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[Federal Register Volume 88, Number 209 (Tuesday, October 31, 2023)]
[Notices]
[Pages 74563-74565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-23946]

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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

[Docket No. FTA-2022-0029]

Interim Asset Disposition Guidance

AGENCY: Federal Transit Administration (FTA), Department of 
Transportation (DOT).

ACTION: Interim Guidance and response to public comments.

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SUMMARY: The Federal Transit Administration (FTA) hereby establishes 
Interim Guidance to provide clarity on an asset disposition option 
under the National Defense Authorization Act (NDAA) for Fiscal Year 
2022. Under the new provision, FTA may authorize the transfer of real 
property acquired or improved with Federal assistance, but no longer 
needed for the originally authorized purpose, to a local governmental 
authority, nonprofit organization, or other third-party entity if 
certain statutory criteria are met.

DATES: The effective date of this Interim Guidance is October 31, 2023.

ADDRESSES: One may access this interim guidance and public comments on 
the proposed guidance at docket number FTA-2022-0029. For access to the 
docket, please visit https://www.regulations.gov or the Docket 
Operations office located in the West Building of the United States 
Department of Transportation, Room W12-140, 1200 New Jersey Avenue SE, 
Washington, DC 20590, between 9 a.m. and 5 p.m. Monday through Friday, 
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: For policy guidance questions, contact 
Maggie Schilling, Office of Budget and Policy, Federal Transit 
Administration, 1200 New Jersey Ave. SE, Room E52-315, Washington, DC 
20590, phone: 202-366-1487, or email [email protected]. For 
legal questions, contact Kathryn Loster at (202) 360-2322 or email 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Introduction

    This guidance explains changes made to 49 U.S.C. 5334(h)(1) by the 
National Defense Authorization Act (NDAA) for Fiscal Year 2022 (Pub. L. 
117-81). Specifically, section 6609 of the NDAA added a new disposition 
option for real property acquired or improved with Federal assistance 
that are no longer needed for the originally authorized purpose. Under 
the new provision, FTA may authorize the transfer of property to a 
local government authority, nonprofit organization, or other third-
party entity if, among other criteria enumerated in the law, it will be 
used for transit-oriented development and include affordable housing.
    FTA published a notice of availability of the proposed asset 
disposition guidance and request for comments on March 15, 2023 (88 FR 
16076), and the comment period ended April 14, 2023. This notice 
provides a summary of the comments received, responses and guidance 
clarifications from FTA, and the publication of the interim guidance in 
the form of FAQs, which is available on the agency's public website at 
https://www.transit.dot.gov/funding/funding-finance-resources/interim-asset-disposition-guidance.

II. Response to Public Comments

    FTA received comments from five respondents on its Proposed Asset 
Disposition Guidance. The commenters represent transit agencies and 
industry stakeholders, including the American Public Transportation 
Association, Sound Transit, and the Local Initiatives Support 
Corporation. In this section, FTA responds to public comments in the 
following topical order: (A) General Comments; (B) Eligibility; (C) 
Review and Approval Process; (D) Affordable Housing Requirements; (E) 
Monitoring Requirements; (F) Other Requirements; and (G) Categorization 
of Special Purpose Entities. One commenter raised issues that are 
outside the scope of the Proposed Guidance and Legislative Authority, 
and FTA does not address those concerns in this Interim Guidance.

A. General Comments

    i. Two commenters expressed support for the legislative change, 
which provides this additional asset disposition option, and the 
benefit this will have on Transit Oriented Development and affordable 
housing. One comment notes this guidance is helpful and constructive.
    FTA Response: FTA appreciates these comments and the transit agency 
and industry stakeholder support for affordable housing.

B. Eligibility

    i. One commenter requested clarity on whether provisions apply to 
real property that was either acquired or improved with FTA assistance. 
For example, those improved as part of an FTA-assisted project, even if 
it was originally acquired with non-federal funds.
    ii. One commenter requested clarity on whether provisions in 
question apply to projects whose Federal funding

[[Page 74564]]

source was an FTA-administered RAISE grant or flexed funds from other 
Operating Administrations, such as Federal Highway Administration 
(FHWA).
    FTA Response:
    i. In accordance with the definition of ``real property'' in 49 CFR 
262.3, eligible assets include land improvements. FTA will provide 
additional clarity in the Interim Guidance.
    ii. This provision applies to assets acquired, or improved, with 
FTA-administered funds, including those flexed over from other 
operating administrations such as FHWA. FHWA funds flexed to FTA allow 
utilization of 49 U.S.C. 5334(h)(1) disposition provisions and these 
funds take on Chapter 53 elements. RAISE grants are not authorized 
under Chapter 53. As such, any property funded by a RAISE grant would 
be outside the scope of this provision.

