TITLE 43.TRANSPORTATION

Part 1. TEXAS DEPARTMENT OF TRANSPORTATION

Chapter 31. PUBLIC TRANSPORTATION

The Texas Department of Transportation (department) proposes amendments to §31.11, concerning state formula program and §31.36, concerning the Section 5311 grant program for public transportation.

EXPLANATION OF PROPOSED AMENDMENTS

Transportation Code, §456.022 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.

On June 24, 2004, the commission amended §31.11 and §31.36 to establish formulas for the distribution of state and federal funds. The commission now desires to further define the formulas to better allocate funding resources.

The Public Transportation Advisory Committee (PTAC) met several times to discuss the changes to the existing formulas 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 state funds be allocated between urban and non-urbanized areas with 35% of the funding allocated to the urban areas of the state and 65% of the funding allocated to the non-urbanized areas of the state. PTAC also recommended that any further distribution of state funds allocated to urban areas be based on population not to exceed 199,999, in both the 80%, which is allocated based on population, and the 20%, which is allocated based on system performance. In addition, PTAC recommended new state funds performance criteria for the urban areas to be based on local funds per operating expense, operating expense per mile (inverted), and ridership per capita. PTAC recommended for the urban areas that the state funds performance criterion of operating expenses per mile (inverted) be calculated comparing a transit agency against its previous performance. PTAC further recommended state funds performance criteria for the urban areas that local funds per operating expense and ridership per capita be compared system to system.

The rules presented include recommendations from PTAC as outlined above and also include the following changes to the state formula for urban areas and federal funds for Section 5311, non-urbanzied areas: (1) Provisions of the phase-in process are revised to use fiscal year 2004 as the base year when calculating allocations for the next allocation of funds, after which, succeeding allocations will be based on previous fiscal years; and (2) The limitation of the growth cap will be removed allowing systems to grow to their full formula allocation, subject to available funding, and should available funding exceed the full formula allocations, additional funding will be allocated to all systems on a pro rata basis with these additional awards not subject to the transition funding allocation process in succeeding fiscal years.

On March 15, 2005, PTAC met and, by unanimous vote of the members present, waived preliminary review and comment of the proposed rules until after the public comment period is initiated.

The amendments to §31.11, Formula Program, provide changes to the current formula. The funds will be allocated between small urban and non-urbanized areas with 35% of the funding allocated to the urban areas of the state and 65% of the funding allocated to the non-urbanized areas of the state. This percentage funding split more closely parallels historical distribution between urban and non-urbanized areas.

Urban areas that have populations of 200,000 or greater will be adjusted on a pro rata basis to reflect a population level of 199,999 for both the 80%, which is allocated based on population, and the 20%, which is allocated based on system performance. This adjustment of population more closely aligns systems with the population levels used at the federal level, which separate smaller urban systems from larger urban systems, and also more closely aligns with the population levels used in the definition of urban transit district defined in Transportation Code, Chapter 458.

Performance criteria for the urban areas are changed to local funds per operating expense, operating expense per mile (inverted), and ridership per capita. Operating expenses per mile (inverted) will be calculated comparing a transit agency against its previous performance. Local funds per operating expense and ridership per capita will be compared system to system. These revised performance criteria reflect standards that provide a more meaningful and accurate measurement and comparison.

The five-year phase-in process that went into effect in FY 2005 will continue for the next four fiscal year allocations. However, the provisions of the phase-in process are revised to use fiscal year 2004 as the base year when calculating allocations for the next allocation of funds, after which, succeeding allocations will be based on previous fiscal years. This will allow an entity time to plan before it will be affected by a significant change in funding. In addition, the limitation of 20% growth will be removed allowing systems to grow to their full formula allocation, subject to available funding. Should available funding exceed the full formula allocations, additional funding will be awarded by the commission on a pro rata basis, competitively, or a combination of both. Consideration for the award of these additional funds may include, but is not limited to, coordination and technical support activities, compensation for unforeseen funding anomalies, assistance with eliminating waste and ensuring efficiency, maximum coverage in the provision of public transportation services, and reductions in air pollution. These additional awards will allow the commission to address state priorities. These awards are not subject to the transition funding allocation process in succeeding fiscal years.

