: PTAC considered graduated performance measures and has indicated they would like to discuss an increase in their weight for future changes to the rules. The department would have to define what would be considered "no fault" in order to include it as part of the criteria for award. The department does not have enough information at this time to make such a determination but is open to specific suggestions for future changes to the rules. If additional money is allocated for these programs, it will be distributed in accordance with the formula. The department does not have the authority to remove money from other programs such as medical transportation because those funds are dedicated by state and federal law to those programs. The department contractually addresses local match for those programs that require a local match. The department is committed to coordination; however, the funds that are the subject of these rules are to be distributed to the agency for specific transportation needs. The department will continue to review the value of innovative financing options such as toll credits that are not part of this rule promulgation.

In regards to cities over the 200,000 population level, state statute, specifically Texas Transportation Code, Chapter 456, stipulates those entities that are eligible and ineligible for state funds under this program.

Comment: A commenter from West Texas Opportunities submitted oral comments that the current proposed rules will not allow the system to keep up with the increases they have obtained over the past year. The commenter expressed the need for a better way to report local match since they are only allowed to report 20% under the rules. The commenter stated that everyone should be doing service in the same way. The commenter recommended coordination be part of the formula, and that the 2004 formula remain the same since it is too late to change it. Finally, the commenter stated that rural systems could not compete with populated areas since rural costs are greater than that of populated areas.

Response: The department also notes that the reference to only being allowed to report 20% local match under the rules appears to be a misunderstanding. The proposed amendments and existing rules do not place limits on reporting of local match. The department and the PTAC considered coordination as part of the criteria, but found it difficult to quantify. The department would consider quantifiable suggestions for future changes to the rules. The formula is divided between urbanized and nonurbanized, and takes land area into consideration for the nonurbanized areas.

Comment: A commenter from Pan Handle Community Services (PHCS) orally expressed support for the new formula because it takes land area into consideration. PHCS believes that agencies should be rewarded for coordinating trips and looks forward to coordination of transportation with other state agencies through the department. PHCS suggested that the 20% being held by the commission could be used to offset some systems not being increased by the formula and expressed the need to support all systems. PHCS expressed support for the 10% and 20% cap and base. PHCS stated the real problem with the formula is that there are not enough funds and that costs have gone up, especially fuel. Finally, PHCS stated that every city should have access to transportation.

Response: The department is committed to coordination. The commission has the option of using part or all of the 20% to address funding anomalies. The statutes determine what entities are eligible for this funding, and under this formula, the department will provide funding for all eligible entities.

Comment: Citilink, the transit system in Abilene, submitted oral comments that suggested the department consider other options, such as performance, when developing the formula.

Response: The department agrees and has provided for the inclusion of performance in the funding formula.

Comments: Several comments were received concerning the cross-border populations. A United Transportation Union Local 1670 representative and coach operator for Laredo Municipal Transit system submitted oral comments that expressed concern for the systems along the Texas/Mexico border and commented that the proposed formula's 80/20--Needs/Performance split works against the systems along the border, with the possible exception of Harlingen and McAllen, as the border systems have heavy ridership from large cross-border transient populations. He suggested working with "scenario two" for implementation.

A commenter from Brownsville Urban System (BUS) opposed the proposed funding formulas in written and oral comments. BUS expressed concern with using population since 40% of its ridership is walking across the bridges from Mexico. BUS further stated that any reduction in funding would diminish performance and efficiency improvements. BUS requested the following proposal be considered and only applied to fiscal year 2005: (1) continue to seek input to determine a formula that would not decrease funding for any transit agency; (2) that transit systems which would be reduced under the formula should be funded at their fiscal year 2004 funding levels; (3) the 20% be required to be used to adjust funding to at least the fiscal year 2004 levels; and (4) incorporate a border area adjustment into both the temporary fiscal year 2005 and final funding formulas.

The Lower Rio Grande Valley Development Council orally commented that any changes would affect its system since they run all types of systems and funding cuts would affect any system's ability to provide service. The commenter proposed status quo as an option when looking at development of new rules. It was further stated that systems along the border have a uniqueness to provide service to United States citizens as well as citizens of Mexico. The commenter stated that efforts should be focused on finding new funding streams.

