[Federal Register Volume 72, Number 39 (Wednesday, February 28, 2007)]
[Notices]
[Pages 9062-9073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-3452]


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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

[Docket No: FTA-2006-25365]


Formula Grants for Other Than Urbanized Areas Program (49 U.S.C. 
5311): Notice of Final Circular

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Notice of Availability of Final Circular.

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SUMMARY: This notice announces the publication of final guidance in the 
form of a circular to assist grantees in implementing the Federal 
Transit Administration (FTA) Formula Grants for Other Than Urbanized 
Areas Program (commonly referred to as Section 5311). This notice 
provides a summary of the Section 5311 program circular, and addresses 
comments received in response to the July 31, 2006, Federal Register 
notice (71 FR 43280) announcing the availability of the proposed 
circular for comment.

DATES: The effective date of this final circular is April 1, 2007.

AVAILABILITY OF THE FINAL CIRCULAR: You may download the circular from 
the Department's Docket Management System (http://dms.dot.gov) by 
entering docket number 25365 in the search field. You may also download 
an electronic copy of the circular from FTA's Web site, at 
www.fta.dot.gov. You may obtain paper copies of the circular by calling 
FTA's Administrative Services Help Desk, at 202-366-4865.

FOR FURTHER INFORMATION CONTACT: Lorna R. Wilson, Office of Program 
Management, Federal Transit Administration, 400 Seventh Street, SW., 
Room 9114, Washington, DC 20590, phone: 202-366-2053, fax: 202-366-
7951, or e-mail: <a href="/cdn-cgi/l/email-protection#15797a677b743b627c79667a7b55717a613b727a63"><span class="__cf_email__" data-cfemail="acc0c3dec2cd82dbc5c0dfc3c2ecc8c3d882cbc3da">[email protected]</span></a>. Legal questions may be addressed 
to Shauna J. Coleman, Office of Chief Counsel, Federal Transit 
Administration, 400 Seventh Street, SW., Room 9316, Washington, DC 
20590, phone: 202-366-4063, fax: 202-366-3809, or e-mail: 
<a href="/cdn-cgi/l/email-protection#76051e170318175815191a131b17183612190258111900"><span class="__cf_email__" data-cfemail="47342f263229266924282b222a26290723283369202831">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Chapter-by-Chapter Analysis
    A. Chapter I--Introduction and Background
    B. Chapter II--Program Overview
    C. Chapter III--General Program Information
    D. Chapter IV--Program Development
    E. Chapter V--Locally Developed, Coordinated Public Transit-
Human Services Transportation Plan
    F. Chapter VI--Program Management and Administrative 
Requirements
    G. Chapter VII--State Management Plan
    H. Chapter VIII--Intercity Bus
    I. Chapter IX--Rural Transit Assistance Program
    J. Chapter X--Other Provisions
    K. Appendices
Appendix 1.--Implementation of Two-Year Pilot of In-Kind Match for 
Intercity Bus

I. Background

    On July 31, 2006, the Federal Transit Administration (FTA) 
published a Notice of Proposed Program Guidance and Request for 
Comments on the proposed revisions to FTA Circular 9040.1E, 
``Nonurbanized Area Formula Program Guidance and Grant Application 
Instructions,'' dated 10-01-98. The proposed circular contained 
guidance on how to administer the Section 5311 program. The proposed 
circular also contained summaries of cross-cutting provisions such as 
Charter Bus, Buy America, Title VI, and EEO requirements. FTA did not 
seek specific comments on these cross-cutting provisions, however, 
because these are subjects of separate rulemaking or circular efforts.
    The comment period remained open until September 29, 2006. FTA 
received 17 comments to the docket. FTA reviewed and considered all 
comments submitted. In addition to changes made in response to comments 
received, FTA also edited the proposed circular for clarity and 
accuracy. Based upon comments received, FTA hereby announces issuance 
of the final circular, Federal Transit Administration (FTA) Circular 
9040.1F, ``Nonurbanized Area Formula Program Guidance and Grant 
Applications Instructions,'' which supersedes the 1998 FTA Circular 
9040.1E. FTA reserves the right to make changes to this circular in the 
future and to update references to requirements contained in other 
revised or new guidance and regulations that undergo notice and comment 
procedures without further notice and comment on this circular.

[[Page 9063]]

    This notice does not contain the final circular, but rather 
provides a summary of the provisions found within. An electronic 
version of the circular may be found on the docket, at http://dms.dot.gov, docket number FTA-2006-25365, or on FTA's Web site, at 
www.fta.dot.gov. You may obtain paper copies of the circulars by 
contacting FTA's Administrative Services Help Desk, at 202-366-4865.

II. Chapter-by-Chapter Analysis

A. Chapter I--Introduction and Background

    This chapter is a general introduction to FTA to provide an 
orientation for those readers less familiar with FTA and our programs. 
FTA intends to include this introduction in all new and revised program 
circulars for the orientation of readers new to FTA programs. Chapter I 
also includes definitions.
    Six parties submitted comments on this chapter, with some parties 
offering multiple comments. One commenter thought that the statement 
``Grants.gov is information on all Federal grant opportunities'' was 
misleading because not all Federal grants are included on this Web 
site. This commenter suggested that FTA provide information concerning 
who is responsible for updating this Web site.
    FTA agrees and revised the final circular to reflect that all 
competitive discretionary Federal grants are included on Grants.gov. 
FTA further clarified, in the final circular, that while FTA does not 
manage Grants.gov, FTA is responsible for posting all FTA competitive 
grant opportunities. In addition, FTA clarified, in the final circular, 
that the Department of Health and Human Services officially manages the 
Grants.gov postings.
    Five commenters submitted comments concerning the definitions. Four 
commenters submitted comments regarding the use of the term ``small 
urban areas'' throughout the proposed circular. Three of these 
commenters stated that the inclusion of the term ``small urban areas'' 
in the definition of ``nonurbanized areas'' was confusing and 
misleading when FTA proposed using ``small urban areas'' as synonymous 
with ``nonurbanized areas,'' ``rural and small urban areas,'' and 
``rural.'' These commenters proposed that FTA not define small urban 
areas as synonymous with rural areas. One commenter supported the 
continued use of the term ``small urban'' in the circular, and believed 
that its use was consistent with current language. One commenter 
suggested that FTA more clearly define intercity bus service. Another 
commenter suggested that FTA consistently define ``mobility 
management.''
    FTA agrees that while the technical use of the term ``small urban'' 
throughout the circular was correct, we understand that the common use 
of the terms ``small urban'' and ``small urbanized'' may be confusing. 
Therefore, FTA revised the definition of ``Other than Urbanized 
(Nonurbanized) Area,'' in the final circular, to clarify that a 
nonurbanized area means any area outside of an urbanized area, and 
includes rural areas and urban areas with populations under 50,000 not 
included within an urbanized area. Further, FTA added definitions of 
``rural area,'' and ``urbanized areas'' for further clarification. In 
addition, FTA removed the term ``small urban'' throughout the circular 
and replaced it with the term ``nonurbanized.''
    In response to the commenter who suggested that FTA more clearly 
define intercity bus service, the commenter failed to specify what 
aspect of the definition was unclear. Therefore, FTA adopts the 
definition of intercity bus service from the previous versions of the 
circular and as proposed in the proposed circular. FTA agrees with the 
commenter who proposed that FTA consistently define ``mobility 
management.'' Therefore, FTA replaced the proposed definition to make 
it consistent with the definition of mobility management provided in 49 
U.S.C. 5302(a)(1)(L).

B. Chapter II--Program Overview

    This chapter replaces the former Chapter I, ``General Overview,'' 
in Circular 9040.1E. It provides an overview of the Section 5311 
program in terms of its statutory authority and program goals. It 
defines the role of the individual States and FTA, and explains the 
program's relationship to other FTA-funded programs, as well as its 
coordination with other Federal programs. It contains the same 
information as the existing circular, with minor updates.
    Three parties submitted comments on this chapter, with some parties 
offering multiple comments. One commenter asked FTA to provide a 
definition of ``takedown'' when FTA uses it in relation to the Rural 
Transportation Assistance Program (RTAP).
    FTA agrees with this suggestion and added a definition of 
``takedown'' to the definitions section in Chapter I of the final 
circular.
    One commenter suggested that FTA mention, in Chapter II, funding 
transfers of interrelated FTA grant funding. This commenter further 
suggested that FTA mention that States may choose to delegate some of 
their non-metropolitan transportation planning functions to regional 
planning organizations, in addition to noting that States may choose to 
suballocate some of their statewide transportation planning funds to 
Metropolitan Planning Organizations (MPOs). Another commenter suggested 
that FTA expand the brief descriptions of its other programs in Chapter 
II to provide comprehensive cross-program guidance to ensure 
consistency in management and reporting requirements.
    FTA disagrees that Chapter II should discuss funding transfers in 
detail because FTA intended Chapter II to be an overview. FTA provided 
a detailed discussion of transfers of interrelated FTA grant funding in 
Chapter III. For the same reason, FTA did not adopt the suggestion that 
FTA expand the brief descriptions of its other programs in Chapter II 
to provide comprehensive cross-program guidance. However, FTA revised 
some program descriptions to emphasize the relationship to the 
nonurbanized area formula program and referenced the transfer 
provisions.
    One commenter suggested that FTA provide additional guidance, under 
Section 3(b)(2), State Role in Program Administration, concerning the 
State's obligation when the Regional Planning Agency makes funding 
decisions for the nonurbanized area.
    In response, FTA added a sentence to Chapter II, Section 5(f) to 
clarify that the State is responsible for satisfying grantee 
requirements for the Section 5311 program. Because each State's unique 
authorizing legislation defines the roles, responsibilities, and 
authorities of Regional Planning Agencies, each State must establish 
appropriate controls to monitor subrecipient activities to ensure that 
all provisions of the Section 5311 program are met. FTA looks to the 
States, not to Regional Planning Agencies or other subrecipients, to 
demonstrate program compliance.
    Two commenters submitted multiple comments on the Tribal Transit 
Program. These commenters asked FTA to clarify the State's role and 
relationship to the Section 5311 program in relation to the Federal 
Highway Administration's (FHWA's) Indian Reservation Roads (IRR) 
Program. Specifically, one commenter asked FTA whether a tribe could 
support its transit program with simultaneous funding from Section 5311 
assistance through the State in which it is located, 5311(c)(1) funding 
directly from FTA, and IRR funding. This commenter also asked FTA

