1. (a) Purpose. The Federal Transit Act of 1964, Section 18 as amended (49 United States Code §5311, authorizes the Secretary of the United States Department of Transportation to make grants for public transportation projects in nonurbanized areas. The department has been designated by the governor to administer the Section 18 program.

2. (b) Goal and objectives. The Department's goal in administering the Section 18 program is to promote the availability of professional, cost-effective, efficient, and coordinated passenger transportation services to the general public in nonurbanized areas using the most efficient combination of financial and other resources. To achieve this goal, the objectives of the department are to:

   1. (1) promote the development and maintenance of a network of general public transportation services in nonurbanized areas throughout the state, in partnership with local officials;
   2. (2) fully integrate the Section 18 program with other federal, state, and local resources that are designed to serve nonurbanized populations;
   3. (3) improve the efficiency, effectiveness, and safety of Section 18 systems through the provision of technical assistance and the establishment of performance goals and management objectives; and
   4. (4) include private sector operators in the overall plan to provide public transportation services.

3. (c) Department role. The department acts as the designated recipient for all Section 18 funds appropriated to the state and has an oversight responsibility for all nonurbanized transit services within the state. The department, however, recognizes the contractors as partners who shall retain control of daily operations. As the administering agency, the department will:

   1. (1) develop application materials and disseminate information to prospective applicants and other interested parties;
   2. (2) allocate the available program funds in a fair and equitable manner as described in subsection (g) of this section (the department will not provide Section 18 funds to more than one transit system in a geographical area);
   3. (3) develop evaluation criteria and select projects for funding;
   4. (4) prepare the state's annual program of projects and funding application and submit that material to the Federal Transit Administration for approval;
   5. (5) negotiate and execute contracts with local Section 18 recipients;
   6. (6) prepare requests for federal reimbursement, and process payment requests from Section 18 recipients;
   7. (7) monitor and evaluate the progress of ongoing transportation operations, including compliance with federal regulations; and
   8. (8) provide technical assistance to Section 18 recipients to aid them in improving transit services.
4. (d) Eligible recipients. State agencies, local public bodies, private nonprofit organizations, Indian tribes and groups, and operators of public transportation services are eligible to receive Section 18 funds through the department. Private for-profit operators of public transportation services may participate in the program through contracts with eligible recipients. An entity must be a rural transit district as defined in §31.3 of this title (relating to Definitions) to receive Section 18 funds.

5. (e) Eligible assistance categories. The following categories of expenses are eligible for federal reimbursement under the Section 18 program.

   1. (1) State administrative expenses. The department will use up to 15% of the annual federal apportionment to defray its expenses incurred for the administration of Section 18 program. Such funds may also be used to provide technical assistance to contractors. Technical assistance may include project planning, program development, management development, coordination of public transportation projects, and related research. Projects are solicited from contractors and other interested parties. State administrative and technical assistance expenses do not require a non-federal match.

   2. (2) Capital expenses.

      1. (A) Eligible items include, but are not limited to:

         1. (i) buses;
         2. (ii) vans or other paratransit vehicles;
         3. (iii) radios and communications equipment;
         4. (iv) passenger shelters, bus stop signs, and similar passenger amenities;
         5. (v) wheelchair lifts and restraints;
         6. (vi) vehicle rehabilitation;
         7. (vii) operational support such as computer hardware/software;
         8. (viii) other durable goods such as spare components or parts with a unit cost over $300 and a useful life of more than one year;
         9. (ix) installation costs;
         10. (x) vehicle procurement, testing, inspection, and acceptance costs;
         11. (xi) construction or rehabilitation of transit facilities including design, engineering, and land acquisition;
         12. (xii) facilities to provide access for bicycles to mass transit facilities or equipment for transporting bicycles on mass transit vehicles;
         13. (xiii) the lease of equipment or facilities, provided the local recipient, with the concurrence of the department, determines a lease is more cost effective than the purchase of equipment or facilities after considering management efficiency, availability of equipment, staffing capabilities and guidelines on capital leases as contained in 49 CFR Part 639; and
         14. (xiv) the capital cost of contracting as defined in FTA Circular 7010.1.
      2. (B) Based on funding availability, federal funds may be used to reimburse up to 80% of eligible capital expenditures. The federal share may increase to up to 90% for bicycle facilities projects or for incremental costs related to compliance with the Clean Air Act or the Americans with Disabilities Act of 1990. Eligibility standards for the higher federal share are defined in FTA Circular 9040.1C. The local contractor must provide a 20% or 10% cash match at the time the equipment is delivered or the services are received.
   3. (3) Project administrative expenses. Costs not directly tied, but essential, to the operations of passenger transportation systems may be reimbursed at up to 80% with federal funds. The local contractor must provide a 20% match, either in cash or with in-kind donations.
   4. (4) Operating expenses. Those costs directly tied to systems operations, such as fuel, oil, drivers', mechanics' and dispatchers' salaries, and replacement parts may be reimbursed at 50% of net operating costs. The local contractor must provide a 50% match, either in cash or with in-kind donations.
6. (f) Local share requirements. Federal Transit Administration program funds cannot be used as the local share required for Section 18 grants. Eligible match sources include local or state programs, or unrestricted federal funds. At least half of the local share for both net operating and non-operating expenses must be cash or cash equivalent from sources other than unrestricted federal funds. In-kind contributions, volunteer services, and donations are eligible as local share if the value is documented.