The amendments to §31.36, Section 5311 Grant Program, provide changes to the current formula. The five-year phase-in process that went into effect in FY 2005 will continue for the next four fiscal year allocations. However, the provisions of the phase-in process are revised to use fiscal year 2004 as the base year when calculating allocations for the next allocation of funds, after which, succeeding allocations will be based on previous fiscal years. This will continue to guarantee that an entity will have time to plan before it will be affected by a significant reduction. In addition, the limitation of 20% growth will be removed allowing systems to grow to their full formula allocation, subject to available funding. Should available funding exceed the full formula allocations, additional funding will be awarded by the commission on a pro rata basis, competitively, or a combination of both. Consideration for the award of these additional funds may include, but is not limited to, coordination and technical support activities, compensation for unforeseen funding anomalies, assistance with eliminating waste and ensuring efficiency, maximum coverage in the provision of public transportation services, and reductions in air pollution. These additional awards will allow the commission to address state priorities. These awards are not subject to the transition funding allocation process in succeeding fiscal years.

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 urban systems that receive state funds, the maximum reduction for the first four fiscal years is 10% per fiscal year, and for the fifth year, the maximum reduction for urban systems is 11.41%. For the urban systems that receive state funds, the maximum growth for the first five years is 36.51%, 38.42%, 121.63%, 35.75%, and 12.44% respectively.

For non-urbanized systems that receive state funds, the maximum reduction for the first four fiscal years is 10% per fiscal year, and for the fifth year, the maximum reduction for non-urbanized systems is 41.00%. For the non-urbanized systems that receive state funds, the maximum growth for the first five years is 24.73%, 18.09%, 15.54%, 12.59%, and 101.57% respectively.

For non-urbanized systems that receive federal funds, the maximum reduction for the first four fiscal years is 10% per fiscal year, and for the fifth year, the maximum reduction for non-urbanized systems is 39.22%. For the non-urbanized systems that receive federal funds, the maximum growth for the first five years is 33.73%, 19.70%, 12.86%, 18.09%, and 86.51% 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 than their current level may realize a higher percentage funding level. Funding levels were applied based on the department's request for legislative appropriation and the fiscal year 2005 federal apportionment. However, future appropriations and apportionments cannot be predicted. Therefore, commission awards also cannot be predicted should additional funding be available.

Susan N. 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 HEARINGS

Pursuant to the Administrative Procedure Act, Government Code, Chapter 2001, the Texas Department of Transportation will conduct three public hearings to receive comments concerning the proposed rules. Public hearings will be held at: 4:00 p.m. on April 25, 2005, at the Texas Department of Transportation Corpus Christi District office, 1701 South Padre Island Dr., Room A; 4:00 p.m. on May 4, 2005, in the first floor hearing room of the Dewitt C. Greer State Highway Building, 125 East 11th Street, Austin, Texas; and 4:00 p.m. on May 9, 2005, at the Texas Department of Transportation Dallas District office, 4777 E. Hwy 80, Dallas Room. These hearings will be conducted in accordance with the procedures specified in 43 Texas Administrative Code §1.5. Those desiring to make comments or presentations may register 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 hearing, 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 hearing so that appropriate services can be provided.

SUBMITTAL OF COMMENTS

Written comments on the proposed amendments may be submitted to Bobby Killebrew, Deputy Director, Public Transportation Division, 125 East 11th Street, Austin, Texas 78701-2483. The deadline for receipt of comments is 5:00 p.m. on May 16, 2005.