[[Page 9064]]

whether tribes could use IRR funds as the non-Federal share of Section 
5311 assistance to tribes.
    FTA permits a tribe to support its transit program with 
simultaneous funding from Section 5311 assistance through the State in 
which it is located, 5311(c)(1) funding directly from FTA, and IRR 
funding, as long as the tribe uses the funds for costs associated with 
administering the respective programs.
    Regarding the commenter's question of whether State may use IRR 
funds for the ``non-Federal'' share of Section 5311 assistance to 
tribes, FTA points out that States may use IRR funds for the non-FTA 
share. Title 49 U.S.C. 5311(g)(3) allows States to use funds from 
Federal agencies, other than those of the U.S. Department of 
Transportation, for the non-FTA share of a Section 5311 grant, but 
makes a specific exception allowing States to use the Federal lands 
highway programs for the local share. The FHWA, a U.S. Department of 
Transportation operating administration, administers IRR funds under 
the Federal Lands program. Therefore, IRR funds are not ``non-Federal'' 
funds. They are Federal funds, but they are eligible as local match. To 
clarify that IRR funds are eligible as local match, FTA added to 
Chapter III, Section 3(d) of the final circular a statement indicating 
that IRR funds are an eligible local match.
    One commenter suggested that FTA expand Section 6(c) Other 
Intraagency Coordination to include the following language:

    Federal transit law requires metropolitan planning organizations 
to coordinate their planning with the activities of other 
governmental agencies and non-profit organizations that receive 
Federal financial assistance from sources other than the Department 
of Transportation to provide non-emergency transportation services. 
This requirement does not extend to statewide transportation 
planning activities, but FTA does encourage State participation in 
interagency efforts, such as coordinated statewide planning of 
public and human services transportation, and the facilitation or 
involvement in State rural development councils or other interagency 
coordinating bodies. States also are reminded that they will be 
responsible for the selection of nonurbanized Section 5310, 5316, 
and 5317 projects as derived from locally developed, coordinated 
public transit-human services transportation plans, and that the 
creation or use of statewide interagency councils or other bodies 
may be a successful strategy for reviewing plans and making project 
selections under these programs.

    FTA agrees with the general idea of this recommendation. FTA did 
not adopt this commenter's proposal verbatim, but FTA expanded Chapter 
II, Section 6(b) of the final circular to include the following 
language:

    FTA encourages State DOT participation in interagency efforts, 
such as coordinated statewide planning of public and human services 
transportation. Since States are responsible for the selection of 
nonurbanized Section 5310, 5316, and 5317 projects as derived from 
locally developed, coordinated public transit-human services 
transportation plans, the creation or use of statewide interagency 
councils or other bodies may be a successful strategy for reviewing 
plans and making project selections under these programs.

C. Chapter III--General Program Information

    This chapter consolidates the former Chapters II ``Apportionments'' 
with Chapter III ``Eligibility''. This revised chapter sets forth the 
basis for the apportionment of Section 5311 funds including the 
availability of those funds and the transfer of funds; also, it 
identifies eligible recipients and expenses, and the traditional 
Federal/State matching ratio. Although this revised chapter retains 
much of the content of the first two chapters, it includes several 
changes required by the Safe Accountable, Flexible, Efficient 
Transportation Equity Act (SAFETEA-LU). These changes include: (1) A 
sliding scale that permits a higher Federal share for capital and 
operating costs for several States based on a formula used by FHWA; (2) 
an expanded list of eligible capital expenses for crime prevention and 
security; and (3) the inclusion of Mobility Management as an eligible 
capital expense.
    Nine commenters submitted comments on this chapter, with some 
parties offering multiple comments.
    One commenter suggested that if the provisions of 48 U.S.C. 1469a 
do not apply to Puerto Rico, FTA should note this in Section 1(e) 
Consolidation of Grants to Insular Areas. This commenter further asked 
FTA to address whether or not Section 5307 (Urbanized Area Formula 
Grant Program) funds attributable to the U.S. Virgin Islands may be 
part of the consolidated grants to insular areas authorized under 48 
U.S.C. 1469a.
    In response to the first issue, FTA notes that 48 U.S.C. 1469a does 
not specify Puerto Rico as a covered insular territory. Therefore, the 
consolidated grant provisions do not apply to grants to Puerto Rico. 
Further, FTA declined to note in Chapter III, Section 1(e) that 48 
U.S.C. 1469a does not apply to Puerto Rico. FTA explicitly listed the 
covered insular territories, and does not believe that listing every 
other uncovered territory in the circular is warranted. In response to 
the second issue, FTA notes that Section 5307 funding that is 
attributable to the U.S. Virgin Islands and Guam may be part of the 
consolidated grants to insular areas authorized under 48 U.S.C. 1469a. 
FTA added Section 5307 to the list of grant programs in this section 
and notes that the U.S. Virgin Islands do not receive Section 5311 
funds.
    Two comments concerned transfers of apportionment under different 
programs. One commenter asked whether FTA permits States to combine 
funds available to them for program administration under Section 5311 
funds with Sections 5310 (Elderly Individuals and Individuals With 
Disabilities), 5316 (Job Access and Reverse Commute), and 5317 (New 
Freedom) into a common program management account, or whether FTA 
requires States to track each program's State administrative expense 
separately. Another commenter noted it is not clear why FTA allows a 
transfer of funds if it is only for ``administrative streamlining of 
grant making,'' particularly when States must separate and track the 
transferred funds under the same grant, and asked FTA to provide some 
examples of this procedure. This commenter further suggested that FTA 
retain the ability to transfer 5310 funds to 5311 strictly for capital 
projects, without a separate grant process for the use of those funds.
    In response to the first comment, FTA determined that States may 
combine program administration funds available to them into one 
administrative account at the State level, so long as the State uses 
the funds for State costs associated with administering the 5310, 5311, 
and 5316 programs. However, FTA must still track the funds attributable 
to each program at the accounting classification code, Activity Line 
Item (ALI), and Financial Purpose Code level in the respective grants. 
As the State incurs expenses against the pooled funds for program 
administration, it can draw down the reimbursement against any grant 
that has undisbursed program administration funds. In response to the 
second comment, FTA, upon closer examination, agrees that there is 
little administrative ease in combining the program in a consolidated 
grant, because FTA would still require States to separate and track the 
transferred funds under the same grant. However, a State may transfer 
funds it allocates to Federally recognized Indian tribes under Section 
5310, 5316 or 5317 to Section 5311 to enable FTA to make direct grants 
to Federally recognized Indian tribes for the selected projects, 
because the tribes are eligible direct

