Subchapter I. SAFE ROUTES TO SCHOOL PROGRAM

The Texas Department of Transportation (department) adopts amendments to §31.11, Formula Program, and §31.36, Section 5311 Grant Program. The amendments to §31.11 and §31.36 are adopted without changes to the proposed text as published in the April 14, 2006, issue of the Texas Register (31 TexReg 3241) and will not be republished.

EXPLANATION OF ADOPTED AMENDMENTS

Transportation Code, §456.022 requires the Texas Transportation Commission (commission) to adopt rules to establish a formula allocating state and federal funds among individual eligible public transportation providers. The statute states that the formula 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. Transportation Code, §456.008 states that the commission may establish different performance measures for different sectors of the transit industry and also states that the performance measures shall assess the efficiency, effectiveness, and safety of the public transportation providers.

On May 26, 2005, the commission amended §31.11 and §31.36 regarding formulas for the distribution of state and federal funds. The commission now desires to further refine the formulas to better allocate funding resources; to better reflect the requirements of state and federal law; and to reflect the department's goals to reduce congestion, enhance safety, expand economic opportunity, improve air quality, and increase the value of transportation assets.

The amendments to §31.11, Formula Program, revise the current formula for state funds. Amendments to §31.11(b)(1)(A) provide that funds for small urban transit providers be divided into two tiers. Tier one will include transit providers that restrict transit eligibility for all public transportation services to the elderly and persons with disabilities. State funding available in tier one is calculated by multiplying the available urban funding by the population of elderly and persons with disabilities in tier one providers, divided by the service eligible population of urbanized areas receiving funding under this subchapter. Tier two will include transit providers that provide any service to the general population. The funds for tier two will be the remaining balance of the available funds after the funds for tier one have been allocated. Funds within each tier will be allocated to transit providers based on §31.11(b)(1)(B) and (C). The changes will assist in the allocation of available funding by more accurately reflecting the nature of the service provided. The changes will also reflect the requirements of state and federal law and will reflect an assessment of public transportation provider efficiency, effectiveness, and safety.

Amendments to §31.11(b)(1)(B) and (C) provide that any further distribution of state funds allocated to urban areas be based on the relative proportion of urbanized area population and a weighted average of four performance criteria: local funds per operating expense; ridership per capita; ridership per revenue mile; and revenue miles per operating expense. The relative proportion of urbanized area is intended to capture the need of the transit operator, and the weighted average of the four criteria is intended to capture the performance of the transit operator. The revised allocation of transportation funding will be based on 80% need and 20% performance for fiscal year 2007 (the second year of the 2006-2007 biennium); 65% need and 35% performance for the 2008-2009 biennium; and 50% need and 50% performance for each biennium thereafter. This further emphasizes the performance of individual public transportation providers in allocating funding. The commission recognizes performance as an important aspect of providing public transportation services in an effective and efficient manner, and wishes to increase the emphasis on performance in the allocation of transportation funding as part of the department's plan to improve statewide transportation, enhance safety, and improve air quality.

Section 31.11(b)(1)(B) changes the consideration of population for tier one providers to 199,999, or the city population, whichever is less. The reason for this change is that the urbanized area population may be significantly larger than the population reported for the incorporated jurisdiction. This reflects the actual population eligible to receive service from a particular transit provider and this change more fairly allocates funds to account for that smaller population eligible to receive services.

Section 31.11(b)(1)(C) changes the method for calculating the criterion called "ridership per capita." Formerly, for urban areas with populations greater than 199,999, this criterion was adjusted to limit the impact of the population to 199,999. The department eliminates the provision that defines this criterion. The impact would be to use the total applicable population, and therefore calculate more fairly this performance indicator for those providers in areas with populations greater than 199,999. The department adopts the state funds performance criteria for the urban areas based on the following weighted criteria: 30% local funds per operating expense, 20% ridership per capita, 30% ridership per revenue mile, and 20% revenue miles per operating expense. This amendment to the formula adds two new measures, revenue miles per operating expense and passengers per revenue mile, while deleting one measure, revenue miles per capita. This also changes the allocation from an even distribution to a distribution emphasizing local support and service effectiveness. These changes establish a broader set of measures to emphasize service effectiveness and efficiency. A broader set of measures will create more opportunities for the diverse small urban transit providers to show improvements in performance.

The department deletes provisions that give the commission the authority to allocate a portion of the funds to address strategic priorities. These revisions ensure all funds in these programs are allocated according to the established formula, while retaining the requirement that recipients of funding under this subparagraph be in good standing with the department.