Subchapter B. STATE PROGRAMS

43 TAC §31.11

STATUTORY AUTHORITY:

The amendments are proposed under Transportation Code, §201.101, which provides the commission with the authority to establish rules for the conduct of the work of the department, and more specifically, Transportation Code, §456.022, which requires the commission to adopt rules establishing a formula allocating funds among eligible public transportation providers; and Transportation Code, §461.003 which requires the commission to adopt rules necessary to implement Transportation Code, Chapter 361 and provides the commission with the authority to adopt rules to require certain state agencies to contract with the department for the department to assume the responsibilities of that agency relating to the provision of public transportation services, and to adopt rules to require a public transportation provider to provide detailed information on its public transportation services.

CROSS REFERENCE TO STATUTE: Transportation Code, §456.022.

§31.11.Formula Program.

(a) Purpose. Transportation Code, Chapter 456 requires the commission to allocate, at the beginning of each fiscal biennium, certain appropriated amounts from the public transportation fund. This section sets out the policies, procedures, and requirements for that allocation.

(b) Formula allocation. At the beginning of each state fiscal biennium, an amount equal to the amount appropriated from all sources to the commission by the legislature for that biennium for public transportation, other than federal funds and amounts specifically appropriated for coordination, technical support, or other costs of administration, will be allocated to designated recipients. The commission will allocate those funds between small urban and rural providers, with 35% [ 75% ] of the funding allocated to small urban providers and 65% of the funding allocated to rural providers [ based on population and 25% based on land area using the latest census data available from the United States Census Bureau, when applicable ].

(1) Urban funds available under this section will be allocated to municipalities that are designated recipients or transit providers in urbanized areas that are not served by an authority and to designated recipients that received state transit funding during the fiscal biennium ending August 31, 1997, that are not served by an authority but are located in urbanized areas that include one or more authorities. Any local governmental entity having the power to operate or maintain a public transportation system, except an authority, may receive formula program funds. The commission will distribute the money in the following manner.

(A) Eighty percent will be awarded giving consideration to population by using the latest census data available from, and as defined by, the U.S. Census Bureau for each urbanized area relative to the sum of all urbanized areas. Any urban provider whose urbanized area population is 200,000 or greater will have the population adjusted to reflect a population level of 199,999.

(B) If the transit district is in good standing with the department and has no deficiencies and no findings of noncompliance, 20% will be awarded under clause (i) or (ii) of this subparagraph as follows.

(i) The commission, using all or a portion of the funds, may award funding to address strategic priorities for the urbanized public transportation program. These amounts are not subject to the transition funding allocation process described in subsection (c) of this section in succeeding fiscal years, and will be awarded on a competitive basis unless they are needed to compensate for funding anomalies arising under this subsection.

(ii) The commission will award the funding by giving equal consideration to local funds per operating expense [ capita ], operating expenses per mile (inverted) as compared to the systems performance from the previous year, and ridership per capita [ as compared to the systems performance from the previous year, and vehicle revenue miles as compared to the systems performance from the previous year ]. Any urban provider whose urbanized area population is 200,000 or greater will have the aforementioned criteria adjusted on a pro rata basis to reflect a population level of 199,999. 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.

(2) Rural funds available under this section will be allocated in nonurbanized areas. Any eligible recipient may receive formula program funds. Of the money allocated under this paragraph, the commission will distribute the money in the following manner.

(A) Eighty percent will be awarded giving consideration to population weighted at 75% and on land area weighted at 25% by using the latest census data available from, and as defined by, the U.S. Census Bureau for each nonurbanized area relative to the sum of all nonurbanized areas.

(B) If the transit district is in good standing with the department and has no deficiencies and no findings of noncompliance, 20% will be awarded under clause (i) or (ii) of this subparagraph as follows.

(i) The commission, using all or a portion of the funds, may award funding to address strategic priorities for the nonurbanized public transportation program. These amounts are not subject to the transition funding allocation process described in subsection (c) of this section in succeeding fiscal years, and will be awarded on a competitive basis unless they are needed to compensate for funding anomalies arising under this subsection.

