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in Task 20), which is presented in this research report The infrastructure of the intercity bus network as a series of tables to describe the Section 5311(f) pro- through planning and marketing assistance and gram implementation by each of the states. The addi- capital investment in facilities. tional research also identified best practices for use by The circular also indicates that FTA encour- other states, and addressed the role of this program and ages states to use Section 5311(f) to support these its structure for consideration in the reauthorization national objectives, as well as priorities determined effort. by the state. CHAPTER 2 SECTION 5311(F) Other FTA Programs Supporting PROGRAM DESCRIPTION Intercity Bus Transportation INTERCITY BUS PROGRAMS While the focus of this research report is the Sec- UNDER SAFETEA-LU tion 5311(f) program, there are two other FTA pro- SAFETEA-LU supports intercity bus transpor- grams under SAFETEA-LU that support intercity tation through three grant programs--the Section bus service. 5311(f) Rural Intercity Bus Assistance Program, the Section 5309 Bus and Bus Facility Program Section 5309 Bus and Bus Facility Program-- (for intermodal facilities), and the Section 3038 Intermodal Terminals Over-the-Road Bus Accessibility Program to assist in SAFETEA-LU made it clear that the intercity bus purchasing accessibility equipment and training for portion of an intermodal facility is eligible for Sec- private operators of over-the-road coaches. tion 5309 Bus and Bus Facility Program funding-- as well as for capital funding under Section 5307 Section 5311(f) (Urbanized Area Formula Program) and Section 5311. In addition, SAFETEA-LU created a funding source Federal Section 5311(f) funds are a key funding for the intercity bus facilities by authorizing $35 mil- source for intercity bus operations and are used in a lion per year under the Bus and Bus Facilities dis- majority of states to subsidize targeted intercity bus cretionary program (Section 3011) for intercity bus services. This chapter provides a description of the facilities--a total of $175 million over the life of program as defined under SAFETEA-LU. the bill, which began in FY 2005. The program is Section 5311(f) is a subsection of the Section 5311 administered by FTA within the general Bus and (Non-Urbanized/Rural and Small Urban Areas) Bus Facilities Program. formula allocation program for small urban and rural areas under 50,000 population, which allocates Section 3038 Over-the-Road Bus funding to each state's governor for distribution to Accessibility Program local applicants. The amount of funds provided to each state is based on the non-urbanized population This program was authorized as part of TEA-21, of the state. Section 5311 program funds can be used and it continues under SAFETEA-LU. It makes for capital, operating, planning, and administrative funds available to private operators of over-the-road assistance to state agencies, local public bodies, non- buses to pay for the incremental capital and training profit organizations, and operators of public trans- costs associated with compliance of the final U.S. portation services. Department of Transportation (U.S. DOT) rules on As stated in the most recent FTA Section 5311 over-the-road accessibility.1 Over-the-road buses Circular (C 9040.1F) of April 2007, the national are defined as buses with a high seating deck with lug- objectives of the funding for intercity bus service gage compartments below. The definition of intercity, under Section 5311 include support for: fixed-route over-the-road bus service is essentially the same as that for the Section 5311 program: "regularly The connection between nonurbanized areas and the larger regional or national system of intercity bus service, Services to meet the intercity travel needs of 149 CFR Part 37, published in the Federal Register on Sep- residents in nonurbanized areas, and tember 28, 1998 (63 FR 51670). 5

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scheduled bus service for the general public, using an Operates with limited stops over fixed routes, over-the-road bus that: operates with limited stops connecting two or more urban areas not in close over fixed routes connecting two or more urban areas proximity; not in close proximity; has the capacity for transport- Has the capacity to carry passenger baggage; ing baggage carried by passengers; and makes mean- and ingful connections with scheduled intercity bus Makes meaningful connections with sched- service to more distant points." The only difference uled intercity bus service to points outside the is the focus on the over-the-road bus. The Section service area. 3038 program is conducted directly by FTA (includ- ing its regional offices) rather than being managed by It is important to note that the intercity service is state recipients. not defined by the type of operator or the vehicle used. While intercity bus service is traditionally provided with over-the-road buses, it may be more appropriate SECTION 5311(F) PROGRAM (and cost effective) to operate