EXHIBIT A 

LOCAL COST-EFFECTIVENESS CMAQ POLICY

Summary 

The Congestion Mitigation and Air Quality (CMAQ) program provides funding for 

transportation projects or programs that will contribute to attainment or maintenance of the 

national ambient air quality standards. The CMAQ program supports two important goals of the 

Department of Transportation: improving air quality and relieving congestion. SAFETEA-LU 

strengthens these goals by establishing priority consideration for cost-effective emission 

reduction and congestion mitigation activities. Exhibit A provides a summary of the policy for 

distributing at least 20% of the CMAQ funds to projects that meet a minimum cost-effectiveness 

threshold for emission reductions beginning in FY 2011. This policy will focus on achieving the 

most cost-effective emission reductions, while maintaining flexibility to meet local needs. 

Estimates of Available Funds 

Caltrans Programming provides apportionment estimates to all regions of the state. The FTIP is 

currently developed for a four-year programming cycle; with each new FTIP document, Merced 

County Association of Governments (MCAG) will use the Caltrans estimate to develop the 

available CMAQ funds over the four-year period. MCAG commits to dedicate at least 20% of 

the total funding for the four-year period of each FTIP as part of the local cost-effectiveness 

CMAQ policy. For example, if an agency is estimated to receive $20 million over a four-year 

period, it would allocate 20%, or $4 million, of the CMAQ program to projects that meet a 

minimum cost-effectiveness. 

The CMAQ allocation formula is currently based on population, ozone status, and carbon 

monoxide status. Revisions to the formula or updates to estimates may result in changes to 

available funds for theca CMAQ program; such updates will also affect the funds available for 

the local cost-effectiveness policy. CMAQ estimates may be revised at any time due to changes 

from Caltrans, Federal legislation, or classification of the air quality standards in the San Joaquin 

Valley. 

Timeframe 

The local cost-effectiveness CMAQ policy is scheduled to be implemented in FY 2011 because 

the current federally approved 2007 Federal Transportation Improvement Programs (FTIPs) have 

committed CMAQ funds through FY 2009 and in some cases, regional commitments through 

FY 2010. In addition, the current CMAQ programming assists in implementing approved local 

RACM (Amended 2003 PM-10 Plan) that are committed through 2010. 

The San Joaquin Valley Air Basin is currently classified as a serious ozone nonattainment area 

with an attainment deadline of 2013. As part of the 2007 Ozone plan, the Air District is 

requesting an “extreme” classification, which would delay the attainment deadline until 2023. If 

approved and assuming no change to the current funding formula, the MPOs may continue to 

receive CMAQ funding through that time (2023). The local cost-effectiveness CMAQ policy 

may remain in effect through 2023; however, continuation of the policy will be reviewed on a 

regular basis per the Policy Review section below. 
Local Allocation of Funds 

New CMAQ guidance based on SAFETEA-LU was released by the Federal Highway 

Administration (FHWA) on October 31, 2006. The new legislation and guidance clarifies 

project eligibility, including advanced truck stop electrification systems and the purchase of 

diesel retrofits. SAFETEA-LU directs States and MPOs to give priority to diesel retrofits and to 

cost-effective congestion mitigation activities that provide air quality benefits. Though 

SAFETEA-LU establishes these investment priorities, it also retains State and local agencies' 

authority in project selection, meaning that changes to local procedures are not required by 

SAFETEA-LU. MCAG has previously developed procedures for allocating CMAQ funds; the 

local cost-effectiveness CMAQ policy will be incorporated into existing procedures. 

Prioritization and funding of projects will continue to be based on criteria developed by MCAG. 

Cost-Effectiveness Threshold 

Cost-effectiveness is a key component of providing funding to projects that improve air quality 

and reduce congestion. The cost-effectiveness of an air quality project is based on the amount of 

pollution it eliminates for each dollar spent. Policies that focus on cost-effectiveness will result 

in the largest emission reductions for the lowest cost. Cost-effectiveness can be based on total 

project costs, including capital investments and operating costs. However, for the purposes of 

this policy, cost-effectiveness is based on CMAQ funding dollars only. 