(ii) The commission will award the funding by giving equal consideration to local funds per capita, operating expenses per mile (inverted) as compared to the systems performance from the previous year, ridership per capita as compared to the systems performance from the previous year, and vehicle revenue miles as compared to the systems performance from the previous year. 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.

(3) Funds allocated under this section and any local funds may be used for any transit-related activity except that a designated recipient not included in a transit authority but located in an urbanized area that includes one or more transit authorities may only use funds to provide:

(A) 65% of the local share requirement for federally financed projects for capital improvements;

(B) 50% of the local share requirement for projects for operating expenses and administrative costs;

(C) 50% of the total cost of a public transportation capital improvement, if the designated recipient certifies that federal money is unavailable for the proposed project and the commission finds that the proposed project is vitally important to the development of public transportation in the state; and

(D) 65% of the local share requirement for federally financed planning activities.

(c) Transition. Each agency will have five years to transition to full formula allocation and during the five years after the first application of new census data from the United States Census Bureau, the allocations under subsection (b)(1) and (2) of this section will be adjusted to avoid extreme short-term disruptions in the continuity of funding. During this time no award to a transit district under this section will be less than 90% of the award to that transit district for the previous fiscal year, except that fiscal year 2004 will be used as the base year when calculating allocations for fiscal year 2006 allocation of funds, after which succeeding allocations will be based on previous fiscal years [ and no award to a transit district will be more than 120% of the award to that transit district for the previous fiscal year ]. All allocations under subsection (b)(1) and (2) of this section are subject to revision to comply with this standard. If available funding exceeds the allocations, additional funding will be awarded by the commission on a pro rata basis, competitively, or a combination of both. Consideration for the award of these additional funds may include, but is not limited to, coordination and technical support activities, compensation for unforeseen funding anomalies, assistance with eliminating waste and ensuring efficiency, maximum coverage in the provision of public transportation services, and reductions in air pollution [ allocated to the transit districts that have the lowest relative funding levels compared to the base ]. These additional awards are not subject to the transition funding allocation process in succeeding fiscal years.

(d) Change in service area. If part of a transit district's service area is changed due to declaration by the United States Census Bureau, or if the service area is otherwise altered, the department and the subrecipient shall negotiate an appropriate adjustment in the funding awarded to that subrecipient for that funding year or any subsequent year, as appropriate. This negotiated adjustment is not subject to the minimum and maximum standards set forth in subsection (c) of this section.

(e) Unobligated funds. Any money under this section that the designated recipient has not applied for before the November commission meeting in the second year of a state fiscal biennium will be administered by the commission under the discretionary program described in §31.13 of this subchapter.

(f) Returned funds. Any money under this section that the designated recipient agrees to return to the department will be administered by the commission under the discretionary program described in §31.13 of this subchapter.

(g) Application. To receive funds allocated under this section, a designated recipient must first submit a completed application, in the form prescribed by the department, to the appropriate district. The application must include certification that the proposed public transportation project is consistent with continuing, cooperating, and comprehensive regional transportation planning implemented in accordance with 49 USC §5301 and §1602a. Federal approval of a proposed public transportation project will be accepted as a determination that all federal planning requirements have been met.

(h) Project evaluation. In evaluating a project under this section, the department will consider the need for fast, safe, efficient, and economical public transportation and the approval of the FTA, or its successor.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 1, 2005.

TRD-200501372

Richard D. Monroe

General Counsel

Texas Department of Transportation

Earliest possible date of adoption: May 15, 2005

For further information, please call: (512) 463-8630


Subchapter C. FEDERAL PROGRAMS

43 TAC §31.36

STATUTORY AUTHORITY:

The amendments are proposed under Transportation Code, §201.101, which provides the commission with the authority to establish rules for the conduct of the work of the department, and more specifically, Transportation Code, §456.022, which requires the commission to adopt rules establishing a formula allocating funds among eligible public transportation providers; and Transportation Code, §461.003 which requires the commission to adopt rules necessary to implement Transportation Code, Chapter 361 and provides the commission with the authority to adopt rules to require certain state agencies to contract with the department for the department to assume the responsibilities of that agency relating to the provision of public transportation services, and to adopt rules to require a public transportation provider to provide detailed information on its public transportation services.

