AMENDMENTS TO FEDERAL LAW REGARDING USE OF USER FEES AS FEDERAL MATCH

Overview: Federal transportation law generally requires a 20% local match for Federal capital programs for both highways and transit. Some exceptions do exist for improvements to the Interstate and in other areas, where the match is lower. This paper presents a straightforward argument for why should receive a match consideration in this area, based on their user fees. Below are points of consideration in regard to the national benefits of vanpools, the toll credit precedent for reducing Federal match, the proposal in Senate bill 909 (Murkowski) to reduce vanpool match requirements and a new proposal to include Senate bill 909 in a broader measure.

Benefits of Vanpools: As is well-known, vanpools offer a low cost solution to peak hour congestion, safety and air pollution issues. As is also well-known, vanpools operate best in the nation’s large urban areas, where congestion issues are most severe, although some rural vanpools are successful.

Nationally vanpools operate at a profit or break even fiscal level, compared with an average public operating subsidy of 60% or more for public transit systems. Being a highly economic alternative to single occupant vehicles (SOVs), commuter or , vanpools operate at a public cost of a few cents per passenger trip. These few cent costs are accounted for by the public budgets of the Transportation Demand Management (TDM) Agencies across the country, which market and facilitate ridematching, vanpool formation and vanpool ridership maintenance. If the capital cost of lots are included, then the total costs for vanpools, which share these lots with traditional and “sluggers” (e.g. instant carpools formed at park and ride lots), increase a few cents per trip.

According to the vanpool industry (see attachment) there are 8,000 plus vanpools in the country. If the average vanpool daily round trip distance is fifty miles, a conservative figure, and if the average vanpool carries eight passengers, including the driver, then the nation’s vanpools provide roughly 3.2 million passenger revenue miles per day, or about 800 million passenger revenue miles per year. In other words, for a few cents per passenger trip, the nation’s vanpools eliminate in the range of 700 million miles of SOV traffic annually during the peak hours, saving 45 million gallons of fuel, decongesting critical roadways in large urban areas and improving roadway safety.

A word should be said about transit options and markets, as this paper does not present an argument against slugging, commuter or commuter rail, or even single occupant vehicles (SOVs). The market in each individual urbanized area determines the choices each commuter make for themselves. Vanpools are simply one option.

Under current law, vanpools can sign a contract with a public transit provider in an urbanized area of over 200,000, recognized by FTA, and report their ridership, mileage and other information to the National Transit Database (NTD). As a result of that reportage the recognized public transit provider receives increased allocations of FTA Section 5307 funds. This reportage and these funds are currently being conducted and received by over fifty urbanized areas in the country. Current law requires a 20% capital match for vanpools to use Section 5307 funds.

The bottom line is that, while all modes should be employed, the nation’s resources are very well-served in supporting vanpools.

Toll Credits, A Precedent for Federal Action: Toll credits were introduced in Section 1044 of the Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991 and amended in subsequent reauthorizations. The intent of toll credits is to allow the use of tolls collected on highways to be used as soft match for Federal funds, provided the State DOTs maintain their total transportation expenditures, or maintenance of effort (MOE). The State DOTs decide to which projects the toll credits are applied. Matching transit projects is also an eligible expense. FHWA has, in the ensuing years, reported that toll credits are highly successful, as they allow State DOTs to better manage their cash flow, as an alternative to the historic “save and match” requirement of the Federal government, which severely limits each State’s project selection. Virginia is now employing the use of toll credits as soft match for Federal funds.

Senate Bill 909 (See Attached): Although it is a bit difficult to decipher, SB 909 appears to say that vanpools contracting with recognized FTA grant recipients can use user fee revenues in excess of their operating and capital costs to provide the Federal 20% capital cost match, thus eliminating their capital match.

Recommended Federal Language: The Federal language should provide the match relief requested in SB 909. Beyond that the Federal language should prescribe that vanpool user fee revenues in excess of the operating and capital costs of the NTP-reporting vanpool providers, including the vanpool provider’s match requirements, can be used by affected MPOs to assign match waivers to Title 49 and Title 23 funds, provided the Governor or his designee concurs, and provided the total maintenance of effort (MOE) for highway and transit expenditures is maintained, as certified by the Governor.

112th Congress: S. 909 - “The Private Investment in Commuter Vanpooling Act”

Federal transit law allows local match to be provided in many forms… including commitments of privately-financed capital, e.g. buses, rail and vans. revenue, however, is precluded from use as a local match mechanism. Accordingly, a private provider of public transportation (working with a public agency on an 80% federal transit funding grant) who makes a private capital investment in vehicles may not use passenger revenue to recover the unsubsidized local portion (20%) of the private provider’s capital investment.

For all but a single mode of public transportation, this is a practical reality… The costs of service provision preclude the ability of a conventional transit service provider, public or private, to collect funds in excess of operating costs. In fact, the typical public transportation service recovers less than 40% of its operating expense and none of its capital expenses from fare revenue.

Private providers of vanpool services for the public have already purchased ~8,000 commuter vans… a financial commitment of $250 million. These private companies are willing to expand their services and to use privately- provided capital in conjunction with the use of federal transit funds and policies, e.g. the FTA Capital Cost of Contracting.

