(a) Eligible sources for required annual local matching funds.

1. (1) For a private transportation company receiving grants directly from the Department under the act, eligible annual local matching funds shall only consist of contributed cash income that was generated by the transportation company from its nonsubsidized activities.

2. (2) Except for those local transportation organizations using local matching funds from private third-party contractors prior to the enactment of the act, eligible sources of local matching funds for a local transportation organization shall be cash contributions provided by one or more municipalities or private entities in accordance with paragraphs (1) and (10).

   1. (i) The total amount of municipal local match cash contributions for operating assistance cannot be less than the total amount of municipal local match cash contributed in the prior fiscal year.
   2. (ii) If the required local match is 15% of the State funding for operating assistance, the municipal local match contribution can be reduced proportionate to any reduction in State operating assistance funding.

3. (3) Advertising revenue may be considered an eligible source of local matching funds for operating assistance grants if the municipalities responsible for providing all of the local matching funds annually pass a resolution which:

   1. (i) Acknowledges their responsibility for providing the local matching funds.
   2. (ii) Agrees to offset any shortfall in advertising revenue received during the fiscal year which results in insufficient local matching funds.
   3. (iii) Acknowledges that any reduction in service or increase in fares due to the net loss of operating revenue associated with the use of advertising revenue as local match is the responsibility of the municipalities which provide local match.

4. (4) If a shortfall in advertising revenue causes the local transportation organization to obtain less than its required operating assistance local matching funds in any fiscal year and the municipality does not offset the shortfall to bring the local match to the minimum required for State operating assistance funding, the following apply:

   1. (i) Advertising revenue will no longer be considered an eligible source of local matching funds for the affected local transportation organization in future fiscal years.
   2. (ii) The State operating assistance funding for the fiscal year in which the shortfall occurs will be prorated in accordance with subsection (e)(4).
5. (5) All categories of local transportation organization operating revenue, including passenger fares; public or private payments provided in lieu of fares including route guarantees, unless the route guarantee revenue is allowed as local match in accordance with paragraph (9); charter or school bus revenue; advertising revenue, unless the advertising revenue is approved for use as local match in accordance with paragraph (3); and interest income or other miscellaneous sources of revenue do not constitute eligible sources of local matching funds.
6. (6) Local bonds issued by local transportation organizations and guaranteed in whole or in part by State funding sources, including interest arbitrage instruments, do not constitute eligible sources of local matching funds for State grants.
7. (7) Income generated from the subsidized public passenger transportation service is not eligible to be used as a source of local matching funds.

8. (8) For a local transportation organization using funds provided by a private third-party contractor as a source of local matching funds prior to the enactment of the act, the following apply with regard to operating assistance:

   1. (i) Local matching funds equal to the local matching funds provided by third-party contractors in State Fiscal Year 2009-10 may continue to come from private third-party contractor sources provided the following requirements are met. The private third-party contractor source of local matching funds must:

      1. (A) Segregate finances for all business entities.
      2. (B) Maintain separate accounting records for each business entity.
      3. (C) Submit an independently prepared audit for each business entity. The audit must clearly identify revenue sources used for local matching funds.
   2. (ii) Local matching funds in excess of the local matching funds provided in State Fiscal Year 2009-10 must be provided in accordance with paragraph (2). Funding from private third-party contractor sources is not eligible for this portion of the local matching funds.
   3. (iii) If the amount of local matching funds provided by the private third-party contractor is ever decreased to an amount less than the local matching funds provided in State Fiscal Year 2009-10, the lower amount will become the maximum amount of local matching funds which can be provided by the private third-party contractor. All local matching funds in excess of the lower amount must be provided in accordance with paragraph (2). Private third-party contractor sources are not eligible for this portion of the local matching funds.