In the state of California, the Air Resources Board (ARB) provides funding for air quality 

improvement projects through the Carl Moyer Program, which requires that heavy-duty vehicle 

projects meet a cost-effectiveness threshold. The San Joaquin Valley Air Pollution Control 

District (SJVAPCD) also uses cost-effectiveness thresholds for projects funded through the 

REMOVE II and Heavy-Duty Incentive Programs. However, there is currently no minimum 

cost-effectiveness established for the CMAQ program, and according to recent studies, the 

numbers vary widely across the country and by project type. 

Prior to allocation of CMAQ funds for the local cost-effectiveness policy with each FTIP, the 

SJV MPOs in consultation with the interagency consultation (IAC) partners will develop the 

minimum cost-effectiveness threshold. While other criteria may be developed at the discretion 

of MCAG, all projects funded by the 20% of CMAQ dollars related to the local costeffectiveness CMAQ policy must meet that minimum threshold. 

Expenditure of Funds under the Local Cost-Effectiveness Policy 

MCAG will make every effort to expend the minimum 20% funding for the cost-effective 

projects as soon as possible beginning in FY 2011. However, recognizing that there are 

additional issues related to project delivery and financial constraint, MCAG will be allowed to 

meet the 20% funding over the course of the FTIP, beginning with the 2008 FTIP and each new 

FTIP thereafter. For example, if the four-year estimate is $4 million, then the MPO could spend 

$1 million per year over the four year FTIP cycle, $4 million in one year, or other combination of 

funding. 

Project eligibility will continue to be based on federal CMAQ guidance. MPOs can continue to 

fund projects within the local jurisdictions, or contribute funding to the SJVAPCD air quality 

grant incentive programs to meet their cost-effectiveness threshold requirements. 
Emissions Estimates 

CMAQ projects must demonstrate an air quality benefit, and the expected emissions reductions 

will continue to be estimated with the most recent methodology. As of 2007, the ARB “Methods 

to Find the Cost-Effectiveness of Funding Air Quality Projects” released in 2005 is the 

appropriate methodology. If necessary, interagency consultation will be used to reach agreement 

on the methodology for future estimates. Emission benefits and cost-effectiveness calculations 

will continue to be based on the applicable pollutants for the region, including nitrogen oxides 

(NOx), volatile organic compounds (VOC), and particulate matter (PM). 

Reporting Requirements 

Tracking of the CMAQ policy will be achieved through several methods. MPOs must develop 

annual reports for Caltrans and FHWA that specify how CMAQ funds have been spent and the 

expected air quality benefits. This report is due by the first day of February following the end of 

the previous Federal fiscal year (September 30) and covers all CMAQ obligations for that fiscal 

year. As has been the practice of several MPOs, a copy of the CMAQ annual report will also be 

submitted to the Air District for information purposes. Each MPO will also post information 

related to the implementation of the local cost-effectiveness CMAQ policy on its website. 

Policy Review 

Due to changes in project costs and technology over time, the MPOs will revisit the minimum 

cost-effectiveness threshold, as well as policy feasibility, at least once every four years prior to 

FTIP development. A periodic review of the policy is necessary due to potential changes in 

federal transportation legislation, apportionments, and project eligibility. This policy will only 

affect 20% of the allocated federal CMAQ funds, and does not imply changes to other funding 

programs. Should future transportation legislation not include CMAQ funding, this policy will 

no longer be in effect. 

Example Schedule 

The following is an example schedule of the policy implementation and updates. This 

information is only representative of the general approach and specific schedules will be 

developed in the future (annual reports will continue to be prepared and submitted as required). 

Summer 2007 Develop cost-effectiveness threshold through interagency consultation 

Fall 2007 Identify funding available in the 2008 FTIP related to the 20% local costeffectiveness policy 

Spring 2008 Call for projects – Quantify, rank, and select CMAQ projects 

Summer 2008 Approve 2008 FTIP 

Summer 2011 Review policy feasibility. If policy is continued, proceed with following 

steps. 

Update cost-effectiveness threshold through interagency consultation 

Fall 2011 Identify funding available in the 2012 FTIP related to the 20% local costeffectiveness policy 

Spring 2012 Call for projects – Quantify, rank, and select CMAQ projects 

Summer 2012 Approve 2012 FTIP