C. Review and Approval Process

    i. A commenter requested confirmation that a disposition under this 
new provision is approved by an FTA Regional Administrator and does not 
require publication in the Federal Register.
    FTA Response:
    i. This disposition option does not require publication in the 
Federal Register. Further, requests for asset disposition under this 
provision follow existing asset disposition approval processes, 
beginning with the FTA Regional Office and may involve additional 
review by FTA Headquarters offices.

D. Affordable Housing Requirements

    i. A commenter noted that the language includes owner income 
requirements, which they state is not necessary for affordable rental 
housing projects since they are required to serve low-income 
households, and they recommend removing this language for affordable 
rental housing projects.
    ii. Clarification is requested on whether affordability 
requirements are kept intact if the asset is subsequently sold or 
changes partnership after the initial transfer.
    iii. Additionally, a commenter requested clarification regarding 
FAQ 2(c) of the Proposed Guidance, on whether the 20 percent of units 
that must meet the 30 percent area median income (AMI) are included 
within the total 40 percent of units that must meet the 60 percent AMI 
level.
    iv. Request for clarification on whether the non-housing space 
within an affordable housing project is exempt from the ongoing housing 
requirement.
    FTA Response:
    i. This is a statutory requirement, per 49 U.S.C. 5334(h)(1)(B)(i)-
(iii), and as such cannot be removed from this guidance. However, FTA 
clarifies that only individuals purchasing or renting units that are 
sold or rented as affordable owner-occupied units need to meet these 
income thresholds. The income requirement does not apply to the 
developer or property owner offering rentals.
    ii. FTA confirms that the affordability requirements remain intact 
for the 30-year period, even if the asset is sold or changes 
partnership. The FTA recipient disposing of the property under this 
provision is responsible for ensuring compliance with this requirement.
    iii. The guidance states that at least 40 percent of housing units 
must be legally binding affordability restricted to tenants and owners 
at or below 60 percent AMI, which shall include at least 20 percent of 
such housing units restricted to tenants and owners at or below 30 
percent AMI. This is read to mean that the 20 percent of units that 
must meet 30 percent AMI are included within the total 40 percent of 
units that must meet the 60 percent AMI, meaning that at least 8 
percent of the total amount of housing units must meet 30 percent AMI. 
Please note that this requirement is separate from the requirement that 
at least 20 percent of the total floor area ratio of the development be 
dedicated to affordable housing. The Interim Guidance will be amended 
to include this clarification.
    iv. The requirement that 20 percent of the total floor area ratio 
(FAR) applies to the totality of the project, including non-housing 
space. The FTA recommendation is that, further, at least 50 percent of 
the TOD's FAR is dedicated to housing or other community benefits; this 
also applies to the totality of the project. The requirements for 40 
percent of housing units to be legally binding affordability restricted 
to tenants and owners at or below the 60 percent AMI level, which 
includes 20 percent of units restricted at or below the 30 percent AMI 
level, apply only to the project's housing space.

E. Monitoring Requirements

    i. A requirement of this asset disposition option includes 
monitoring of affordable housing requirements over a 30-year term. Two 
commenters expressed that a monitoring requirement may place an undue 
burden on an agency.
    Further, commenters recommended that FTA allow the long-term 
monitoring to be performed by other entities that conduct compliance 
monitoring activities, including the new ownership entity, other public 
agencies, state housing finance agencies, and other housing agencies 
with subsidies in the project that require long-term affordability. 
Other suggestions include a standard reporting mechanism to ease the 
burden.
    FTA Response:
    i. The Proposed Guidance did not prescribe how the recipient must 
ensure compliance with affordable housing requirements over the 30-year 
term. The requirement for a property to remain in use and compliant 
with affordable housing requirements for 30 years after the date of 
transfer is a statutory requirement. FTA recognizes that there are many 
ways in which a recipient could ensure oversight and compliance with 
this requirement, including long-term monitoring by a third party or 
other public agency.

F. Other Requirements

    i. Under this provision, an asset can be transferred to a Third-
Party Entity if a Local Government Authority or Nonprofit Organization 
is ``unable to receive'' the property. A commenter requested 
clarification on whether ``choosing not to receive'' is assumed to be 
the same as ``unable to receive.''
    FTA Response:
    i. Under this provision, a local government or nonprofit entity 
``choosing not to receive'' the property can be considered the same as 
``unable to receive.'' Documentation demonstrating that the property 
has been offered and refused would be sufficient to meet this 
requirement.