Section 31.11(b)(2)(A) and (B) changes the allocation of state funds for the rural providers based on a figure that represents 75% population and 25% land area, relative to all other rural public transportation providers and on an equally weighted formula of three criteria: local funds per operating expense, ridership per revenue mile, and revenue miles per operating expense. The figure that represents 75% population and 25% land area is intended to capture the need of the transit operator, and application of the equally weighted criteria is intended to capture performance of the transit operator. The new provisions state that the allocation of transportation funding will be based on 80% need and 20% performance for fiscal years 2007 and 2008; and 65% need and 35% performance for fiscal year 2009 and each fiscal year thereafter. These changes increase the emphasis on performance, and reward providers who improve the efficiency or effectiveness of their service.

Section 31.11(b)(2)(B) changes the performance criteria for the rural areas. Currently, the formula considers local funds per operating expense, operating expenses per mile, and operating expense per passenger. The department changes the measure of operating expense per passenger to passengers per revenue mile, and the measure of operating expense per mile to revenue miles per operating expense. The relative weights of the three criteria will not change, but will remain at one third each for the following criteria: local funds per operating expense, ridership per revenue mile and revenue miles per operating expense. These changes provide a measure of service effectiveness. It is an acknowledged goal of the commission to improve service effectiveness, which represents an increase in services provided to the public.

Amendments to §31.11(c) provide that annual adjustments are limited to a maximum 10% decrease from year to year for both the urban and rural providers to provide funding stability. The purpose of this change is to assist public transportation providers in planning for future year funding allocations and to enable continuity of service. The department also adopts changes in purchasing power as an eligible consideration for the award of additional funds. The base year to the state fiscal biennium 2006-2007 is also reset.

Section 31.36, Title 49 USC 5311 Grant Program, changes the current formula and also reflects the federal statutory requirement that the department consult with intercity bus service providers.

Amendments to §31.36(g)(1)(B) concerning inter-city bus regulation reflect changes to federal statutes, which now require the state to consult with the intercity bus service providers under certain circumstances. The changes were enacted in Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, (Pub. L. No. 109-59) (2005), known as "SAFETEA-LU."

Section 31.36(g)(2)(A) and (B) states that federal funds for the rural providers are allocated based on a figure that represents 75% population and 25% land area, relative to all other rural public transportation providers and on an equally weighted formula of three criteria: local funds per operating expense, ridership per revenue mile and revenue miles per operating expense. The figure that represents 75% population and 25% land area is intended to capture the need of the transit operator, and application of the equally weighted criteria is intended to capture performance of the transit operator. The new provisions provide that the allocation of transportation funding will be based on 80% need and 20% performance for fiscal years 2007 and 2008; and 65% need and 35% performance for fiscal year 2009 and each fiscal year thereafter. These changes increase the emphasis on performance, and reward providers who improve the efficiency or effectiveness of their service. Further changes to the performance criteria for the rural areas match the formula for state rural funding allocation. Currently, the formula considers local funds per operating expense, operating expenses per mile, and operating expense per passenger. The department changes the measure of operating expense per passenger to passengers per revenue mile, and the measure of operating expense per mile to revenue miles per operating expense. The relative weights of the three criteria will not change, but will remain at one third each for the following criteria: local funds per operating expense, ridership per revenue mile, and revenue miles per operating expense. The provisions provide a measure of service effectiveness. It is an acknowledged goal of the commission to improve service effectiveness, which represents an increase in services provided to the public.

Section 31.36(g)(3) provides that consideration be made to account for changes in the relative purchasing power of the amounts from year-to-year. The provisions concerning the allocation of excess funds are revised to include consideration of adjustments if changes in purchasing power occur. The department changes the funding baseline from a particular fiscal year to a set level of funding for purposes of determining if additional funds exist. The impact of the change is to increase the baseline by $7,000,000, and move allocation levels closer to the amount determined by the allocation formula, considering both transportation provider need and performance.

The Public Transportation Advisory Committee (PTAC) has met numerous times to discuss the changes to the existing formulas and rules, and to make recommendations to the commission. Four PTAC committee members represent a diverse cross-section of public transportation providers; three members represent a diverse cross-section of public transportation users; three members represent the general public; and one member is designated to have experience in the transportation of clients of health and human services programs. 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 rules or rule changes involving public transportation matters during their development and prior to final adoption.

PTAC met on May 19, 2006, and by motion recommended adoption of the amendments.

COMMENTS

The Texas Department of Transportation conducted a public hearing to receive comments concerning the proposed rules. A public hearing was held at 1:30 p.m. on May 4, 2006, in the first floor hearing room of the Dewitt C. Greer State Highway Building, 125 East 11th Street, Austin, Texas. This hearing was conducted in accordance with the procedures specified in §1.5 of this title. In addition to comments presented at the public hearing, the department received written comments on adoption of the rule.

COMMENT

The Texas Transit Association (TTA) stated that it "cautiously supported" the rules as proposed. TTA stated that the new formula provides an equitable distribution of funds to the transit operators, however, under the revised formula the majority of both the urban and rural operators will experience a decrease in state funding. TTA further expressed the opinion that the cost is ultimately going to be a loss of service in those communities that have a decrease in both state and federal funding.