[[Page 9065]]

recipients under Section 5311 but not under the other programs.
    In response to the third comment, FTA can no longer allow a State 
to transfer Section 5310 funds to Section 5311 without first selecting 
projects eligible under Section 5310. In other words, the State must 
now use the Section 5310 funds it transfers to Section 5311 only for 
Section 5310 program purposes. This is a result of a change in the law, 
FTA can no longer allow the transfer of Section 5310 to Section 5311 to 
supplement resources available under the nonurbanized formula grant 
program, as the law previously permitted.
    Eight comments concerned Federal Motor Carrier Safety 
Administration (FMCSA) regulations in relation to feeder bus service. 
Four commenters noted that information in Chapter III, Section 2(c) and 
Chapter VIII, Section 9 is conflicting when Chapter III states that 
operators of interstate service ``may'' be required to comply with 
FMCSA regulations, and Chapter VIII states that operators of interstate 
service ``are required'' to comply with FMCSA regulations. These 
commenters proposed that FTA clarify these statements. Two commenters 
recommended that FTA's guidance emphasize that rural transit services 
that feed intercity bus service with meaningful connections can provide 
that service without any FMCSA regulatory involvement, as long as the 
rural transit service does not physically cross state lines and does 
not interline with the intercity bus service. Additionally, two 
commenters recommended that FTA provide in the circular that a rural 
transit agency's costs of compliance with FMCSA safety and insurance 
regulations are eligible for Section 5311(f) funding to the extent that 
they are incurred in providing eligible feeder service.
    FTA agrees with the comments concerning the conflicting language in 
Chapter III and Chapter VIII. FTA reconciled the conflicting statements 
by replacing ``may be required'' in Chapter III with ``are required.'' 
In response to the commenters' suggestions that FTA guidance emphasize 
that rural transportation services are subject to FMCSA regulation when 
the rural transportation service crosses state lines or when 
interlining is involved, Chapter VIII, Section 9 contains this 
statement. To the extent FMCSA regulations apply beyond this statement, 
FTA declines to further interpret FMCSA regulations and directs 
commenters to contact FMCSA Headquarters for further information.
    In response to the commenters' suggestion that FTA state in the 
circular that a rural transit agency's costs of compliance with FMCSA 
safety and insurance regulations are eligible for Section 5311(f) 
funding to the extent that they are incurred in providing eligible 
feeder service, FTA agrees and added language to clarify in Chapter 8, 
Section 9.
    Three commenters submitted concerns about Eligibility Assistance 
Categories. One commenter noted that the funding derived under Section 
5340 (Apportionments based on growing States and high density States 
formal factors) is a substantial portion for most States' Section 5311 
apportionments, and suggested that FTA move the paragraph that refers 
to Section 5340 to the second paragraph under the subheading of 
``Apportionment of Section 5311 Funds.'' One commenter requested that 
FTA clarify ``capital activities.'' Another commenter suggested that 
FTA expressly add park and ride lots to the list of eligible capital 
items.
    FTA agrees with the commenter's suggestion concerning Section 5340 
and moved that paragraph as suggested. FTA disagrees that the circular 
should further clarify eligible capital activities. As proposed, 
Chapter III, Section 2(e)(2) of the proposed circular defines ``capital 
expenses'' and provides a list of eligible capital expenses. In 
response to the last commenter, FTA added park and ride lots to Chapter 
III, Section 2(e)(2) of the final circular.
    Four commenters submitted multiple comments concerning Federal/
Local matching requirements. Two commenters recommended that FTA retain 
all of the matching requirements set forth in the draft circular 
without change. One commenter applauded FTA for its proposal to allow 
the increased ``sliding scale'' Federal share for Section 5311 
assistance in States with high proportions of public lands. This 
commenter suggested that FTA include a qualifying statement in Section 
3(a)(3) regarding whether FHWA is likely to recalculate these sliding 
scale rates and their qualifying States.
    FTA agrees with the first two commenters and retained all matching 
requirements set forth in the final circular without change. FTA notes 
that the match provisions in the circular reflect our understanding of 
Congressional intent. However, FTA notes that technical corrections 
legislation may be forthcoming which could further clarify SAFETEA-LU 
provisions on this point. Finally, FTA defers any questions about 
possible changes to FHWA's rates to FHWA.
    One commenter noted that Chapter III (Table 2) is not clear as to 
whether the 88.53 percent (sliding scale for capital projects) for the 
State of California covers all capital, including accessible vehicle 
purchase with 3 percent allowance. Another commenter suggested that FTA 
name the five specific programs established under the Federal Lands 
Highway authorization (e.g., Indian Reservation Roads, Park Roads and 
Parkways, Forest Highways, Public Lands Highways, and Refuge Roads), 
when FTA discusses the eligibility of Federal Lands Highway funds 
toward the non-Federal share of Section 5311 grants.
    In response to the clarity of Table 2, FTA notes that it allows the 
recipient the option of using the sliding scale in lieu of the 80 
percent match. In addition, FTA notes that a recipient may also use the 
90 percent for the actual incremental costs of equipment necessary to 
comply with the Americans with Disabilities Act (ADA) or the Clean Air 
Act (CAA) if that calculation proves more advantageous than the sliding 
scale. FTA added this explanatory language to Chapter III, Section 
3(d). While no commenters raised objections regarding a provision in 
the proposed circular, which stated that States could not use Section 
5310 funds received under service agreements as local match for 5311 to 
the docket, several States subsequently raised this objection to FTA 
regional staff. FTA reaffirmed and clarified this position, in Chapter 
III, Section 3(b) of the final circular, based on reading of 49 U.S.C. 
5311(g)(3)(A) and 49 U.S.C. 5311(g)(3)(B).
    In response to the addition of the eligibility of Federal Lands 
Highway funds, FTA believes that FHWA is better suited to provide this 
information. FTA added a reference to Chapter III, Section 3 to direct 
interested parties to the statutorily defined sources of DOT funds that 
States can use as local match for Section 5311 projects from the 
Federal Lands Highway Program.

D. Chapter IV--Program Development

    FTA renamed and made minor updates to Chapter IV, including adding 
a requirement that designated State agencies provide annual 
Certifications and Assurances to FTA, which was always assumed under 
the former circular, but is now explicitly stated. FTA also made non-
substantive, technical corrections to this chapter for clarity.

[[Page 9066]]

E. Chapter V--Locally Developed, Coordinated Public Transit--Human 
Services Transportation Plan

    This chapter replaces the former Chapter V ``Application 
Instructions,'' which is now attached as Appendix A to the proposed 
circular. This new Chapter V describes the Locally Developed 
Coordinated Public Transit--Human Services Transportation Plan 
(Coordinated Plan) required under three other FTA programs (Sections 
5310, 5316, and 5317) and addresses the relationship to that planning 
process for Section 5311 subrecipients. Although SAFETEA--LU does not 
require Section 5311 projects to be derived from a local coordinated 
plan, FTA states in Chapter V the expectation that Section 5311 and 
5307 recipients and subrecipients will be included as essential 
partners or participants in any coordinated planning activities. FTA 
also revised Chapter V in the final version to include a reference to 
the statutory requirements for ``maximum feasible coordination'' with 
transportation assistance by other Federal services.
    One commenter submitted multiple comments on this chapter. This 
commenter expressed concern that the proposed guidance was completely 
silent on the question of how, or whether FTA would allow incumbent Job 
Access and Reverse Commute (JARC) projects to continue. This commenter 
also was concerned about how FTA will allow local Section 5311 and 5307 
grantees and subrecipients to provide important transportation services 
through Sections 5310, 5316, or 5317 directly. The commenter was 
further concerned that the approaches FTA was considering for these 
designations and allocations ``will shut the door on many currently 
effective and many more potentially effective job access, new freedom, 
or elderly and disabled persons' mobility programs.''
    FTA agrees that the proposed circular did not address how FTA will 
allow local Section 5311 and 5307 grantees and subrecipients to provide 
important transportation services through Sections 5310, 5316, or 5317 
directly. FTA has revised this chapter to include a cross-reference to 
5310, 5316, and 5317 program circulars. In addition, FTA directs 
readers to FTA's proposed JARC circular, which addresses incumbent JARC 
projects. The Federal Register notice accompanying the circular (71 FR 
52610, Sept. 6, 2006) and the proposed circular are available on FTA's 
Web site at http://www.fta.dot.gov. FTA will publish the final JARC 
Circular at a later date.

F. Chapter VI--Program Management and Administrative Requirements

    This chapter retains the requirements that were in Chapter VI of 
Circular 9040.1E, and adds the National Transit Database (NTD) 
reporting required by SAFETEA-LU.
    Nine commenters submitted comments on this chapter, with some 
commenters submitting multiple comments. One commenter generally 
applauded the clarity with which FTA presents procurement procedures 
that States and subrecipients may consider under the Section 5311 
program.
    One commenter provided comments on the proposed ``Procurement'' 
section. This commenter suggested that FTA emphasize in Section 5(a) 
that States may set procurement procedures or requirements that are 
more restrictive than FTA's guidance, provided that a State's policy 
does not violate Federal requirements. This commenter further suggested 
that FTA consider giving States' authority to establish vehicle useful 
life and replacement standards for vehicles acquired with Section 5309 
assistance for use by subrecipients under Section 5310, 5311, 5316, and 
5317.
    In response to this commenter's first suggestion, FTA does not 
believe that it needs to add this qualifying statement to Chapter VI, 
Section 5(a) because this qualifying statement appears in the first 
sentence of this section. In response to this commenter's second 
suggestion, FTA believes that this suggestion would be better addressed 
in the Section 5309 (Capital Investment Grant program) Circular, which 
is currently in the process of being revised.
    One commenter provided a comment on the proposed ``Financial 
Management'' section. This commenter requested that FTA clarify Section 
6(c) regarding the application of accrual accounting to subrecipients.
    The common grant rule gives States the right to have the same 
financial management system for Federal funds they receive that they 
use for State funds. However, the requirement for accrual accounting is 
an FTA requirement. FTA requirements as well as common grant rule 
requirements are passed through to the subrecipient. Therefore, the 
accrual accounting requirement applies to subrecipients as well.
    One commenter took exception on the proposed closeout requirements 
that require closing out subrecipient grant agreements within 90 days 
after all funds are expended. This commenter preferred to closeout a 
subrecipient grant after FTA has reviewed the single audit report and 
made any adjustments, including repayments, to the grant.
    The common grant rule, which is applicable to all recipients and 
subrecipients, requires the recipient or subrecipient to submit all 
financial, performance, and other reports required as a condition of 
the grant within 90 days after the expiration or termination of the 
grant. As this is a separate regulation not governed by FTA, FTA did 
not incorporate this commenter's proposal into the final circular.
    Seven commenters provided comments on the proposed NTD reporting 
requirements. One commenter recommended that FTA should keep data 
collection and reporting requirements to a minimum. This commenter 
further suggested that data collection and reporting requirements 
should have a direct purpose to transit performance. Three commenters 
noted that FTA designed the existing Rural NTD data module for a 
voluntary pilot program that predates the SAFETEA-LU requirements, and 
includes data categories that exceed the statutory requirements. These 
commenters also proposed that FTA eliminate the excess data categories 
and requirements to avoid unnecessary data collection and reporting.
    FTA agrees that 49 U.S.C. 5311(b)(4) does not require some data 
elements, such as fatalities, that the current form requires. FTA also 
notes that the current form does not provide for collection of data 
required by SAFETEA-LU, such as fleet size and type. However, due to 
timing and funding limitations for the 2006 reporting year, FTA used 
the existing NTD rural data reporting module, which FTA developed in 
consultation with the State DOTs. For the FY 2007 reporting cycle, FTA 
is working with a team of NTD experts, selected State DOTs, and rural 
and private operators to review data elements and definitions in light 
of SAFETEA-LU requirements. FTA anticipates data for intercity bus and 
Tribal transit will be added at this time, though the number of data 
elements will be kept to a minimum. FTA also agrees with the direct 
purpose comment, and points out that the one-page, rural form requires 
the following performance measures: trips, costs, miles, and hours.
    Three commenters supported direct reporting of data from rural 
subrecipients of Section 5311 funds. One of these commenters further 
suggested that FTA develop the option for States to allow their 5311 
subrecipients to directly enter NTD data elements, subject to 
verification/concurrence by the State and suggested that FTA use, as a 
model, the Volpe