a smaller vehicle (such REQUIREMENTS FOR STATES as a body-on-chassis bus) in areas where demand The Requirement for States is lower. to Have the Program Feeder services to intercity bus services are also eligible for Section 5311(f), because such services The Section 5311(f) program is implemented by enhance coordination of rural connections between each state as part of its overall Section 5311 program small transit operations and intercity bus carriers. management activities. A full 15% of each state's Feeder service can have different characteristics from annual Section 5311 apportionment must be used to the intercity service itself. It can be deviated fixed- support intercity bus service through the Section route or demand-responsive. FTA also encourages 5311(f) component of the program--unless the gov- feeder service to provide access to intercity connec- ernor of the state certifies that all rural intercity bus tions with rail or air service where feasible. needs are met. A partial certification is also possible, Commuter service, however, is excluded from if the needs utilize less than the full 15%. If the gov- Section 5311(f) funding eligibility. In the context of ernor certifies that intercity needs are met, the fund- its Americans with Disabilities Act (ADA) regula- ing reverts to the overall Section 5311 program for tions (49 CFR Part 37, S. 37.3), FTA defines com- use on other rural transit projects. muter service as "fixed route bus service, character- Under SAFETEA-LU, states planning to certify ized by service predominantly in one direction during (partially or completely) are required to undergo a peak periods, limited stops, use of multi-ride tickets, consultation process prior to certifying. The re- and routes of extended length, usually between the vised FTA circular calls for the certification process central business district and outlying suburbs." to include identification of the intercity carriers, defi- In C 9040.1F, FTA has added guidance that makes nition of the activities the state will undertake as clear that Section 5311(f) funded intercity services part of the consultation process, an opportunity for must take schedule considerations into account to intercity carriers to submit information regarding ser- have a meaningful connection with scheduled inter- vice needs, a planning process that examines unmet city bus services to points outside the service area, needs, and documentation that the results of the con- adding the schedule dimension to the definition of a sultation process support the decision to certify--if, meaningful connection. Furthermore, FTA suggests in fact, that is the final decision. that services that include a stop at the intercity bus station as one among many stops should not prop- Eligible Projects erly be considered for Section 5311(F) funding, but instead should utilize other federal funding pro- Section 5311(f) funds rural intercity bus services grams. Both of these new interpretations have the as well as services, facilities, and administrative effect of narrowing the definition of eligible inter- functions that support rural intercity bus services. city service under Section 5311(f). Intercity bus service is defined in C 9040.1F as reg- Other types of projects eligible for Section 5311(f) ularly scheduled bus service for the general public, funding include "planning and marketing for intercity with three major characteristics: bus transportation, capital grants for intercity bus 6

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shelters, joint-use stops and depots, operating grants vide no state operating assistance. In response to this through purchase-of-service agreements, user-side issue, FTA has issued guidance for a pilot program subsidies and demonstration projects, and coordina- permitting use of a proportion of the value of capi- tion of rural connections between small public trans- tal used in connecting private unsubsidized service portation operations and intercity bus carriers." as an in-kind match for Section 5311(f) operating For projects that may have both a rural and urban funds. This program, known as the "Pilot Project," component (for example, a bus terminal located in an is discussed below. The major downside to this urbanized area, but served by rural routes), recipients method is that the available Section 5311(f) alloca- can use Section 5311(f) funds as a portion of the tion will fund fewer projects, because the effect of overall project funding. Their use for capital projects the funding approach is that a much higher percent- in urbanized areas is limited to those aspects of the age (or the entire amount) of the operating deficit is project that can be clearly identified as a direct bene- funded with federal dollars. fit to services to and from non-urbanized areas. Such State administration, planning, and technical as- projects have to be included in both the metropolitan sistance activities in support of intercity bus service Transportation Improvement Program (TIP) and the are eligible at 100% federal share if applied against State Transportation Improvement Program (STIP). the 15% cap on state administration expenses. The amount of Section 5311 funds used for planning of intercity bus service is not limited by the 15% cap. Eligible Recipients However, the federal share of any planning assistance States and Indian tribes are the direct recipi- for intercity bus not included in the 15% allowed for ents eligible under Section 5311, including Sec- state administration is limited to 80% of the plan- tion 5311(f). With regard to eligible subrecipients, ning cost. for the Section 5311(f) program only, FTA allows states to pass-through funds to private intercity bus "PILOT PROJECT" USE OF THE VALUE OF carriers directly as subrecipients, if they are willing CAPITAL ON CONNECTING UNSUBSIDIZED to accept the federal terms and conditions. Carriers SERVICE AS IN-KIND MATCH FOR may decide not to be recipients directly, and prefer OPERATING ASSISTANCE to be third-party contractors to a subrecipient (which may be the state itself or a local public entity or non- On October 20, 2006, FTA executive manage- profit organization). As a third-party contractor, a ment approved a 2-year pilot project allowing states carrier is able to isolate its other (non-assisted) oper- to use the capital costs of unsubsidized service con- ations from the requirements associated with a fed- necting private sector intercity bus service as in-kind eral and/or state grant. match for the operating costs of rural intercity bus In addition, other types of subrecipients under feeder service.2 Later guidance has extended the the general Section 5311 program, including local period of the pilot through FFY 2010, as posted in the public bodies, non-profit organizations, and opera- Federal Register (Vol. 75, No. 30, February 16, 2010). tors of public transportation services, may be eligi- This approach is intended to be similar in concept to ble for Section 5311(f) funding for Section 5311(f)- the permitted use of human services transportation eligible service. funds for match by Section 5311 and Section 5307 providers. Under the Pilot Project, the project definition in- Matching Requirements for Funded Projects cludes both the rural intercity segment requiring For both Section 5311 and Section 5311(f) capi- operating assistance, and a specific connecting un- tal funds, the maximum federal share is 80% of the subsidized service segment, in terms of both costs net cost, and for operating assistance, 50% of the net and revenues. As part of this approach, the value of cost. Net cost for operating expenses are those ex- the capital cost portion of the total cost of connecting penses that remain after operating revenues, which at unsubsidized services is used as in-kind match. Be- a minimum include farebox revenues, and are sub- cause the operating cost portion of the unsubsidized tracted from eligible operating expenses. Obtaining local cash operating match has been a 2Guidance was provided in the Federal Register, Vol. 72, No. 39, major program issue, particularly in states that pro- February 28, 2007, p. 9072, Appendix 1. 7

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miles is offset by the revenues, there is no operating and it must acknowledge that the service it provides is deficit on that portion of the project, but the value of covered by the labor warranty and other requirements. the capital used on those miles (if provided by the Because this essentially supplants the need for carrier) can be used as an in-kind match to address the local operating match, it will have the effect of uti- 50% local match requirement on the net operating lizing the available Section 5311(f) operating funds deficit of the subsidized segment. Based on the at approximately twice the rate that would have been precedent of the FTA regulations permitting 50% the case, where local sources (including carriers or of the total cost of a turnkey operating contract to transit agencies) provided local match for 50% of the be considered as eligible for the 80% capital match net operating deficit. In addition, it means that the pol- ratio, FTA has allowed 50% of the total per-mile icy guidelines and project designs will need to con- cost of the unsubsidized connecting intercity bus form to the FTA guidance for such projects, and that service to be considered as the in-kind capital con- the private carriers providing the unsubsidized seg- tribution of the intercity bus company to the rural ments will need to be full participants in program intercity bus project. and project design. The schedule of the rural subsidized connecting service is considered in determining if it makes a meaningful connection with the unsubsidized service. FUNDING FOR SECTION 5311(F) The length of the unsubsidized segment and the fre- Table 2-1 presents available Section 5311(f) quency of the connecting service determine the num- funding levels since the passage of TEA-21. ber of bus-miles that can be used to provide the in-kind Table 2-1 is represented graphically in Figure 2-1. match, which sets a limit on the value of the in-kind As can be seen in the graph, the federal allocation contribution, which is the capital cost portion (50% of for Section 5311 increased substantially following the fully allocated per-mile operating cost) of the con- the passage of SAFETEA-LU, even with the Section necting miles operated on the unsubsidized segment. 