RESPONSE

For forecasting the fiscal impact of the proposed changes, appropriations of state funds for public transportation grants were kept at the FY 2006-2007 level. Future appropriations are contingent on legislative actions. Holding the level of funding constant establishes that for any system to increase funding, other systems must receive less. Actual allocations will be based on available funding. Regarding transit service, the type and level of service provided by urban and rural transit districts is determined locally. The allocation formula provides funding in proportion to the need, determined by population or population and land area and performance, to promote effective and efficient delivery of service. No change was made to the rule as a result of the comments.

COMMENT

One commenter stated that the intent of using performance measures tied directly to funding is an excellent plan. Two commenters also noted the critical need to have an accurate and verifiable performance measure evaluation system that defines and measures each performance criterion.

RESPONSE

The department has contracted with the Texas Transportation Institute to facilitate improvements in the collection of accurate performance data. No change to the rule was made as a result of these comments.

COMMENT

Regarding §§31.11(b)(1)(C), 31.11(b)(2)(B) and 31.36(g)(2)(B), one commenter recommended removing the requirement that transit operators have no deficiencies and no findings of non compliance from the rule, stating the wording is ambiguous and could cause a transit operator to lose funding for the smallest of infractions or errors in any area of compliance. The commenter further stated that the provision requiring the transit operator to be in good standing with the department is sufficient language.

RESPONSE

The referenced requirements currently exist in the sections noted by the commenter and the proposed changes retain that current language. In specifying that a transit operator not only be in good standing with the department, but also have no deficiencies and no findings of noncompliance, the requirements are stated unambiguously. The requirements are intended to promote effective and efficient delivery of service, to provide funding in proportion to the need, and to reward effective and efficient performance. The requirement is consistent with the intent of the rules to tie performance measures directly to funding. No change to the rule was made as a result of these comments.

COMMENT

Regarding §31.11(c), two commenters suggested removing the language that references funding exceeding $57,482,135 because this would mean any additional state funds provided by the legislature would be placed into a commission discretionary fund. The commenters state that any state funds provided by the legislature should go directly to the transit operators, not to the commission and they state opposition to a discretionary fund that will potentially grow annually. The commenters suggested instead that the commission discretionary fund be established as a specific dollar amount to be set aside each year or, as an alternative, a maximum percentage of the annual apportioned funds.

RESPONSE

Language establishing a discretionary fund as part of the allocation formula rules was adopted two years ago. The rule sets an explicit dollar amount instead of using a reference to a prior fiscal biennium in order to quantify the funding by a dollar amount rather than by reference to the previous biennium. If additional funds exist, the commission must award the funds to transit providers on a pro rata basis, competitively or a combination of both, in accordance with the rule. Consideration for the award of the 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, adjustments for reductions in purchasing power, and reductions in air pollution. The rule already requires that additional funding go to transit operators. The rule establishes a method of distribution that is consistent with accomplishing the department's stated goals and addresses the needs of transit operators for any additional funding that may exist. No change was made to the rule as a result of this comment.

COMMENT

One commenter stated its opposition to the transition for distribution of available funds from 80 percent/20 percent needs-versus-performance to 50 percent/50 percent funds distribution, as set forth in §31.11, for small urban operators. The commenter recommended retaining the 80 percent/20 percent needs-versus-performance distribution of funding until further assessment of the effectiveness of the rule can be made. The commenter also stated its opposition to the proposed transition in distribution of funding for non-urbanized or rural transit operators from 80 percent/20 percent needs-versus-performance to a 65 percent/35 percent split for fiscal year 2009 and thereafter, for the same reasons. Another commenter supports the use of performance measures as a basis of funding, however they believe that the increase in the weighted value of performance measures to 50 percent is premature.

RESPONSE

After much study and public discussion, the Public Transportation Advisory Committee recommended the transitions in funding distribution to transit operators based on a need versus performance ratio, with an increasing emphasis on performance versus need. The department supports this position because it awards a greater share of funds to transit systems that have greater-than-average public transportation service effectiveness, efficiency, or both. The department also recognizes the difference between small urban and rural systems and as such the proposed change in weight between need and performance for rural systems is scheduled to occur after more time has passed. No change to the rule was made as a result of the comment.

COMMENT

One commenter stated concerns regarding the elimination of the five-year transition period, as proposed. The commenter states that the potential impact of "dramatic changes" is particularly critical given other proposed changes and regional service planning.

RESPONSE

The rule does not eliminate the transition period. Instead, the rule removes the five-year limit on the term of the transition period. The rule institutionalizes the transition and provides for a more stable funding environment. No change to the rule was made as a result of the comment.

COMMENT

Just Transportation Alliances stated its support of the proposed changes to the funding of the so-called "enclave cities," referring to the establishment of two funding tiers in the state urban program.

RESPONSE

No change to the rule was made as a result of this comment.

Subchapter B. STATE PROGRAMS