[[Page 9067]]

Center's Drug and Alcohol Management Information System (DAMIS) 
submission system.
    FTA will continue to require the States to submit subrecipient 
data, and in the short term FTA will continue to require recipients to 
use the module that FTA and State DOTs developed. While FTA cannot use 
the Volpe Center's DAMIS submission system for direct reporting by 
subrecipients as a model at this time, FTA will explore implementing 
improvements in the reporting software as resources permit in the 
future. FTA will also explore other alternate means of receiving 
formatted data from the States.
    Four commenters opposed FTA collection of subrecipient NTD data. 
Two commenters suggested that FTA consider accepting rural data in the 
aggregate rather than requesting forms for each State's subrecipients. 
One of these commenters further suggested that FTA discontinue such 
requests and accept rural transit data on an aggregate statewide level 
because such reporting is not compelled by statute. This commenter 
urged FTA to make an express written decision, reflected either in the 
final program circular or in a Federal Register notice, that it will 
not require the submission of 5311 program data by subrecipient. This 
commenter further questioned whether FTA provided notice that is 
legally sufficient to enable it to impose upon Section 5311 recipients 
a requirement to collect and submit data by subrecipient, at least for 
FY 2007 and beyond.
    FTA is preparing a separate Federal Register notice on NTD 
reporting that will address the 5311 reporting requirements for in 
SAFETEA-LU for FY 2007, and seek comment on the implementation of rural 
data collection provisions. Overall, FTA has statutory authority to 
require recipients to gather and report subrecipients' NTD data to FTA 
pursuant to 49 U.S.C. Section 5335. Section 5335(a) states that FTA may 
request and receive appropriate information for the NTD from ``any 
source,'' and Section 5335(b) states that FTA ``may award a grant under 
section 5307 or 5311 only if the applicant, and any person that will 
receive benefits directly from the grant, are subject to the reporting 
and uniform systems.'' A subrecipient of Section 5311 is a direct 
beneficiary of the grant and, as such, is subject to providing 
information for the NTD to the extent FTA requires.
    On the issue of collecting subrecipient data in the aggregate, FTA 
disagrees with the commenter's position. As stated above, 49 U.S.C. 
5335(a) permits FTA to ``request and receive appropriate information 
from any source,'' and 49 U.S.C. 5335(b) subjects ``any person that 
receives benefits directly from the grant'' to the reporting and 
uniform systems. In addition, Congress expected that the data 
collection requirements would be ``tailored to the smaller size of the 
typical public transportation system in rural areas, while still 
providing enough information to judge the condition and performance of 
our Nation's network of rural public transportation systems.'' 
Conference Report No. 109-203, at 943 (2005). FTA does not believe that 
aggregate data is ``tailored to the smaller size of the typical public 
transportation system in rural areas.'' Moreover, FTA does not believe 
that aggregate data provides ``enough information to judge the 
condition and performance of our Nation's network of rural public 
transportation systems.'' Based on 49 U.S.C. 5335 and the Conference 
Report, FTA will require that States provide individual subrecipient 
NTD data to FTA.
    One of these commenters suggested that FTA add a sentence at the 
end of the paragraph concerning NTD reporting to read as follows: ``It 
is the State's responsibility to collect such information from its 
subrecipients as will be necessary to submit these annual reports to 
the NTD.''
    FTA agrees with the general idea of this sentence, and added the 
following statement to the end of the Chapter VI, Section 12(e): ``The 
State agency administering the FTA Formula Program for Non-Urbanized 
Areas (49 U.S.C. 5311) will be responsible for the data collection and 
compilation from each Section 5311 subrecipient in the State serving 
the general public.''
    Two commenters suggested that FTA provide training on the Rural NTD 
Program requirements and processes. One of these commenters recommended 
``in person'' training in addition to online training or telephone help 
desk assistance.
    FTA agrees and is working to provide more training on rural 
reporting. Currently, most States are using the NTD rural reporting 
telephone help desk, 703-462-5233. Additionally, FTA anticipates 
providing an NTD rural training session during the FY 2007 State 
Programs Meetings, in addition to various trainings throughout the 
year. FTA will post the training schedule on FTA's public Web site, 
located at http://www.fta.dot.gov. FTA will also post the training 
schedule on the NTD Program Web site, located at http://www.ntdprogram.com. States should frequently check these Web sites for 
updated training information.
    One commenter provided comments on proposed Chapter VI, Section 14, 
``FTA Management Review.'' This commenter stated that there have been 
misunderstandings, or misplaced apprehensions, about ramifications of 
subrecipient site visits in the context of FTA management reviews. This 
commenter suggested FTA state that while FTA or its contractors may 
visit a sampling of subrecipients as part of the State Management 
Review, FTA does not intend for these visits to validate observations 
of States' program management practices, or to be compliance reviews of 
subrecipients. This commenter further suggested that FTA revise the 
first paragraph of Section 14 to read, ``FTA also conducts more 
specific compliance reviews of States or their subrecipients in 
particular areas; for example * * * ''
    FTA agrees that there have been misunderstandings, or misplaced 
apprehensions, about ramifications of subrecipient site visits in the 
context of FTA management reviews, and therefore, incorporated a 
modified version of the commenter's suggested language into Chapter VI, 
Section 14 of the final circular.

G. Chapter VII--State Management Plan

    This chapter consists of the previous Circular 9040.1E's Chapter 
XI, which FTA moved forward in the document to be consistent with the 
general format for FTA's revised circulars.
    One commenter provided multiple comments on this chapter. This 
commenter generally applauded FTA's encouragement of States to prepare 
consolidated State Management Plans (SMPs) that encompass Sections 
5310, 5316, and 5317, in addition to their Section 5311 program 
management. This commenter was concerned, however, that FTA does not 
require SMPs to explain the State's processes for assuring that it 
considered rural projects in the statewide transportation planning 
process. This commenter suggests that FTA encourage States to discuss 
outreach and consultation with local officials and, as appropriate, 
with Indian tribal governments as part of the Section 5311 management 
process.
    FTA agrees that discussion of the State's approach to outreach and 
consultation with local officials should be included in the State 
Management Plan. FTA added clarifying language to Chapter VIII, Section 
4 of the final circular.