Response: The department realizes the unique situation and challenges faced by transit operations in the Texas/Mexico border area. The department believes that local, state, and federal governments need to focus attention, and possibly financial resources, in addressing this important aspect of the border area. In regards to "scenario two," the proposed rules do not list scenarios, and therefore the reference is unknown.

Additional input in determining a formula for fiscal year 2005 would delay the distribution of the funding that will be available September 1, 2004. The formula has some flexibility since the commission has the authority to use all or part of the 20% to address funding anomalies. The department is willing to consider specific input concerning border area adjustments for future revisions to these rules.

Comment: A commenter from the Town of South Padre Island representing The WAVE, the local transit system, expressed concerns with the population and land area formula since their resident population versus the population they serve is quite varied. Basing the formula on performance may limit their option to explore other items such as route changes.

Response: The department realizes the unique situation and challenge faced by the transit operations on South Padre Island. The department and PTAC considered the tourist areas when considering the formula, but could not come up with a way to numerically accommodate the influx of tourists in various areas, while keeping in mind the needs of the rest of the state. The department suggests that local, state, and federal governments need to focus attention, and possible financial resources, in addressing this important aspect of a tourist area. The department is also willing to consider any specific suggestions in future amendments to these rules.

Comment: The City of Rio Grande City submitted oral comments that recommended reducing base needs and increasing performance percentages which should help with the transient population coming over from Mexico. The city stated that a change in the percentage would help the border area.

Response: The department will consider increasing performance percentages and other performance indicators such as a reduction in base needs, and agrees that further review of border area needs is appropriate for future rule amendments.

Comment: A commenter from Hildago County Metropolitan Planning Organization questioned the term "population." He spoke of transit dependent populations such as "low income." He suggested that "general population" is not reflective of "need."

Response: The department considered various types of populations, but determined that it would be difficult to ascertain reliable numbers indicating special populations such as low income, elderly, and disabled. The department also received various opinions at the public hearings and informally from the transit community. Although they agreed that population should be used, the transit community differed in how to categorize the transit dependent population. In addition, the department is committed to providing transportation for all persons wishing to use public transportation.

Comment: The Central Texas Rural Transit District submitted written comments that expressed concern that the data used in the performance measure of the formula does not treat their system fairly since their system expanded into two additional counties during the last four and one-half months of fiscal year 2003.

Response: The department will review the data used to fairly account for all transit providers. The rules address a change in service area. If a service area is otherwise altered, the department and the subrecipient will negotiate an appropriate adjustment in the funding awarded to that subrecipient for that funding year or any subsequent year, as appropriate.

Comment: The Texas Citizen Fund (TCF) submitted written comments that expressed their thoughts regarding the factuality of spreadsheets and information disseminated before and during the release of the proposed changes to the rules. TCF strongly recommends that the commission proceed, rather than start the process over, even with the concerns it raised.

TCF suggested that the commission could achieve greater equity in the distribution of state (and to a related extent federal) funding by tying the allocation of funds to: (1) the needs of transit customers and communities statewide; and (2) the performance of transit systems. As the fiscal year 2005 proposed funding formula moves forward, TCF strongly encouraged the commission to promptly re-examine of those criteria that define an eligible system and to make equitable the population calculations.

TCF suggested that the commission prioritize performance accountability by identifying state transit priorities, clarifying performance expectations and goals, standardizing the measurements of these expectations and goals with greater uniformity, and tracking performance. TCF commented that the performance measures contained within the proposed funding formula are driven by the past. TCF further stated that in fiscal year 2005, the commission should press staff, the public, transit operators, and others to move forward on developing criteria that would capture the performance and functioning of a system, not repackage operational measurements as "performance measures."

TCF suggested that the commission and department meet the legislature's mandates of innovation, efficiency, coordination, and exemplary performance by rewarding systems that meet the transportation needs of communities and individual customers. TCF encouraged the commission to provide a vision toward which PTAC members, the public, and the department could move.