7. (g) Allocation of funds. As part of its administration of the Section 18 program, the department is charged with ensuring that there is a fair and equitable distribution of program funds within the state (FTA Circular 9040.1D, Chapter 1, Section 4). Effective January 1, 1998, the department will allocate Section 18 funds to local contractors in the following manner.

   1. (1) Unless the governor certifies to the Secretary of the United States Department of Transportation that the intercity bus service needs of the state are being adequately met, the department will reserve not less than 5.0% of the fiscal year 1992 Section 18 federal apportionment for the development and support of intercity bus transportation. The percentage to be reserved for intercity bus transportation will rise to 10% in fiscal year 1993 and 15% in fiscal year 1994 and beyond unless the governor certifies that such expenditures are not necessary. If it is determined that all or a portion of the set-aside monies are not required for intercity bus service, those funds shall be applied to the formula apportionment process described in paragraph (3) of this subsection. Procedures for determining if a certification of adequacy is warranted are as follows.

      1. (A) The department will review all data on intercity bus service availability, including outstanding requests from intercity operators, and levels of service.
      2. (B) The department will consult with other state agencies that have jurisdiction with respect to intercity bus regulation and seek their recommendations as to the adequacy of current service.
      3. (C) Based on the findings of subparagraphs (A) and (B) of this paragraph, the commission will recommend that the governor certify to the adequacy of intercity bus service.

   2. (2) An amount not to exceed 10% of the balance of the annual Section 18 federal apportionment, after the set-aside for intercity bus service described in paragraph (1) of this subsection and department administrative expenses are deducted, and 10% of the remaining balance of previous Section 18 federal apportionments shall be reserved for the expansion of nonurbanized public transportation services or other strategic program priorities established by the commission. If the commission determines that state program needs and priorities would be better served by awarding these funds to existing nonurbanized systems for ongoing public transportation services as provided in paragraph (3) of this subsection, then all or a portion of the funds made available under this paragraph, as determined by the commission, shall be distributed in accordance with the provisions of paragraph (3) of this subsection.

      1. (A) No later than January 15 of each year, all applicants requesting funding for service expansions shall file a notice of their intentions to expand services. All service expansions shall be initiated on September 1 following the filing of the notice of intent unless otherwise authorized by the department. The amounts to be awarded for each service expansion shall be determined by the commission. After receiving an award under this subparagraph, service expansions, with the exception of capital awards, shall become subject to the funding allocation process described in paragraph (3) of this subsection in succeeding fiscal years.

      2. (B) The commission may also elect to use all or a portion of the funds made available under this paragraph to address strategic priorities for the nonurbanized public transportation program. The amounts to be awarded for each strategic priority shall be determined by the commission and awards made under this subparagraph are not subject to the funding allocation process described in paragraph (3) in succeeding fiscal years. For the purposes of this subparagraph, strategic program priorities are defined as projects which the commission has determined will:

         1. (i) stabilize funding levels;
         2. (ii) increase transit operating efficiency or effectiveness as demonstrated by significant cost savings or substantial enhancements to service delivery; or
         3. (iii) advance the level of coordination among transportation service providers, and among transportation service providers and health and human services agencies.

   3. (3) Except as provided in paragraphs (1) and (2) of this subsection, the balance of the annual Section 18 federal apportionment, plus the remaining balance of previous Section 18 federal apportionments, and any state funds appropriated specifically for the purpose of funding nonurbanized public transportation services will be allocated to existing RPT contractors as described in this paragraph. No later than June 1 of each calendar year, the department will announce the allocations for the fiscal year beginning on September 1 of the same year.

      1. (A) Subject to the following limitations and adjustments, each RPT contractor shall receive the same percentage of funds as were awarded to that contractor by the commission for fiscal year 1994.

         1. (i) The percentage awards to each RPT contractor will be adjusted annually to include any projects funded under paragraph (2) of this subsection during the previous fiscal year.
         2. (ii) If a portion of an RPT contractor's service area is declared an urbanized area by the United States Census Bureau or the service area is otherwise reduced, the department and that contractor shall negotiate an appropriate adjustment in the award of nonurbanized public transportation funding to that contractor.
         3. (iii) If a previously designated urbanized area is declared nonurbanized by the United States Census Bureau, a public transportation contractor serving that area shall apply for funds in accordance with paragraph (2) of this subsection.
      2. (B) Prior to receiving funds a contractor must complete and comply with all application requirements, rules and regulations applicable to the Section 18 program, and must negotiate a contract with the department pursuant to paragraph (4) of this subsection.