H. Chapter VIII--Intercity Bus

    This chapter retains the same information from Chapter VII of 
Circular 9040.1E, and adds the SAFETEA-LU

[[Page 9068]]

mandated enhanced consultative process requirement. While consultation 
between a State and intercity bus operators regarding the adequacy of 
intercity bus service within the State was encouraged under the 
previous circular, SAFETEA-LU now makes consultation mandatory for any 
State certifying that intercity bus needs are adequately met.
    Ten commenters submitted comments on this chapter, with some 
commenters providing multiple comments. Two commenters submitted 
general comments. One of these commenters applauded FTA's efforts to 
see that States more fully include and consider intercity bus service 
operators in the development and support of rural transit services. 
Another commenter expressed concern that the guidance under this 
section would affect an urban grantee as well as a non-urban grantee, 
and suggested that FTA consider intercity bus service as public 
transportation.
    On the issue of considering intercity bus transportation as public 
transportation, FTA does not agree. Title 49 U.S.C. 5302(a)(10) 
expressly excludes intercity bus transportation from the definition of 
public transportation. Although, intercity bus transportation is 
explicitly eligible for assistance under Section 5311(f), the 
commenter's concern is misplaced. Commuter bus service is public 
transportation, not intercity bus service, and is eligible for 
assistance under FTA's Urbanized Area Formula Program. As such, FTA has 
not incorporated the commenter's suggestion into the final circular.
    Three commenters provided multiple comments on the consultation 
requirement to access intercity bus service. These commenters thought 
this requirement was too burdensome, and were concerned that the State 
will be unable to certify that intercity needs are met because private 
intercity bus operators are reluctant to submit proposals for intercity 
program funding. Two of these commenters believed that the evaluation 
of private sector business activities is outside of its scope and 
authority.
    FTA is aware that it may be difficult to obtain proposals for 
intercity bus projects in areas where the State has identified unmet 
needs. The statutory provision for certification implies a statewide 
assessment of intercity bus service that is currently available and an 
assessment of any existing needs. This is not a new requirement.
    On the issue of FTA's scope and authority, FTA notes that 49 U.S.C. 
5311(f)(2) requires the chief executive officer to consult with 
``affected intercity bus providers.'' Affected intercity bus providers 
may include private sector providers. In addition, 49 U.S.C. 5311(f)(2) 
requires the State to certify to FTA that the ``intercity bus service 
needs of the State are being met adequately,'' if the State will not 
use the funds to support intercity bus service. Because FTA requires a 
direct correlation between the consultation process and the result of 
such certification, States will necessarily have to assess private 
sector business. Therefore, it is not outside of FTA's scope and 
authority to require States to assess private sector business 
activities to the extent that 49 U.S.C. 5311(f)(2) requires.
    One commenter was concerned that any proposal related to counting 
expenditures on intercity bus services outside of a delineated Section 
5311(f) project would need to verify that the service does meet the 
standards for Section 5311(f) participation.
    FTA believes that Chapter VIII is clear that intercity bus mobility 
needs can be met in many ways, including by publicly provided service. 
FTA agrees that to meet the Section 5311(f) expenditure requirement, a 
project must meet the standards for 5311(f) participation provided in 
Chapter VIII of the final circular.
    Two commenters suggested that if consultation demonstrates that 
there are significant unmet intercity bus needs in the State and there 
are substantial proposals presented to meet those needs, there is no 
``direct correlation'' between the process and the result. The 
commenters suggest that the requirement for certification that there 
are no unmet bus needs renders the consultation process meaningless. 
These commenters proposed that when there is no direct correlation 
between the process and the results, FTA should not accept the 
certification. Further, these commenters suggested that FTA clarify, in 
Section 3 or 4, that FTA will reject the certification if it finds that 
there is no direct correlation between the certification and the 
results of the consultation process.
    FTA agrees that a ``direct correlation'' should exist between the 
certification processes and consultation results, including any needs 
assessment. In response, FTA strengthened the language in Chapter VIII, 
Section 3, and modified the model certification letter in Appendix E. 
As such, FTA will review letters of certification upon receipt to 
ensure that a direct correlation exists. FTA will not accept the 
certification if it is apparent that there is no direct correlation 
between the certification and the results of the consultation process. 
FTA will also review the consultation processes and needs assessment 
during the State Management Review.
    Four commenters submitted multiple comments on the proposed 
consultation process requirements. One commenter suggested that 
Sections 4(b)(2) and (4) are not clear. Another commenter was concerned 
that the process, as proposed, was too burdensome.
    These commenters were not specific concerning which aspects of the 
consultation requirements were unclear or burdensome. Therefore, FTA 
adopted the consultation process for intercity bus service as proposed 
in the proposed circular.
    Two commenters supported the definition of ``consultation'' as 
defined in the joint FTA/FHWA Metropolitan and Statewide Planning 
regulation (49 CFR part 613). Specifically, one of these commenters 
noted that the specific aspects in Section 4(b) undermine the 
flexibility granted in the planning regulation, and proposed that the 
consultation requirements of this circular should reflect the 
requirements of the planning regulation. This commenter further 
recommended that FTA replace ``must include'' with ``may include'' in 
Section 4(b) to support flexibility in the approaches that States may 
take in the consultation process.
    FTA retained the definition of ``consultation'' as provided in FTA/
FHWA's Statewide and Metropolitan Planning regulation, but also notes 
that consultation, as it applies to the intercity bus program, must 
meet specific requirements. FTA disagrees with the proposal that FTA 
replace ``must include'' with ``may include'' in Section 4(b). FTA 
believes that the four elements outlined in the guidance are necessary 
to establish an effective consultation with intercity bus providers and 
an assessment of the State's needs. FTA further believes the elements 
are not too prescriptive and allow the State's flexibility in 
establishing an assessment and consultation process.
    Two commenters submitted comments on the proposed suggestions for 
identifying private intercity carriers. One commenter applauded FTA's 
comprehensive list of suggested consultation activities and suggested 
that States may identify the intercity bus network and consultation 
with its members through State outreach to State-level or multi-State 
regional associations of motor coach operators. This commenter further 
suggested consultation activities could include participation, 
dialogue, and meaningful interactions at the meetings and

[[Page 9069]]

conferences of these associations. This commenter also feels that the 
locally developed, coordinated public transit-human services 
transportation plans have enough concerns and priorities from their 
statutory mandates, and to have them become a vehicle for intercity bus 
industry consultation, as well, strikes the commenter as too burdensome 
a suggestion. Another commenter suggested that FTA change the wording 
in 4(c)(b) regarding the use of ``The Bus Industry Directory'' to 
``industry directories'' to avoid reference to a particular book that 
may no longer be published.
    FTA agrees with the commenters and encourages States to engage in 
as many activities as possible to facilitate an effective consultation 
process. FTA also agrees that the requirement to include an assessment 
of intercity bus needs in the development of Coordinated Public 
Transit-Human Service Transportation Plans could indeed become 
burdensome. However, Section 5311 and 5307 recipients are the ``public 
transit'' in the Coordinated Public Transit-Human Service 
Transportation Plan, and FTA expects and encourages their involvement 
in the development of those plans. To the extent that intercity bus 
service is an unmet need for low income, elderly, or persons with 
disabilities, States should include those needs, and strategies to meet 
those needs, in their coordinated plans. To that extent, the 
coordinated planning process can be a resource to States in identifying 
unmet intercity bus transportation needs. On the issue of amending 
``The Bus Industry Directory'' to read ``industry directories,'' FTA 
agrees and incorporated this change accordingly.
    Two commenters thought that informing intercity bus carriers of a 
State's intent to certify was not an appropriate way to start the 
consultation process because it implies that a State has made a 
judgment about certification that it should not make prior to 
consultation. Furthermore, these commenters believed that the proposed 
Section 4(c)(2)(a) implies that consultation should be limited to those 
situations where the State is considering certifying, rather than 
including intercity bus operators in the State rural planning process 
on an ongoing basis. These commenters recommended that FTA strike the 
language of Section 4(c)(2)(a) and substitute it with the following 
language:

    Inform intercity bus carriers of the State's rural planning 
process and encourage their participation in that process, and where 
a State is considering possible certification, provide an 
opportunity to submit comments and/or request a public meeting to 
identify unmet needs and discuss proposals for meeting those needs.

