1. (a) Purpose. The Federal Transit Act, codified at 49 USC §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 5311 program.

2. (b) Goal and objectives. The Department's goal in administering the Section 5311 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 5311 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 5311 systems through the provision of technical assistance; 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 5311 funds appropriated to the state and has an oversight responsibility for all nonurbanized transit services within the state. The department, however, recognizes the subrecipients 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 5311 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 FTA for approval;
   5. (5) negotiate and execute contracts with local Section 5311 subrecipients;
   6. (6) prepare requests for federal reimbursement, and process payment requests from Section 5311 subrecipients;
   7. (7) monitor and evaluate the progress of ongoing transportation operations, including compliance with federal regulations; and
   8. (8) provide technical assistance to Section 5311 subrecipients to aid them in improving transit services.
4. (d) Eligible subrecipients. State agencies, local public bodies, private nonprofit organizations, Native American tribes and organizations, and operators of public transportation services are eligible to receive Section 5311 funds through the department. Private for-profit operators of public transportation services may participate in the program through contracts with eligible subrecipients. An entity must be a rural transit district to receive Section 5311 funds. Private for-profit operators of public transportation services and entities that are not rural transit districts are eligible to receive Section 5311 funds through the department under the intercity bus program, as set forth in subsections (g)(1) and (j) of this section.

5. (e) Eligible assistance categories. The following categories of expenses are eligible for federal reimbursement under the Section 5311 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 5311 program. These funds may also be used to provide technical assistance to subrecipients. Technical assistance may include project planning, program development, management development, coordination of public transportation projects, and related research. Projects are solicited from subrecipients 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, remanufacture, or overhaul;
         7. (vii) preventive maintenance, including all maintenance costs;
         8. (viii) extended warranties that do not exceed the industry standard;
         9. (ix) the mass transit portion of ferry boats and terminals;
         10. (x) operational support such as computer hardware or software;
         11. (xi) installation costs and vehicle procurement, testing, inspection, and acceptance costs;
         12. (xii) construction or rehabilitation of transit facilities, including design, engineering, and land acquisition;
         13. (xiii) facilities to provide access for bicycles to mass transit facilities and equipment for transporting bicycles on mass transit vehicles;
         14. (xiv) the lease of equipment or facilities, provided that the local subrecipient, with the concurrence of the department, determines that 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;
         15. (xv) the capital portions of costs for service under contract;
         16. (xvi) joint development projects (FTA Circular 9300.1A, or its latest version, provides guidelines for joint development projects);
         17. (xvii) the introduction of new technology, through innovative and improved products, into mass transportation;
         18. (xviii) transit-related intelligent transportation systems; and
         19. (xix) the provision of ADA paratransit service, which shall not exceed 10% of the state's annual apportionment of Section 5311 funds and shall be used only by subrecipients that are in compliance with ADA requirements for both fixed route and demand responsive service.
      2. (B) The capital cost of contracting includes depreciation, interest on facilities and equipment, and those allowable capital costs that would otherwise be incurred directly, including maintenance. No capital assets (vehicle, equipment, or facility) that have any remaining federal interest in them and no items purchased with state or local government funds may be capitalized under the grant agreement.
      3. (C) 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 with the Americans with Disabilities Act of 1990. Eligibility standards for the higher federal share are defined in FTA Circular 9040.1E, or its latest version. The local subrecipient 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 subrecipient 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 subrecipient must provide a 50% match, either in cash or with in-kind donations.
6. (f) Local share requirements. FTA program funds cannot be used as the local share required for Section 5311 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 5311 program, the department is charged with ensuring that there is a fair and equitable distribution of program funds within the state (FTA Circular 9040.1E, or its latest version). The department will allocate Section 5311 funds to local subrecipients 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 15% of the Section 5311 federal apportionment for the development and support of intercity bus transportation. If it is determined that all or a portion of the set-aside monies is not required for intercity bus service, those funds will 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 may certify or 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 5311 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 5311 federal apportionments will 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, will be distributed in accordance with the provisions of paragraph (3) of this subsection.

      1. (A) Upon notification by the department that funds are available, all applicants requesting funding for service expansions must 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 will be determined by the commission. After an applicant receives an award under this subparagraph, service expansions, with the exception of capital awards, will 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 will 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 that 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 5311 federal apportionment, plus the remaining balance of previous Section 5311 federal apportionments, and any state funds appropriated specifically for the purpose of funding nonurbanized public transportation services will be allocated to existing RPT subrecipients 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 will receive the same percentage of funds as were awarded to that subrecipient by the commission for fiscal year 1994.

         1. (i) The percentage awards to each RPT subrecipient 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 subrecipient'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 subrecipient shall negotiate an appropriate adjustment in the award of nonurbanized public transportation funding to that subrecipient.
         3. (iii) If a previously designated urbanized area is declared nonurbanized by the United States Census Bureau, a public transportation subrecipient serving that area must apply for funds in accordance with paragraph (2) of this subsection.
      2. (B) Prior to receiving funds a subrecipient must complete and comply with all application requirements, rules, and regulations applicable to the Section 5311 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 and shall be for a 12-month period unless otherwise authorized by the department.
8. (h) Application requirements. To receive funds allocated under this section, a designated recipient must submit a completed application, in a form prescribed by the department, to the appropriate district office. The application must 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. Upon commission approval of the allocation, these projects will be submitted to the FTA 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 FTA 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; amended to be effective February 15, 2001, 26 TexReg 1365; amended to be effective April 17, 2003, 28 TexReg 3080.