TCF urged the commission to hold the department accountable for significant improvements in its advance preparations, logistical sensitivity, and mechanisms for public inclusion as it moved forward on the funding formula to be used post-fiscal year 2005. And finally, TCF strongly recommended that the commission move forward by restoring the allocations calculated and released by the department in a draft spreadsheet dated April 2004.

Response: There has been a misunderstanding about the spreadsheets. The cap for the designated recipients located in urbanized areas which include a transit authority but are not served by the transit authority is in effect. Transportation Code, §456.006, which this was based on, was not repealed. Therefore the final numbers will approximate the April 2004 spreadsheet. The proposed formula determines the needs as based on population, and for the nonurbanized areas, land area. The formula takes performance into consideration and is designed to meet the legislature's mandates. The department welcomes any specific, quantifiable suggestions for future rule amendments as to performance measures.

The department has performance measures, including measures for public transportation. The commission will allocate any additional funding and has discretion to allocate some funding on the basis of funding anomalies.

Comment: The Texas Transit Association (TTA) submitted written comments that suggested engaging the services of the Texas Transportation Institute to prepare an inventory of current providers and programs which would most likely show: (1) public transportation models in Texas which work well; (2) overlapping services; and (3) the real cost of effectiveness of systems across the state.

TTA implored the department to freeze rural and small urban providers at their fiscal year 2004 funding levels, and to use potential federal funds to cover the shortfall.

The commenter voiced concern over the use of operating expense per mile as one of the performance measures which could unfairly penalize providers when uncontrollable costs, such as fuel and insurance, increase dramatically. The commenter also expressed concern that performance data is not current. The commenter did, however, support the proposed change to the definition of local funds and supports the five-year transition period.

TTA also expressed concern regarding transit systems inability to match federal funds with reduced state funding under the proposed rules. It further expressed disappointment that the public hearings were not held via videoconference, and that the information provided to PTAC members at their June 10th meeting was not available prior to the scheduled public hearings.

Response: The department is always available for input concerning efficiency and effectiveness, and considers PTAC's recommendations concerning public transportation models and services. The legislature gave the commission the task to create a fair and equitable funding system. The commission has determined the current formula needs to be changed to meet this mandate.

Regarding operating expense, the department is willing to consider suggestions for future rule amendments; however, it has determined that at this time costs such as fuel and insurance affect all the providers. The department has performed outreach efforts concerning these rules. It held many public meetings, five public hearings, received comments via the mail, and posted information on the Internet.

Regarding information disseminated to PTAC, this committee serves in a special capacity as policy advisors to the department. Information is provided to this committee specifically to address items appearing on the committee's agenda, and the information that is scheduled to be given to PTAC is subject to change. It is considered internal policy decision-making until the documents are finalized. This information may coincide with other processes, such as public hearings, but is not mutually inclusive.

Comment: Colorado Valley Transit submitted written comments that the loss of funds under the proposed formula may result in service reduction or possible elimination. The consequences of this problem may affect delivery of service and therefore a loss of performance funds. With a loss of both funds, some agencies may be eliminated.

Response: The proposed rules are not intended to eliminate systems but provide for a fair and equitable distribution of funds.

Comments: Several commenters submitted written comments suggesting the department adopt "scenario two." The Honorable Richard Raymond, State Representative--District 42, submitted written comments that supported "scenario two" as the most beneficial for Laredo and the southern region.

United Transportation Union supported "scenario two" as being most advantageous to areas along the border.

Response: Regarding "scenario two," there must be a misunderstanding. The proposed rules did not list scenarios.

Comment: The City of Texarkana, Arkansas, submitted written comments that expressed concern regarding the reduction of funds to Texarkana and provided comment regarding the hardship this would have on their service levels and their ability to match federal dollars. The City further commented regarding the need for toll credits to match federal capital projects.

Response: The department realizes the unique situation and challenge faced by the transit operations in Texarkana and will continue to review the value of innovative financing options such as toll credits, which are not part of this rule promulgation.