    FTA agrees with these comments and incorporated this language into 
Chapter VIII, Section 4(c)(2)(a) of the final circular.
    Two commenters agreed with FTA's proposal in Section 4(c)(3)(a) 
concerning the appropriateness for a State to work in partnership with 
the American Bus Association. However, these commenters suggested that 
this should not preclude States from working with carriers on an 
individual basis. These commenters proposed adding ``and/or carriers 
individually'' after ``Association'' in line two of Section 4(c)(3)(a). 
Another commenter noted that not all of Greyhound's schedules are 
listed in the Russell's Guide, and suggested that FTA list Greyhound's 
Web site as a source for identifying intercity bus carriers and 
service.
    FTA agrees that States should not be precluded from working with 
intercity bus carriers on an individual basis and incorporated the 
language ``and/or carriers individually,'' accordingly. On the issue of 
adding the Greyhound Web site, FTA agrees that while the Russell's 
Guide may not contain the most current information, the addition of 
only Greyhound's Web site (and not other intercity carriers' Web sites) 
is not warranted. FTA, however, added ``Web sites of private intercity 
bus operators'' in the resources for identifying intercity bus 
operators in the State.
    Three commenters submitted comments concerning eligible activities. 
One commenter supported the inclusion of FTA's new definition of joint 
development, and applauded FTA for describing this new eligibility in 
the ``eligible activities'' section. Two commenters indicated that FTA 
published proposed guidance on joint development projects, including 
implementation of the new intercity bus terminal eligibility in the 
Federal Register on September 12, 2006. These commenters suggested that 
FTA reference that guidance in Section 8 and suggested that FTA correct 
the last sentence to reflect that the joint development eligibility 
criterion for intercity bus terminals is ``physical or functional'' 
relationship to public transportation facilities, not ``physical and 
functional'' relationship.
    FTA agrees that the joint development eligibility criterion for 
intercity bus terminals is ``physical or functional'' relationship to 
public transportation facilities, not ``physical and functional'' 
relationship. FTA published final guidance on joint development on 
February 7, 2007. Accordingly, FTA added a reference to this document 
in Section 8.
    Two commenters submitted multiple comments concerning feeder 
service. These commenters recommended that Section 9 make clear that 
feeder service is only eligible for Section 5311(f) funding if it makes 
``meaningful connections with scheduled intercity bus service to more 
distant points'' by adding ``and which makes meaningful connections 
with scheduled intercity bus service to more distant points'' at the 
end of the first sentence of Paragraph 9. These commenters further 
noted there are many factors (e.g., weather, accidents, change of 
plans) that can impede a customer's ability to properly schedule a 
return intercity bus trip with a demand-responsive feeder service, and 
suggested that FTA add language to Section 9 that encourages feeder 
services to make regularly scheduled connections with intercity bus 
services. These commenters also recommended that FTA make clear, in 
Section 9, that States should also use the same merit based selection 
process, as outlined in Section 6, for feeder services.
    On the issue of adding ``and which makes meaningful connections 
with scheduled intercity bus service to more distant points'' at the 
end of the first sentence, FTA agrees and added this language 
accordingly. On the issue of adding language that encourages feeder 
services to make regularly scheduled connections with intercity bus 
services, FTA disagrees. FTA believes that this is a local operational 
issue and should be resolved at the local level. On the issue of a 
merit based selection process as applied to feeder service, FTA agrees 
that States should use the same merit based selection process as 
outlined in Section 6 and this process should be documented in the 
State Management Plan.
    One commenter submitted comments concerning ADA requirements. This 
commenter suggested that FTA's explanation of ADA obligations in 
relation to intercity bus operations was ``too light'' in its listing 
of ADA obligations. This commenter pointed out other features of 
accessibility that pertain to public and private intercity bus 
operators alike, such as, the requirement to provide accommodation to 
persons with disabilities and to make information on the operation 
accessible to persons with sensory or cognitive impairments. This 
commenter asked FTA to clarify whether the ADA ``stand in the shoes'' 
standard applies to private operators of intercity bus services who

[[Page 9070]]

receive public support through Section 5311(f).
    On the issue of whether the Section 5311 Circular is ``too light'' 
in its listing of ADA obligations, FTA believes DOT's ADA regulation is 
self-explanatory and that there is no need to repeat the regulation at 
length in this circular. However, FTA revised the final circular to 
state that while the ADA complementary paratransit provisions may not 
apply to intercity bus, FTA notes that other relevant requirements of 
49 CFR parts 27, 37, and 38 may apply to intercity bus service.
    With regard to the ``stand in the shoes'' issue, FTA acknowledges 
that DOT has proposed changes to 49 CFR 37.23 in an attempt to address 
the relationship between a public and private entity where the private 
entity was providing service under a contract or other arrangement, 
with the ``other arrangement'' taking the form of a grant. FTA provided 
a discussion on this issue in the section pertaining to Chapter X.
    Eight commenters submitted comments on the Federal share 
requirements. One commenter concurred with the Federal share for this 
program, and recommended that FTA include the requirement of a 50 
percent of net cost Federal share for operations and 80 percent for 
capital projects and project administration in the final circular. 
Seven commenters submitted comments supporting the use of verifiable 
capital costs of the unsubsidized intercity bus network within its 
borders as local match for a project involving Section 5311(f) services 
that make meaningful connections to that unsubsidized intercity bus 
network, when the entity operating the unsubsidized service approves of 
such use. Two commenters suggested that FTA add the following paragraph 
at the end of Section 11:

    FTA is aware that the 50 percent local match requirement for 
operating assistance for intercity bus services is problematic for 
States attempting to develop networks of intercity bus services 
since these services are, by definition, intercity, not local 
services. In order to encourage the development of such networks, 
FTA will allow a State to use the verifiable capital costs of the 
unsubsidized intercity bus network within its borders as local match 
for a project involving Section 5311(f) services that make 
meaningful connections to that unsubsidized intercity bus network, 
provided that the entity operating the unsubsidized service approves 
of such use. In such cases, the project cost will be defined as the 
net operating cost of the subsidized service plus the capital cost 
of the unsubsidized intercity bus network and any other local match 
as may be needed. Section 5311 funds can be used to fund up to 50 
percent of that project cost.

    Another commenter suggested that the following language be added to 
Section 11:

    In order to encourage the development of intercity networks, FTA 
will allow a State to use the verifiable capital costs of the 
unsubsidized intercity bus network within its borders as local match 
for a project involving Section 5311(f) services that make 
meaningful connections to that unsubsidized intercity bus network. 
In such cases, the project cost will be defined as the net cost of 
the subsidized service plus the capital cost of the unsubsidized 
intercity bus network and any other local match as may be needed. 
Section 5311(f) funds can be used to fund up to 50 percent of that 
project cost.

    FTA agrees in part with the proposal to use verifiable capital 
costs of the unsubsidized intercity bus network within its borders as 
local match, and approved a two-year pilot of In-Kind Match for 
Intercity Bus (``Pilot Program''). This Pilot Program allows States to 
use the capital costs of private sector intercity-bus service as in-
kind match for the operating costs of connecting rural intercity bus 
feeder service funded under 49 U.S.C. 5311(f). FTA included an Appendix 
to this notice that outlines the program terms of the Pilot Program.

I. Chapter IX--Rural Transportation Assistance Program

    This chapter contains the renumbered Chapter VIII from Circular 
9040.1E. Although it makes no significant substantive changes, it 
reflects the new funding source for Rural Transportation Assistance 
Program (RTAP) as defined by SAFETEA-LU. Prior to SAFETEA-LU, RTAP was 
funded out of FTA's Research budget. SAFETEA-LU now funds RTAP with a 2 
percent takedown from the Section 5311 program, with 85 percent going 
to the States for local projects, and 15 percent to be used towards 
national projects to supplement State projects, such as the maintenance 
of a National RTAP resource center. This funding method ensures a 
predictable source of annual funding.
    Two commenters submitted multiple comments on this chapter. One 
commenter applauded FTA for noting that SAFETEA-LU re-named this 
program from ``Rural Transit Assistance Program'' to ``Rural 
Transportation Assistance Program.'' This commenter further applauded 
FTA for its accurate embodiment of SAFETEA-LU's substantive changes to 
RTAP, and agrees that tribal transit technical assistance is a matter 
of pressing need, but thinks that it is outside the scope of this 
circular. This commenter also suggested that FTA update the list of 
initiatives that parallel the national component of RTAP, such as 
Project ACTION, the National Technical Assistance Center for Senior 
Transportation, the National Resource Center for Human Service 
Transportation Coordination, and the FTA/Labor Department JobLinks 
initiative.
    FTA agreed with this commenter and incorporated a link to other 
National Technical Initiatives to Chapter 9, Section 6 of the final 
circular.
    Another commenter stated that this section incorrectly indicated 
how many operators were in Alaska. This commenter suggests that when 
next reviewing RTAP allocations, that FTA make RTAP apportionments to 
States according to the population and area formulas already in place 
for the 5311 program.
    At the time of publication of the proposed circular, FTA used 
information that was readily available; however, we discovered this was 
not the most current information. FTA apologizes to the State of 
Alaska. FTA did not receive other comments advising a change in the 
RTAP formula, and will not be changing the formula at this time.

J. Chapter X--Other Provisions

    This chapter combines Circular 9040.1E's Chapter IX ``Civil Rights 
Requirements'' and Chapter X ``Other Provisions.'' Chapter X of the 
revised circular incorporates the same text from those two existing 
chapters. FTA renumbered and reorganized this text. The revised Chapter 
X also: (1) Expands the public hearing and involvement requirement for 
capital project planning to conform with SAFETEA-LU; (2) adds 
standardized language on real property acquisition and relocation 
assistance; (3) relieves the pre-award and post-deliver audit review 
requirement for procurements of 20 vehicles or less; (4) amends the Buy 
America section to reflect SAFETEA-LU changes regarding post-award 
requests and the right of an adversely affected party to seek FTA 
review; and (5) adds a new section on safety and security.
    Four commenters submitted comments on this chapter, with some 
commenters submitting multiple comments. One commenter raised the fact 
that FTA and FHWA are in the process of drafting updated regulations 
for statewide and metropolitan transportation planning that address the 
National Environmental Policy Act (NEPA) compliance and environmental 
protections, in addition to, core aspects of the planning requirements 
incumbent on States and metropolitan planning organizations. This 
commenter also