5311(f) set-aside extracted. Authorized funding for Depending on the project definition, the amount of unsubsidized service may provide enough in-kind Section 5311(f) increased from $37.65 million in match to cover the entire net operating deficit of the FY 2005 (pre-SAFETEA-LU) to $76.7 million in rural feeder service. FTA recognizes that the amount FY 2010. of in-kind match may not be enough to fully fund the Table 2-2 compares the amount potentially avail- feeder service, and that additional cash match may able to Section 5311(f) with the actual amount oblig- be required. However, if the in-kind match exceeds ated for state Section 5311(f) programs in recent years. the amount needed, the excess cannot be used to In terms of obligations, the Section 5311(f) pro- increase the federal share above the actual operat- gram increased from $22 million in 2004 to over ing deficit of the project. $48 million in 2008 (FY 2009 data are not yet avail- In cases where the unsubsidized (from an operat- able), as shown in Table 2-3. ing perspective) connecting intercity service is already While there have been some states that have operated with FTA-funded capital for vehicles, the consistently certified that there are no unmet rural percentage used for in-kind will need to be adjusted, intercity needs, in some cases it appears that such following the guidelines provided by FTA for deter- a policy reflected a demand for Section 5311 fund- mining the percentage of contract cost eligible for cap- ing to address other rural needs. The significant ital under capital cost of contracting in cases where the increase in overall Section 5311 funding under buses are FTA-funded. This circumstance would nec- SAFETEA-LU has allowed states that had previ- essarily reduce the amount of in-kind generated. ously lacked resources to initiate intercity planning A major part of the rationale for this approach is and programs. based on the call for "meaningful connections with The increase in Section 5311(f) program obliga- scheduled intercity bus service to more distant points" tions may also be due in part to the consultation contained in the C 9040.1F. Because the proposal for requirements included in SAFETEA-LU. States plan- valuing unsubsidized service as local match involves ning to certify that they had no unmet rural intercity defining the project in terms of a meaningful connec- needs are now required to conduct a consultation tion, FTA's guidance requires that the private opera- process that includes input from the intercity carriers, tor has consented to the arrangement in the project, as well as other stakeholders. This process may also 8

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Table 2-1 Federal funding available for Section 5311 and Section 5311(f). FY 5311a 5311-5311(f)b 5311(f)c 1998 $134,819,045 $114,596,188 $20,222,857 1999 $177,856,722 $151,178,214 $26,678,508 2000 $192,717,384 $163,809,776 $28,907,608 2001 $205,485,900 $174,663,015 $30,822,885 2002 $226,410,089 $192,448,576 $33,961,513 2003 $238,954,559 $203,111,375 $35,843,184 2004 $238,501,062 $202,725,903 $35,775,159 2005 $249,635,140 $212,189,869 $37,445,271 2006 $370,300,000 $314,755,000 $55,545,000 2007 $386,177,688 $328,251,035 $57,926,653 2008 $415,993,489 $353,594,466 $62,399,023 2009 $438,480,226 $372,708,192 $65,772,034 2010 $511,324,149 $434,625,527 $76,698,622 Note: a S.5311 Total amounts are based on the following sources: For FY 1998, 1999, 2000, 2001, 2002, 2003, 2007, 2008, and 2009, the total amount is the appropriation (as published annually in the Federal Register) less the oversi ght (1/2%)" with the addition of reapportioned funds. For FY 2004, 2005, and 2010, the total amount is the appropriation (as published annually in the Federal Register) less the "oversight (1/2%)." For FY 2006, the total amount is the appropriation (as published annually in the Federal Register) less the "oversight (1/2%)" subject to a 1% rescission in the FY 2006 Defense Appropriations Act. b Section 5311 minus Section 5311(f) represents 85% of the total S.5311 allocation. c Section 5311(f) represents 15% of the total Section 5311 allocation. Annual 5311 and 5311(f) Apportionments for 19982010 $600,000,000 $500,000,000 $400,000,000 $300,000,000 5311(f) 5311 $200,000,000 $100,000,000 $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Figure 2-1 Annual Section 5311 and Section 5311(f) apportionments for 19982010. Table 2-2 Section 5311(f) allocations compared to obligations. Amount of Section 5311(f) Federal Fiscal Available (15% of Total Section Section 5311(f) Year 5311 Allocation) Obligations FY 2004 $35,775,159 $21,790,920 FY 2005 $37,445,271 $20,620,728 FY 2006 $55,545,000 $40,375,974 FY 2007 $57,926,653 $48,442,130* FY 2008 $62,399,023 $48,583,001* FY 2009 $65,772,034 Not Yet Available Source: *Data provided by FTA as of December 2009, internal status reports on Section 5311(f) Certification. 9