Comment: The Honorable Gonzalo Barrientos, State Senator, District 14, provided written comments that expressed concern regarding the impact the proposed rules would have on the Capital Area Rural Transit System. He was also concerned that the proposed rules will penalize rural transit providers that have expanded their infrastructure over the past several years. The senator suggested using federal money to fund increases while freezing other providers at existing allocation levels.

Response: The department will use additional federal money if it is allocated. To freeze the present allocation would leave the current formula unchanged. The legislature gave the commission the task to create a fair and equitable funding system. The commission has determined the current formula needs to be changed to meet this mandate.

Comment: Golden Crescent Regional Planning Commission submitted written comments that supported the awarding of funds based on performance, but with concerns regarding the language proposed. The commenter suggested the language be changed to the following: "(B) If the transit district is in good standing with the department and has no deficiencies and no findings of non-compliance, 20% will be awarded first under clause (ii) of this subparagraph with remaining funds being awarded under clause (i) of this subparagraph as follows."

Response: The department believes that in developing a new formula for the distribution of funds, it is important to build in some flexibility. The ability to use all or part of the 20% will help address the transition to the new formula.

Comment: The City of Laredo submitted written comments that supported the recommendations of PTAC as drafted. The City further expressed concurrence with PTAC for a graduated split with the increase proportion of weight on performance measures from 80/20 to 70/30 to 60/40 to 50/50.

Response: PTAC did consider the graduated split, but voted for the 80/20 split stated in the rules. The department and PTAC do not wish to increase or decrease these amounts until the effect of the addition of performance measures can be evaluated. PTAC has also indicated that it would like to revisit this split for future amendments.

Comments: Various persons submitted oral comments suggesting that the current formula not be revised. The transit system in Midland/Odessa supports the proposal presented by Citibus. The commenter noted that although Midland/Odessa stands to gain, he is concerned about the cost to other areas around the state and believes the formula creates a competition between urbanized areas. The commenter suggested sustaining the current level of funding.

An individual stated that if you cut funds, the disabled will not be able to get to the doctor or other places and requested the department take this into consideration.

A representative of Congressman Solomon Ortiz submitted oral comments stating that Congressman Ortiz has been active in attempting to improve and bring transportation to the valley. The representative noted the Congressman's understanding that transportation services are very important for jobs, medical, and other necessary functions in life, and that cutting funding would have a severe impact on the area. The representative asked why are we fixing something that is already working well and why are the formulas being changed; and also suggested the state look at the lives they are affecting before making any changes.

The county judges from the following counties submitted separate written comments: Floyd County; Hale County; Motley County; Dickens County; and Crosby County. These county judges expressed concern for local impact and stated their beliefs that more time is needed to come up with a more equitable formula. They suggested that the formula should remain as is for this year to allow more time for an equitable distribution of funds.

The County Judge of King County (Judge Daniel) submitted written comments that suggested the state funding be split 50% based on population and 50% on land area; and the performance of 20% be taken into consideration if a system saw a rise or fall in funding from the previous year. For the federal rural funding, Judge Daniel suggested the funding be split 50% based on population and 50% on land area, and the same consideration be given to the 20% performance portion regarding funding increases/decreases. He recommended more emphasis be factored into the rural formula for the land area instead of population. He also recommended both economic and demographics of each county be considered. The judge stated that the formula should remain as is for this year to allow for more time for an equitable distribution of funds.

Response: The legislature gave the commission the task to create a fair and equitable funding system. The commission has determined the current formula needs to be changed to meet this mandate.

Various splits were considered by the department, and it was determined that the adopted splits create the least disruption to service while being fair and equitable. The commission does have the authority to use all or part of the 20% to address funding anomalies. The department considered economic and demographic criteria, but found it difficult to determine what types of numbers to use as a basis in services that are sorely needed throughout the state, and also how do to this while remaining committed to providing public transportation to all individuals who wish to use it. The commission is willing to consider specific suggestions for future amendments.

Subchapter A. GENERAL