   4. (4) A contract for the allocation of funds pursuant to paragraph (3) of this subsection shall have an effective date of September 1, shall be for a 12-month period unless otherwise authorized by the department, and shall provide for performance goals and management objectives for the RPT contractor that are acceptable to the commission.

      1. (A) Performance goals for each fiscal year shall at a minimum include at least one measure deemed appropriate by that RPT contractor and the department after consultation with the affected RPT contractor from each of the categories listed in clauses (i)-(iii) of this subparagraph and may include at least one measure as provided in clause (iv) of this subparagraph.

         1. (i) Cost efficiency. Examples include, but are not limited to, specific performance targets related to revenue recovery ratio, cost per vehicle mile, or cost per service hour.
         2. (ii) Cost effectiveness. Examples include, but are not limited to, specific performance targets related to cost per passenger trip or cost per passenger mile.
         3. (iii) Service utilization. Examples include, but are not limited to, specific performance targets related to passenger trips per capita, passenger trips per mile, or passenger trips per hour.
         4. (iv) Other measures. The department and the RPT contractor may also adopt other performance goals that are deemed appropriate by the department and that RPT contractor to address particular operational issues. For example, if an RPT contractor has experienced a number of vehicular accidents during the preceding year, the department and that RPT contractor might agree to institution of a safety program with the goal of reducing the number of accidents by a specified percentage.

      2. (B) Management objectives for each fiscal year shall at a minimum include at least one measure deemed appropriate by that RPT contractor and the department after consultation with the affected RPT contractor from each of the following categories.

         1. (i) Training. Examples include, but are not limited to, a target for hours of training to be provided to drivers, renewal of first aid and related certifications for all drivers and management employees, or completion of a total quality management course by a specified number of supervisory staff members.
         2. (ii) Marketing and public involvement. Examples include, but are not limited to, the expenditure of a specified budget percentage or amount on marketing activities, the completion of a specified number of public meetings to obtain comments on system operations, or the administration of a passenger survey on quality of service.
         3. (iii) Disadvantaged business enterprise participation. Examples include, but are not limited to, achievement of a specified percentage increase in the use of disadvantaged business enterprises, or recruitment and certification of a specified number of disadvantaged business enterprises.
         4. (iv) General management activities. Examples include, but are not limited to, the automation of all financial and personnel records, preparation of a business plan to foster private sector partnerships, or completion of a staffing plan that identifies funding resources for anticipated personnel increases.

      3. (C) A contractor's performance goals and management objectives will serve as a basis for the department's annual review of the contractor's efficiency and effectiveness in providing public transportation services. If the contractor fails to meet those goals or objectives, and fails to demonstrate a good faith effort for their accomplishment, the commission may rule the contractor ineligible to receive nonurbanized public transportation funding. However, the department will make all possible efforts to ensure continuity of service in that area to accommodate the needs of public transportation riders.

         1. (i) The department will notify the contractor of any deficiencies noted in the annual review, and will allow the contractor a minimum grace period of one calendar year from the date of notification to correct those deficiencies. During the grace period, the department will make every reasonable effort to provide appropriate technical assistance to the RPT contractor.
         2. (ii) If at the end of the grace period the deficiencies have not been corrected, the commission may by written order authorize the department to terminate funding to the RPT contractor. The RPT contractor may request a public hearing before the commission to present input on why termination is not warranted in accordance with the provisions of §1.5 of this title (relating to Public Hearing).
8. (h) Application requirements. A prospective applicant must submit an application for Section 18 grant funds to the appropriate department district office, on the forms and at the time specified by the department. The application shall document the need and demand for general public passenger transportation services.
9. (i) Program of projects. All existing projects and proposed expansion projects for the following fiscal year will be identified in accordance with the allocation rules included in subsection (g) of this section no later than February of each year. Upon commission approval of the allocation, these projects will be submitted to the Federal Transit Administration as the annual program of projects for the fiscal year beginning the following September 1.
10. (j) Intercity bus. If the governor does not certify to the adequacy of intercity bus transportation within the state, funds will be made available in accordance with subsection (g)(1) of this section. An annual request for proposals will be issued for projects complying with Federal Transit Administration definitions of intercity bus transportation.

Source Note:The provisions of this §31.36 adopted to be effective September 21, 1989, 14 TexReg 4601; amended to be effective July 20, 1992, 17 TexReg 4891; amended to be effective September 23, 1993, 18 TexReg 6109; amended to be effective January 13, 1994, 19 TexReg 90; amended to be effective August 11, 1994, 19 TexReg 5876; amended to be effective March 22, 1996, 21 TexReg 2096; amended to be effective December 11, 1997, 22 TexReg 12092.