[[Page 9071]]

hopes that FTA is taking steps to assure that the Disadvantaged 
Business Enterprise (DBE) language in the circular comports with DBE 
rules and guidance that DOT has issued in recent months and years.
    On February 14, 2007 FTA and FHWA published the new joint planning 
regulation. There were no significant changes in the new planning rule 
that are inconsistent with the more general information in this 
circular relative to the Statewide or Metropolitan planning process. 
Members of the public interested in the planning rulemaking may wish to 
review the docket by going to http://dms.dot.gov and entering docket 
number 22986. FTA agrees with the comment concerning DBE rules and 
guidance. FTA is taking steps to assure that the DBE language in the 
circular comports with DBE rules and guidance that DOT has issued.
    Three commenters submitted comments on civil rights. One of these 
commenters noted that FTA is in the process of revising its civil 
rights circular that addresses a number of issues, including Title VI 
compliance, environmental justice, and consideration of limited English 
proficiency, and suggested that FTA reference these issues referenced 
by this and other program management circulars.
    FTA agrees with these comments, but declined to amend the final 
circular to incorporate changes made in other reference documents until 
these documents have gone through notice and comment, and have been 
finalized. Members of the public interested in the transportation for 
individuals with disabilities rulemaking may wish to review the docket 
by going to http://dms.dot.gov and entering docket number 23227.
    Another commenter stated that Chapter X fails to provide a specific 
reference to the clarification of 49 CFR 37.23 in the Office of the 
Secretary's Notice of Proposed Rulemaking ``Transportation for 
Individuals with Disabilities.'' This commenter proposed highlighting 
this change in the Section 5311 Circular because it affects grants, 
sub-grants, cooperative agreements, and contracting for services.
    FTA declines at this time to provide a specific reference to the 
clarification of 49 CFR 37.23 in Chapter X of the final circular. With 
regard to the ``stand in the shoes'' issue, FTA acknowledges that DOT 
has proposed changes to 49 CFR 37.23 in an attempt to address the 
relationship between a public and private entity where the private 
entity was providing service under a contract or other arrangement, 
with the ``other arrangement'' taking the form of a grant. In other 
words, under current DOT policy and the proposed rule, Section 5311 
subrecipients that are private non-profit agencies providing fixed 
route public transit service would be required to provide complementary 
paratransit. Traditional means of financial support for intercity bus, 
such as vouchers or operating subsidies, would remain covered under 49 
CFR 37.37(a), which would not be changed under the proposed rulemaking. 
According to 49 CFR 37.37(a), a private entity does not become subject 
to requirements applicable to a public entity simply ``because it 
receives an operating subsidy from, is regulated by, or is granted a 
franchise or permit to operate by a public entity.'' The nature of the 
arrangement between the public entity and the private intercity 
operator would determine whether Section 37.37 or Section 37.23 
applies. In any case, the language likening intercity bus service to 
commuter service in terms of applicability of the requirement to 
provide ADA complementary paratransit is still valid and would not be 
changed by the proposed ADA rulemaking.
    Two commenters submitted comments on charter service. One commenter 
agreed that FTA should not issue any new rules or regulations regarding 
charter bus service until the negotiated rulemaking advisory committee 
completes its work. This commenter suggested that FTA rely on its prior 
charter bus rulings and existing legislation. Another commenter 
suggested that FTA add a note that it has begun a negotiated rulemaking 
process concerning its charter service regulations, and the outcome of 
that rulemaking, when completed, likely will result in changes to this 
circular's charter service language.
    FTA agrees, and will rely on the existing regulations. However, FTA 
can supplement the existing regulations with the language in SAFETEA-LU 
to the extent the regulations do not conflict. In the interim, 
recipients can forward any charter issues regarding a particular fact 
scenario to the regions. FTA further suggests that interested parties 
follow the rulemaking proceedings by going to http://dms.dot.gov and 
entering docket number 22657 into the search criteria.
    Two commenters suggested that FTA consider adding language to 
Chapter X, Section 19, ``Safety'' to explain any expectations that FTA 
has of its Section 5311 recipients and subrecipients in the area of 
public transit security. One commenter submitted multiple comments 
concerning safety and/or security. This commenter suggested that FTA 
add a sentence to Section 19 that reads as follows:

    FTA has entered into a Memorandum of Understanding with the 
American Association of State Highway and Transportation Officials 
(AASHTO), the American Public Transportation Association (APTA) and 
the Community Transportation Association of America (CTAA) that 
supports the transit industry and Federal commitment to bus safety, 
and supports a model bus safety program to which all the signatories 
of this agreement have agreed to subscribe.

    FTA agrees, and incorporated the commenter's proposed language. FTA 
further added the following sentence to the end of the commenter's 
suggested language: ``This program will also focus on addressing the 
needs of rural and small urban providers.'' FTA has reserved the right 
to amend the final circular to incorporate changes, with regard to any 
expectations that FTA has of its Section 5311 recipients and 
subrecipients in the area of public transit security, made in other 
reference documents that have gone through notice and comment, and have 
been finalized.

K. Appendices

    FTA proposed to re-label and reorganize Exhibits A-G of Circular 
9040.1E as Appendices A-H of the revised circular. The proposed new 
Appendix A contained revised application instructions that were 
formerly contained in Chapter V of Circular 9040.1E. The proposed 
Appendix B retained the Sample Selection of Projects that was formerly 
Exhibit A, but FTA proposed amending it to recognize the transfer of 
funds from the Section 5310, 5316, and 5317 programs. The proposed 
Appendix C retained the Section 5311 budget information from the former 
Exhibit B, and added new codes for the Section 5310, 5316, and 5317 
programs. FTA proposed adding a new Appendix D to reflect the use of 
flexible funds under SAFETEA-LU. FTA proposed to retain the next three 
appendices without change: Appendix E retained the sample intercity bus 
certification from the former Exhibit E with the addition of evidence 
of consultation; Appendix F proposed to reserve the Section 5333(b) 
labor protection warranty from the former Exhibit F; and Appendix G 
retained the Capital Cost of Contracting percentage breakdowns from the 
former Exhibit G. FTA proposed to add a new Appendix H, listing contact 
information for FTA's Regional Offices.
    Three commenters submitted comments on the Appendices to this 
circular. One commenter asked whether

[[Page 9072]]

the Department of Labor (DOL) and/or FTA will publish the procedures 
and afford States an opportunity to comment in response to the 
statement in Appendix A. Section 1h. under Certification of Labor 
Protective Arrangements that states, ``at the time of this draft, DOL 
is preparing to revise its procedures for Section 5311.''
    In response, FTA would like to clarify that DOL has not yet issued 
a Notice of Proposed Rulemaking (NPRM), but may in coming months. FTA 
anticipates that DOL will provide States an opportunity to submit 
comments on this NPRM. FTA will advise the States how to access the 
NPRM when DOL issues it.
    Two commenters suggested that the following paragraph replace the 
second paragraph and the second bracketed paragraph in Appendix E of 
the Revised Guidelines:

    The State has conducted an assessment of statewide intercity bus 
mobility needs between (fill in dates), which dates are no more than 
four years prior to the date of this certification. What follows is 
a description of the assessment process and findings: * * * Prior to 
this certification, as required by 5311(f)(2), the State consulted 
with affected intercity bus operators. That consultation process 
contained the four elements required by the circular and involved 
the following activities: (Description of activities and how they 
complied with required elements): Considering the State assessment 
and the results of the consultation process, the basis for the 
certification that there are no unmet intercity bus needs in the 
State is (explain in detail).

    These commenters believed this language would provide FTA with an 
initial view of whether a State is complying with the new standards so 
that it can move quickly when corrective action appears necessary.
    FTA agrees and has incorporated these commenters' proposed language 
into the final circular accordingly. FTA has adopted the remainder of 
the Appendix as proposed, with minor technical corrections. FTA does 
not now recommend consolidation of multiple programs into a single 
grant, but retains the Scope code information for potential use. In the 
final circular FTA has also added new data fields for subrecipient 
information in the program of projects to comply with new requirements 
contained in the Federal Funding Accountability and Transparency Act of 
2006 (Pub. L. 109-282), enacted September 26, 2006.

Appendix 1. Implementation of Two-Year Pilot of In-Kind Match for 
Intercity Bus

    Prior to publication of the proposed circular, FTA had ongoing 
conversations with intercity bus industry representatives, a private 
consultant working on intercity bus issues, and a State DOT to 
explore the possibility of capturing the value of unsubsidized 
intercity bus service as a source of in-kind local match for 
intercity bus projects funded with Section 5311(f). Greyhound and 
the American Bus Association submitted comments to the docket for 
the revisions to the Section 5311 program circular that reflected 
the outcome of those preliminary conversations, and several States 
submitted comments in support of the intercity bus industry's 
proposal.
    On October 20, 2006, FTA initiated a two-year pilot allowing 
States to use the capital costs of private sector intercity-bus 
service as in-kind match for the operating costs of connecting rural 
intercity bus feeder service funded under 49 U.S.C. 5311(f).