CROSS REFERENCE TO STATUTE: Transportation Code, §456.022.

§31.36.Section 5311 Grant Program.

(a) Purpose. The Federal Transit Act, codified at 49 USC §5311, authorizes the Secretary of the United States Department of Transportation to make grants for public transportation projects in nonurbanized areas. The department has been designated by the governor to administer the Section 5311 program.

(b) Goal and objectives. The Department's goal in administering the Section 5311 program is to promote the availability of professional, cost-effective, efficient, and coordinated passenger transportation services to the general public in nonurbanized areas using the most efficient combination of financial and other resources. To achieve this goal, the objectives of the department are to:

(1) promote the development and maintenance of a network of general public transportation services in nonurbanized areas throughout the state, in partnership with local officials;

(2) fully integrate the Section 5311 program with other federal, state, and local resources that are designed to serve nonurbanized populations;

(3) improve the efficiency, effectiveness, and safety of Section 5311 systems through the provision of technical assistance; and

(4) include private sector operators in the overall plan to provide public transportation services.

(c) Department role. The department acts as the designated recipient for all Section 5311 funds appropriated to the state and has an oversight responsibility for all nonurbanized transit services within the state. The department, however, recognizes the subrecipients as partners who shall retain control of daily operations. As the administering agency, the department will:

(1) develop application materials and disseminate information to prospective applicants and other interested parties;

(2) allocate the available program funds in a fair and equitable manner as described in subsection (g) of this section (the department will not provide Section 5311 funds to more than one transit system in a geographical area);

(3) develop evaluation criteria and select projects for funding;

(4) prepare the state's annual program of projects and funding application and submit that material to the FTA for approval;

(5) negotiate and execute contracts with local Section 5311 subrecipients;

(6) prepare requests for federal reimbursement, and process payment requests from Section 5311 subrecipients;

(7) monitor and evaluate the progress of ongoing transportation operations, including compliance with federal regulations; and

(8) provide technical assistance to Section 5311 subrecipients to aid them in improving transit services.

(d) Eligible subrecipients. State agencies, local public bodies, private nonprofit organizations, Native American tribes and organizations, and operators of public transportation services are eligible to receive Section 5311 funds through the department. Private for-profit operators of public transportation services may participate in the program through contracts with eligible subrecipients. An entity must be a rural transit district to receive Section 5311 funds except that private for-profit operators of public transportation services and entities that are not rural transit districts are eligible to receive Section 5311 funds through the department under the intercity bus program, as set forth in subsections (g)(1) and (i) of this section.

(e) Eligible assistance categories. The following categories of expenses are eligible for federal reimbursement under the Section 5311 program.

(1) State administrative expenses. The department may use up to 15% of the annual federal apportionment to defray its expenses incurred for the administration of Section 5311 program. These funds may also be used to provide technical assistance to subrecipients. Technical assistance may include project planning, program development, management development, coordination of public transportation projects, and related research. Projects are solicited from subrecipients and other interested parties. State administrative and technical assistance expenses do not require a non-federal match.

(2) Capital expenses.