G. Categorization of Special Purpose Entities

    i. Three commenters requested that FTA clarify that Special Purpose 
Entities created by a nonprofit organization for the purpose of 
utilizing Low-Income Housing Tax Credits (LIHTC) will be treated as 
nonprofit organizations, rather than third-party entities, for the 
purposes of transferring eligible assets under this provision.
    Nonprofit developers typically form Special Purpose Entities (e.g., 
Limited Liability Companies or Limited Partnerships) to utilize the 
LIHTC available under Internal Revenue Code (IRC) 26 U.S.C. Chapter 42. 
As commenters note, LIHTC encourages private parties to invest in 
affordable housing projects, constituting an important and commonly 
used method for financing affordable housing. While the Special Purpose 
Entity is a private entity, it may be controlled and managed by the 
nonprofit housing

[[Page 74565]]

developer. This is important to clarify because, in some cases, the 
Special Purpose Entity may not be able to satisfy the statutory 
requirements for transfer to a third-party entity, such as 
demonstrating a ``satisfactory history of constructing or operating an 
affordable housing development;'' this is because a new Special Purpose 
Entity is created for each project and would not have a history of past 
projects.
    FTA Response:
    i. FTA recognizes that this is a common concern among transit 
agencies and stakeholders interested in utilizing this provision. FTA 
further notes that Special Purpose Entities receiving LIHTC's may take 
many different forms. In interpreting Special Purpose Entities formed 
for the purpose of utilizing LIHTCs under this provision, FTA will look 
to which party (i.e., public or nonprofit vs. for-profit entity) has 
control over the project. Ownership may be transferred to a for-profit 
entity to facilitate the use of tax credits for the project only if the 
public or nonprofit entity demonstrates in its application that it 
retains control over the property (i.e., still considered ``owned'' for 
purposes of this provision). Sufficient control may be satisfied by any 
of the following: (1) a fee simple interest in the Project property, 
(2) owns 51 percent or more of the general partner interests in a 
limited partnership or 51 percent or more of the managing member 
interests in a limited liability company with all powers of the general 
partner or managing member, (3) owns a lesser percentage of the general 
partner or managing member interests and holds control rights, or (4) 
owns 51 percent or more of all ownership interests in a limited 
partnership or limited liability company and holds certain control 
rights.
    ``Control rights,'' as referenced above, include control over 
leasing of the project (e.g., exclusively maintaining and administering 
the waiting list, performing eligibility determinations) and consent 
rights over certain areas, such as changing the number of affordable 
housing units, setting utility allowances, selecting the management 
agent, or setting the operating budget. FTA will treat a Special 
Purpose Entity as a nonprofit entity under this asset disposition 
provision if they meet the above requirements.

III. Interim Guidance

    FTA has reviewed and deliberated over the public comments received 
for the Proposed Asset Disposition Guidance. All feedback was 
appreciated and informative for further shaping this guidance. FTA 
makes made the following amendments in the Interim Asset Disposition 
Guidance:
    The Interim Asset Disposition Guidance is amended to provide a 
response to comments requesting that Special Purpose Entities using Low 
Income Housing Tax Credits (LIHTC) are treated as a nonprofit entity 
under this provision. FTA will allow Special Purpose Entities using 
LIHTCs to be treated as nonprofits if the nonprofit entity retains 
control over the project, as detailed above.
    Additionally, FTA amends the guidance to provide additional clarity 
on the area median income (AMI) percentage requirements. Some 
commenters voiced confusion over the statutory requirements that 40 
percent of the housing units offered must be legally binding 
affordability restricted to tenants and owners at or below 60 percent 
AMI, which shall include at least 20 percent offered to tenants and 
owners at or below 30 percent AMI. FTA will clarify that this is 20 
percent out of the 40 percent, not 20 percent out of the totality of 
the project.
    On the eligibility requirements to use this provision, FTA amends 
the guidance to clarify that this provision applies to assets that have 
been acquired or improved with FTA assistance, including FTA-
administered Federal funds that have been flexed over from other 
Operating Administrations, such as Federal Highway Administration 
(FHWA). However, this provision does not apply to assets acquired or 
improved with FTA-administered RAISE grants, as discussed above.
    FTA amends the guidance to provide additional clarifying language 
on the options available for compliance monitoring during the 30-year 
term, to include third party oversight.

Nuria I. Fernandez,
Administrator.
[FR Doc. 2023-23946 Filed 10-30-23; 8:45 am]
BILLING CODE 4910-57-P
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