Background

    Title 49, U.S.C. 5311(f) requires each State to use 15 percent 
of its annual apportionment under its Section 5311 program to 
support intercity bus service, unless the Governor certifies that 
the intercity bus needs of the states are adequately met. SAFETEA-LU 
strengthened this requirement by requiring consultation with 
intercity bus operators prior to certification.
    In the last several years Greyhound has terminated most of its 
rural service, but Greyhound and other private operators maintain 
service between larger cities. Smaller regional carriers and rural 
transit systems can help support the national network of intercity 
bus service and meet the mobility needs of rural residents by 
providing feeder service that connects rural communities to the 
closest city with intercity bus service.
    Several States have conducted comprehensive state intercity bus 
needs assessments and identified corridors that could be supported 
by Section 5311(f) funding for feeder service, providing intercity 
connections to rural communities and increasing ridership and 
productivity to help sustain the unsubsidized intercity service 
provided by Greyhound and other operators.
    However, even when the State was interested and willing to use 
Section 5311(f) funds to meet identified needs and the private 
operator needed and desired the connecting service, lack of sources 
of local match often impeded implementation of the feeder service.
    A consultant working with the State of Washington came up with a 
creative financing concept, which Greyhound endorsed and promoted to 
FTA. While FTA rejected the original proposal to use the entire 
value of the unsubsidized intercity bus network in a State as a form 
of credit to be awardable for match, FTA continued to work with the 
advocates to refine the proposal. Several states and industry groups 
sought FTA's approval of the financing concept in comments submitted 
to the Docket for the proposed revisions to the Section 5311 program 
circular. FTA internally discussed the proposal and agreed to test a 
limited version of the financing concept in a two-year pilot for 
Section 5311 grants obligated during FY 2007-2008.
    In this notice, FTA addressed the financing concept in the 
preamble but FTA did not incorporate the financing concept in the 
Circular because FTA is limiting the financing concept to a two-year 
period pilot. Depending on whether the pilot proves that the 
financing concept is workable and beneficial, FTA may extend and 
incorporate it into later iterations of the Section 5311 Circular, 
or in future legislative proposals.

I. Implamentation Instructions

A. Defining the FTA Assisted Project

    To use the capital provided by a private operator as in-kind 
match, the FTA assisted project must be defined as including both 
the feeder service and an unsubsidized segment of intercity bus 
network to which it connects.

B. Costs Allowable As In-Kind Match

    To be eligible to be used as in-kind match, a cost must be 
otherwise allowable under the project. Thus, to be eligible under 
Section 5311, the costs contributed by the private operator as in-
kind match must connect the rural community to further points. Also, 
since FTA can only fund the net project cost and the private 
operator is presumed to be collecting at least enough in fares to 
cover the operating costs of the service, we are only allowing the 
capital costs of the unsubsidized service to be used as in-kind 
match. To simplify matters, we will use the percentages allowed in 
the capital cost of contracting guidance to determine how much of 
the private operator's total costs are attributable to capital. 
(e.g., 50% where the operator provides and maintains all the 
equipment, less if FTA funded equipment is provided.)

C. Simplified Example of a Project

  Feeder Service--Rural Community A to Intercity Bus Terminal in City B
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Total Operating Costs..........         $15,000  Service operates 2
                                                  round trips per day, 5
                                                  days per week. 1000
                                                  miles total @ $15/
                                                  mile.
Less Farebox Revenue...........           5,000  Based on weekly
                                                  ridership of 20
                                                  passengers who use the
                                                  feeder to connect with
                                                  intercity service at
                                                  point B.
Net Operating costs............          10,000  Subsidized by 5311(f).
------------------------------------------------------------------------
Note: City B may be either under or over 50,000 in population if the
  origin in Point A is a non-urbanized area.


[[Page 9073]]


 Connecting Service--From Intercity Bus Terminal in City B to Big City C
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Total Operating Costs..........         $20,000  Documented fully
                                                  allocated costs (both
                                                  capital and operating)
                                                  of unsubsidized
                                                  privately operated
                                                  service--2 trips each
                                                  day that connect with
                                                  the feeder service.
                                                  (ten trips per week)
                                                  500 hours of service @
                                                  $40/hour. (If there
                                                  are more trips per day
                                                  that do not connect
                                                  with the feeder, those
                                                  costs aren't counted).
Less Operating Costs...........          10,000  The operating portion
                                                  of the fully allocated
                                                  costs is not allowable
                                                  as in-kind match
                                                  because the private
                                                  operator is not
                                                  operating at a loss,
                                                  so farebox revenues
                                                  are presumed to cover
                                                  all the operating
                                                  costs. Capital cost of
                                                  contracting ratios may
                                                  be used to determine
                                                  the percentage of the
                                                  total unsubsidized
                                                  cost of the private
                                                  service attributable
                                                  to capital--50% if no
                                                  FTA provided vehicles
                                                  are used. The
                                                  remainder is operating
                                                  costs.
Value of Capital contributed by          10,000  May be used as In-Kind
 private operator.                                match.
------------------------------------------------------------------------
Note: Both City B and City C are on the route on which the private
  intercity bus operator provides scheduled service. In this example
  there is just one destination, but in other cases there may be
  additional segments of the network included in the calculation--for
  example, service from B to D as well as B to C.


   FTA Assisted Project--Service From Rural Community A to Big City C
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Operating Deficit Segment A-B..         $10,000  Funded by 5311(f)--
                                                  Federal Share.
Capital Costs Segment B-C......          10,000  In-Kind Match--Local
                                                  Share.
Net Cost of project A-C........          20,000  Net Project Cost--
                                                  included in program of
                                                  projects and in TEAM
                                                  Budget.
------------------------------------------------------------------------
Note: The example above assumes a 50/50 match ratio for operating
  assistance. The Federal share may be greater if a State is eligible to
  use the sliding scale match ratios.

D. Use of Private Capital as In-Kind Match for Subsidized Private 
Sector Routes or Service Contracted From Private Operator

    A contribution of unsubsidized private capital can also be used 
to provide in-kind match when Section 5311(f) funds are used to 
subsidize an unprofitable rural intercity bus route that might 
otherwise be discontinued by the private operator. Section 5311(f) 
funds can be used to pay for the operating deficit and the local 
match can come from the capital costs contributed by the private 
operator. Alternatively, a State (or local transit agency) can 
contract with a private operator to provide rural intercity bus 
service, and pay for the operating deficit with Section 5311(f) 
funds, with the private operator providing in-kind match in the form 
of the value of the unsubsidized capital portion of the contracted 
service.

E. Excess or Insufficient In-Kind Match

    If there is excess in-kind match available from the value of the 
capital costs, it cannot be used to increase the Federal share above 
the actual operating deficit of the project. In the simplified 
example above, if the capital costs of the connecting service were 
$12,000, the Federal share of the project provided in Section 
5311(f) funds would still be $10,000 because that is what is needed 
to pay the operating deficit of the feeder service. Only $10,000 of 
the capital costs are used for in-kind match.
    On the other hand, if the value of the unsubsidized capital 
contribution does not provide sufficient in-kind match to equal the 
Section 5311(f) funds needed to cover the operating deficit, the 
State or local agency has to produce the difference in cash. In the 
simplified example above, if the capital costs of the unsubsidized 
service were only $8,000, the $10,000 operating deficit of the 
feeder service could be paid with $8,000 in Section 5311(f) funds 
and $2,000 in cash from other sources.

F. Period of Availability of the In-Kind Match

    Once included in an approved grant obligated within the two-year 
pilot period, the capital contribution described in the application 
may be used as in-kind match until the Federal share is fully 
expended.

G. Documentation Required in State's Application for Section 5311

    When applying to use the unsubsidized capital as in-kind match, 
the State must provide supplemental information with its Section 
5311 grant application.
    1. For each Section 5311(f) project using the match, the State 
must provide a detailed description of the feeder service and the 
connecting service, identifying locations served by each, and the 
connections. Only those runs that actually connect with the feeder 
service can be used for match. For example, if the private operator 
makes four trips per day through point B but the feeder service only 
operates twice daily, only the capital costs of the two daily 
connecting trips can be used as in-kind match.
    2. Itemize the total and net costs of each segment used in the 
project description (for example A-B and B-C, by actual place names, 
and level of service.) The value of the in-kind match must be based 
on the documented fully allocated costs incurred by the private 
operator in providing the connecting service, with reasonable 
calculations by methods such as costs per mile, or costs per hour. 
Capital Cost of Contracting percentages may be used to determine the 
amount of fully allocated costs attributable to capital, unless the 
operator can provide documentation that the capital costs (including 
preventive maintenance) are higher. The detailed information may be 
presented in table form, as in the simplified example above.
    3. If the capital costs do not provide sufficient match for the 
entire operating deficit of the feeder service, additional cash 
match is required, and should be documented in the application.
    4. The application should include documentation that the private 
operator has consented to the arrangement, documented the costs of 
the private service being used for in-kind match, and acknowledged 
that the private service is part of the FTA project and thus is 
covered by the labor warranty and other Federal requirements.

H. Regional Review and Processing of Grant Application

    When a State applies to use this source of in-kind match during 
the two-year pilot in FY 2007 or 2008, the FTA regional office will 
review the documentation to ensure that the project as defined is 
eligible for Section 5311(f) assistance and that sufficient local 
match is provided by the in-kind capital contribution to match the 
operating assistance provided.

I. Assessment of Pilot Project

    FTA invites States and industry to comment on the implementation 
of the pilot as it proceeds. Observations about any procedural 
issues and reflections on the impact of the pilot in increasing the 
rural intercity bus connections are welcome at any time. FTA 
particularly invites you to submit an assessment on the two-year 
pilot in July, 2008, when FTA expects to consider whether to extend 
or terminate the pilot.

    Issued in Washington, DC, this 22nd day of February, 2007.
James S. Simpson,
Administrator, Federal Transit Administration.

[FR Doc. E7-3452 Filed 2-27-07; 8:45 am]
BILLING CODE 4910-57-P


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