(A) Eligible items include, but are not limited to:

(i) buses;

(ii) vans or other paratransit vehicles;

(iii) radios and communications equipment;

(iv) passenger shelters, bus stop signs, and similar passenger amenities;

(v) wheelchair lifts and restraints;

(vi) vehicle rehabilitation, remanufacture, or overhaul;

(vii) preventive maintenance, including all maintenance costs;

(viii) extended warranties that do not exceed the industry standard;

(ix) the mass transit portion of ferry boats and terminals;

(x) operational support such as computer hardware or software;

(xi) installation costs and vehicle procurement, testing, inspection, and acceptance costs;

(xii) construction or rehabilitation of transit facilities, including design, engineering, and land acquisition;

(xiii) facilities to provide access for bicycles to mass transit facilities and equipment for transporting bicycles on mass transit vehicles;

(xiv) the lease of equipment or facilities, provided that the local subrecipient, with the concurrence of the department, determines that a lease is more cost effective than the purchase of equipment or facilities after considering management efficiency, availability of equipment, staffing capabilities and guidelines on capital leases as contained in 49 CFR Part 639;

(xv) the capital portions of costs for service under contract;

(xvi) joint development projects (FTA Circular 9300.1A, or its latest version, provides guidelines for joint development projects);

(xvii) the introduction of new technology, through innovative and improved products, into mass transportation;

(xviii) transit-related intelligent transportation systems; and

(xix) the provision of ADA paratransit service, which shall not exceed 10% of the state's annual apportionment of Section 5311 funds and shall be used only by subrecipients that are in compliance with ADA requirements for both fixed route and demand responsive service.

(B) The capital cost of contracting includes depreciation, interest on facilities and equipment, and those allowable capital costs that would otherwise be incurred directly, including maintenance. No capital assets (vehicle, equipment, or facility) that have any remaining federal interest in them and no items purchased with state or local government funds may be capitalized under the grant agreement.

(C) Based on funding availability, federal funds may be used to reimburse up to 80% of eligible capital expenditures. The federal share may increase to up to 90% for bicycle facilities projects or for incremental costs related to compliance with the Clean Air Act or with the Americans with Disabilities Act of 1990. Eligibility standards for the higher federal share are defined in FTA Circular 9040.1E, or its latest version. The local subrecipient must provide a 20% or 10% cash match at the time the equipment is delivered or the services are received.

(3) Project administrative expenses. Costs not directly tied, but essential, to the operations of passenger transportation systems may be reimbursed at up to 80% with federal funds. The local subrecipient must provide a 20% match, either in cash or with in-kind donations.

(4) Operating expenses. Those costs directly tied to systems operations, such as fuel, oil, drivers', mechanics', and dispatchers' salaries, and replacement parts may be reimbursed at 50% of net operating costs. The local subrecipient must provide a 50% match, either in cash or with in-kind donations.

(f) Local share requirements. FTA program funds cannot be used as the local share required for Section 5311 grants. Eligible match sources include local or state programs, or unrestricted federal funds. At least half of the local share for both net operating and non-operating expenses must be cash or cash equivalent from sources other than unrestricted federal funds. In-kind contributions, volunteer services, and donations are eligible as local share if the value is documented.

(g) Allocation of funds. As part of its administration of the Section 5311 program, the department is charged with ensuring that there is a fair and equitable distribution of program funds within the state (FTA Circular 9040.1E, or its latest version). The department will allocate Section 5311 funds to local subrecipients in the following manner.

(1) Reserve. Unless the governor certifies to the Secretary of the United States Department of Transportation that the intercity bus service needs of the state are being adequately met, the department will reserve not less than 15% of the Section 5311 federal apportionment for the development and support of intercity bus transportation to be allocated under subsection (i) of this section. If it is determined that all or a portion of the set-aside monies is not required for intercity bus service, those funds will be applied to the formula apportionment process described in paragraph (2) [ (3) ] of this subsection. Procedures for determining if a certification of adequacy is warranted are as follows.

(A) The department will review all data on intercity bus service availability, including outstanding requests from intercity operators, and levels of service.

(B) The department will consult with other state agencies that have jurisdiction with respect to intercity bus regulation and seek their recommendations as to the adequacy of current service.

(C) Based on the findings of subparagraphs (A) and (B) of this paragraph, the commission may certify or recommend that the governor certify to the adequacy of intercity bus service.