Commuter vanpooling, however, because of its comparatively low capital and low operating costs, CAN recover 100% of its operating expenses and a portion of its capital expense… but private providers of public vanpool services are precluded from using this revenue to recover the unsubsidized portion (20%) of their capital investment.

These private providers of public transportation services would like to expand their capital investments for the growth of their commuter service, but today it requires a local match from a public source. Public funds are in short supply everywhere… federal, state and local… private investors are willing and able to step up to the plate…and fare revenue is a viable source, but again it is precluded by law.

Senate Bill 909 proposes to amend 49 U.S.C. 5323 by inserting the following:

Section 5323 of title 49, United States Code, is amended by adding at the end the following:

(q) Costs Incurred by Private Providers of Public Transportation by Vanpool- (1) DEFINITIONS- In this subsection, the following definitions shall apply: (A) PRIVATE PROVIDER OF PUBLIC TRANSPORTATION BY VANPOOL- The term `private provider of public transportation by vanpool' means a private entity that— (i) provides vanpool services in the service area of a recipient of assistance under this chapter using a commuter highway vehicle or vanpool vehicle; and (ii) has entered into a service agreement with a recipient of assistance under this chapter. (B) COMMUTER HIGHWAY VEHICLE OR VANPOOL VEHICLE- The term `commuter highway vehicle or vanpool vehicle' means any vehicle-- (i) the seating capacity of which is not fewer than 6 adults (not including the driver); and (ii) not less than 80 percent of the mileage use of which is reasonably expected to be for the purpose of transporting commuters in connection with between their residences and their place of employment. (2) LOCAL MATCHING SHARE- The non-Federal share of the cost of a capital project under this chapter may include an amount equal to-- (A) any amount expended by a private provider of public transportation by vanpool for the acquisition of rolling stock to be used by the private provider of public transportation by vanpool in the service area of the recipient; less (B) any amount the private provider of public transportation by vanpool has received from the Federal Government or a State or local government for the acquisition of the rolling stock. (3) USE OF REVENUES- A private provider of public transportation by vanpool may use revenues received from providing public transportation service in the service area of a recipient of assistance under this chapter that are in excess of the operating costs of the private provider of public transportation by vanpool for the purpose of acquiring rolling stock, if the private provider of public transportation by vanpool enters into a legally binding agreement with the recipient that requires the private provider of public transportation by vanpool to use the rolling stock in the service area of the recipient.

1

Why make the amendment?

The amendment will enable state and local government authorities to enter into contracts with private vanpool service providers for purposes of supplementing local transit service, as well as meeting long distance commuting needs outside of a typical transit agency’s boundaries.

The amendment is environmentally-friendly, which is particularly important to Metropolitan Planning Organizations in non-attainment areas eager to comply with the Clean Air Act requirements.

This amendment will encourage private vanpool service providers to work more closely with local governments in order to expand and invest private dollars in the public transportation services they currently provide under contractual agreements with grantees and to seek additional contracts in new markets, both urban and rural.

The amendment will simply enable state and local governments to use their FTA funds to leverage private investment in vanpool rolling stock in a cost-effective way. There is no additional cost to the Federal treasury.

Why only commuter vanpooling & only private providers of public vanpool services?

Vanpooling is the lowest cost mode of public transportation. Accordingly, vanpooling can and does recover a significantly higher share of farebox revenue than the other major modes.

Private vanpool service providers are willing to invest in the provision of new and expanded services. Subsidies have demonstrated their ability to increase vanpool growth by a factor of nearly three.

The proposed amendment holds a private vanpool service provider to a higher standard of farebox recovery than any other public transportation mode… 100% of operating costs plus 20% of capital.

Given the planning requirements for the programming of FTA funds in the urbanized areas, there can be no unintended consequences. Programmed funding would be utilized only if service is deployed. Service would not be deployed unless it meets contractual conditions.

Public Protections and Stewardship

 Planning and Programming Via the local transportation planning process, an application would be made for the inclusion of a Vanpool Subsidy Program in the Long-Range Transportation Plan (LRTP) or the Metropolitan Transportation Plan (MTP). The project, because it involves a sub-recipient from the private sector, must have a public steward to administer the subsidy mechanism (in this case the FTA Capital Cost of Contracting Policy for a turnkey program).

The submitted project would be reviewed and analyzed by a technical committee and, if eligible, would be recommended for inclusion in the Transportation Improvement Program (TIP). Based on the implementation priorities for transportation projects and strategies from the metropolitan transportation plan, the project would be ranked and included in the program of projects.

 Competition Requirement The FTA requires all procurement transactions to be conducted in a manner providing full and open competition. Grantees and sub-grantees are to use their own procurement procedures that reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law, including FTA requirements and general procurement standards applicable to third-party contracts. If there is no State law on a particular aspect of procurement, then Federal contract law principles apply.

 Contract Administration Under the FTA Capital Cost of Contracting policy, federal assistance is given to the grantee, not directly to the private vanpool service providers. Grantees are required to maintain a contract administration system that ensures that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders. 2