9. (9) For a local transportation organization using route guarantee funds as a source of local matching funds prior to the enactment of the act, the following apply for operating assistance funding:

   1. (i) Local matching funds equal to the local matching funds provided by route guarantee funds in State Fiscal Year 2009-10 may continue to come from route guarantee funds.
   2. (ii) Local matching funds in excess of the local matching funds provided in State Fiscal Year 2009-10 must be provided in accordance with paragraph (2). Route guarantee funds are not eligible for this portion of the local matching funds.
   3. (iii) If the amount of local matching funds provided through route guarantee funds is ever decreased to an amount less than the local matching funds provided in State Fiscal Year 2009-10, the lower amount will become the maximum amount of local matching funds which can be provided through route guarantee funds. Local matching funds in excess of the lower amount must be provided in accordance with paragraph (2). Route guarantee funds are not eligible for this portion of the local matching funds.

10. (10) Private sources other than funding from private third-party contractors and route guarantees may be eligible as local match provided that a local transportation organization has:

    1. (i) Requested in writing Department approval of the source and amount of the local match from private sources.
    2. (ii) Provided a written contract between the private source and the local transportation organization prior to submitting an application for State funding.

11. (11) Local transportation organizations may use uncommitted local match reserves for operating assistance if the following apply:

    1. (i) The total local match reserve amount is identified in the most recent audit report and can be traced through transaction detail to the source of the local match.
    2. (ii) The board of the local transportation organization passes a resolution which certifies that the local match reserve to be used for operating assistance is not committed to another project.
    3. (iii) The local transportation organization provides to the municipalities responsible for providing the local match written notification of the amount of local match reserve that will be used in a fiscal year to offset shortfalls in local match payments.

(b) Documentation of availability and schedule for payment of local matching funds.

1. (1) For a private transportation provider, the private transportation provider shall submit to the Department a certification, signed by the company’s chief operating officer, assuring that the amount of required eligible local matching funds will be provided by the end of the State fiscal year for which a grant is made.

2. (2) For local transportation organizations:

   1. (i) Each local transportation organization shall submit a resolution, approved by its governing body, certifying that the required amount of eligible local matching funds will be secured no later than the end of the State fiscal year for which a grant is made. The local transportation organization shall submit the resolution to the Department as part of its State grant application.
   2. (ii) A local municipality responsible for providing the required local matching funds shall submit to the local transportation provider an approved/adopted resolution or budget transmitted by letter signed by the municipality’s chief executive officer certifying the amount that it shall provide the local transportation organization no later than the end of the State fiscal year. The local transportation organization shall submit all resolutions or budgets with the transmittal letter signed by the municipality’s chief executive officer to the Department as part of its State grant application.

3. (3) For a local transportation organization receiving local matching funds through a private third-party contractor source, the private source of local matching funds shall provide the following:

   1. (i) Documentation of the amount of local matching funds to be provided.
   2. (ii) Documentation of segregation of finances and accounting records.
   3. (iii) Documentation of agreement to provide an audit for every business.
4. (4) The audit referred to in paragraph (3)(iii) must include the supplemental audit schedules required by the Department.
5. (5) If the availability of required local matching funds is not certified, the Department may not execute a grant agreement.
6. (6) If less than the full amount of local matching funds is certified, the Department will prorate the State grant amount on a proportional basis to the local amount that is certified.

(c) Required recordkeeping.

1. (1) For both local transportation organizations and private transportation companies, the local funding provided to meet local matching funds requirements must be deposited and retained in a separate interest bearing account until used for eligible public transportation program expenses.
2. (2) Interest earned on these funds must only be used for public transportation purposes.
3. (3) Interest earned and expended shall be reported in the annual audit report on the supplemental audit schedules required by the Department.

(e) Insufficient local matching funds.

1. (1) If the required minimum local matching funds are not provided by the end of the project period, the following fiscal year’s allocation will be reduced to reflect a proration of the prior year’s grant based on the amount of local funds provided and the established local matching funds percentage.
2. (2) If the amount of local matching funds in arrears from the previous fiscal year is provided within a grace period of 90 days after the beginning of the fiscal year, the full State allocation will be restored.
3. (3) A grant recipient is eligible for a grace period for receipt of local matching funds no more frequently than once every 3 years.

4. (4) Prorates shall be calculated as follows:

   1. (i) Calculate the State funding supplied for every dollar of local matching funds.
   2. (ii) Multiply the local matching funds shortfall times the State funding supplied for every dollar of local matching funds.
   3. (iii) Reduce funding in the subsequent fiscal year equal to the result of the calculation in subparagraph (ii).