(2) Remaining balance allocation. Except as provided in paragraph (1) of this subsection, the balance of the annual Section 5311 federal apportionment, plus the remaining balance of previous Section 5311 federal apportionments, and any state funds appropriated specifically for the purpose of funding nonurbanized public transportation services will be allocated in the following manner.

(A) Eighty percent will be awarded giving consideration to population weighted at 75% and on land area weighted at 25% by using the latest census data available from, and as defined by, the U.S. Census Bureau for each nonurbanized area relative to the sum of all nonurbanized areas.

(B) If the transit district is in good standing with the department and has no deficiencies and no findings of noncompliance, 20% will be awarded under clause (i) or (ii) of this subparagraph as follows.

(i) The commission, using all or a portion of the funds, may award funding to address strategic priorities for the nonurbanized public transportation program. These amounts are not subject to the transition funding allocation process described in paragraph (3) of this subsection in succeeding fiscal years, and will be awarded on a competitive basis unless they are needed to compensate for funding anomalies arising under this subsection.

(ii) The commission will award the funding by giving equal consideration to local funds per capita, operating expenses per mile (inverted) as compared to the systems performance from the previous year, ridership per capita as compared to the systems performance from the previous year, and vehicle revenue miles as compared to the systems performance from the previous year. 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.

(3) Transition. Each agency will have five years to transition to full formula allocation and during the five years after the first application of new census data from the United States Census Bureau, the allocations under paragraphs (1) and (2) of this subsection will be adjusted to avoid extreme short-term disruptions in the continuity of funding. During this time no award to a transit district under this section will be less than 90% of the award to that transit district for the previous fiscal year, except that fiscal year 2004 will be used as the base year when calculating allocations for the next allocation of funds, after which succeeding allocations will be based on previous fiscal years [ and no award to a transit district will be more than 120% of the award to that transit district for the previous fiscal year ]. All allocations under paragraphs (1) and (2) of this subsection are subject to revision to comply with this standard. If available funding exceeds the allocations, additional funding will be awarded by the commission on a pro rata basis, competitively, or a combination of both. Consideration for the award of these additional funds may include, but is not limited to, coordination and technical support activities, compensation for unforeseen funding anomalies, assistance with eliminating waste and ensuring efficiency, maximum coverage in the provision of public transportation services, and reductions in air pollution [ allocated to the transit districts that have the lowest relative funding levels compared to the base ]. These additional awards are not subject to the transition funding allocation process in succeeding fiscal years.

(4) Adjustments to allocation.

(A) If part of a transit district's service area is changed due to declaration by the United States Census Bureau or the service area is otherwise altered, the department and that subrecipient shall negotiate an appropriate adjustment in the funding year or any subsequent year, as appropriate. This negotiated adjustment is not subject to the minimum and maximum standards set forth in paragraph (3) of this subsection.

(B) If a previously designated urbanized area is declared nonurbanized by the United States Census Bureau, a public transportation subrecipient serving that area must apply for funds in accordance with paragraph (5) of this subsection.

(5) Application and contract. Prior to receiving funds a subrecipient must complete and comply with all application requirements, rules, and regulations applicable to the Section 5311 program. A completed application must be submitted, in a form prescribed by the department, to the appropriate district office, and document the need and demand for general public passenger transportation services. A contract shall be for no less than 12 months unless authorized by the department.

(h) Program of projects. All projects for a fiscal year will be identified in accordance with the allocation rules included in subsection (g) of this section. After commission approval of the allocation, these projects will be submitted to the FTA as the annual program of projects for the fiscal year.

(i) Intercity bus. If the governor does not certify to the adequacy of intercity bus transportation within the state, funds will be made available in accordance with subsection (g)(1) of this section. An annual request for proposals will be issued for projects complying with FTA definitions of intercity bus transportation.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 1, 2005.

TRD-200501373

Richard D. Monroe

General Counsel

Texas Department of Transportation

Earliest possible date of adoption: May 15, 2005

For further information, please call: (512) 463-8630