The Congestion Mitigation and Air Quality Improvement (CMAQ) Program of the Intermodal Surface Transportation Efficiency Act Guidance UpdateMarch 7, 1996

DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

The Congestion Mitigation and Air Quality Improvement (CMAQ)

Program of the Intermodal Surface Transportation Efficiency Act--

Guidance Update--March 7, 1996

AGENCIES: Federal Highway Administration (FHWA) and Federal Transit

Administration (FTA), DOT.

ACTION: Notice of policy guidance.

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SUMMARY: The Federal Highway Administration (FHWA) publishes this

revised guidance with regard to the Congestion Mitigation and Air

Quality Improvement (CMAQ) program. This guidance was previously issued

as a memorandum and is printed in its entirety.

EFFECTIVE DATE: March 7, 1996.

ADDRESSES: USDOT, Federal Highway Administration or Federal Transit

Administration, 400 Seventh Street, SW., Washington, D.C. 20590.

FOR FURTHER INFORMATION CONTACT: at FHWA, Mr. Michael J. Savonis, Team

Leader for Air Quality Policy, (202) 366-2080; at FTA, Mr. Abbe Marner,

Environmental Specialist, (202) 366-0096.

I. Introduction

As established under the Intermodal Surface Transportation

Efficiency Act (ISTEA), the CMAQ Program was designed to substantially

expand the

[[Page 50891]]

focus and purpose of Federal transportation funding assistance to

include air quality improvement as a specific objective. These funds

are to assist areas designated as nonattainment and maintenance under

the Clean Air Act Amendments (CAAA) of 1990 to achieve healthful levels

of air quality by funding transportation projects and programs. Six

billion dollars is authorized under the program, and apportionments

totaling $1 billion are made each year to the States between 1992 and

1997. The first CMAQ apportionment was made in December 1991, and the

last will not lapse until the end of fiscal year (FY) 2000.

The CMAQ program has reached mature spending rates, and States have

obligated these funds at levels comparable to other, more familiar

Federal funding programs, growing to 99 percent in FY 1995. In 1994,

the Federal Highway Administration (FHWA), Federal Transit

Administration (FTA), and Environmental Protection Agency (EPA)

conducted an extensive review of the CMAQ program with the stated

purpose of improving efficiency of program delivery and determining how

to better achieve the program's goals. This revised guidance was

originally issued as a result of that review process in an effort to be

as responsive as possible to the States, local governments, project

sponsors, and other stakeholders in the program. Additional changes

have been made as a result of the National Highway System Designation

Act of 1995 (NHS legislation). Additional copies of this revised

guidance are available from the FHWA Hotline at (202) 366-2069. The

provisions contained herein are effective immediately and supersede all

previous guidance, including all questions and answers and policy

memoranda issued to date.

II. Program Purpose

The original purpose of the CMAQ program was to fund transportation

projects or programs that will contribute to attainment of a national

ambient air quality standard (NAAQS), primarily for ozone and carbon

monoxide (CO). The NHS legislation expands eligibility to areas that

were designated as nonattainment under the CAAA of 1990 but were since

redesignated to attainment status by EPA (referred to as ``maintenance

areas'' (see Section III.B.4)). Nonetheless, the CMAQ Program's primary

purpose is to fund improvement projects that will assist nonattainment

and maintenance areas to reduce transportation emissions rather than

maintain the existing transportation networks.

States with areas which are designated as nonattainment for ozone

or CO must use their CMAQ funds in their nonattainment or maintenance

areas. States with a maintenance area and no nonattainment area should

give the air quality needs of the maintenance areas first priority (see

Section III.B.4). A State may also use its CMAQ funds in any of its

particulate matter (PM-10) nonattainment or maintenance areas, if the

requirements below are met. This and all subsequent mention of

nonattainment status contained in this guidance refers to those areas

classified as marginal or worse for ozone, and moderate or worse for CO

or PM-10 under the CAAA of 1990.

Funding under the CMAQ program may not be used in areas that are

designated as nonattainment by operation of law prior to enactment of

the CAAA of 1990. These include but are not limited to the ozone

``transitional,'' ``submarginal,'' and ``incomplete data'' areas and

the CO ``not classified'' areas.

States with ozone or CO nonattainment or maintenance areas, but

wishing to use CMAQ funds in PM-10 nonattainment or maintenance areas,

must meet the following requirements.

1. The State must consult with, and consider the views of, the

metropolitan planning organizations (MPOs) in all nonattainment and

maintenance areas within the State before programming CMAQ funds for a

PM-10 project. The State must obtain the concurrence only of the MPO in

whose jurisdiction the project is to be implemented.

2. Also, the EPA regional office must agree that the proposed use

of CMAQ funds for PM-10 projects or programs will not detract from or

delay efforts to attain the ozone or CO standards.

The CMAQ provisions in ISTEA recognize ozone and CO as the primary

transportation pollutants. The requirements listed above will ensure

proper consideration of the views of the agencies charged with

controlling transportation emissions of ozone precursors, CO, and PM-

10, especially their views on the most effective use of transportation

funds in achieving the NAAQS. The CMAQ eligibility of PM-10 projects

will not affect a State's CMAQ apportionment, but has the potential to

spread the limited CMAQ funds over a greater number of nonattainment

and maintenance areas within the State. Examples of eligible projects

and programs in a PM-10 nonattainment or maintenance area, if the above

requirements are met, are paving dirt roads, diesel bus replacements,

and purchase of more effective street-sweeping equipment.

These requirements apply only to projects and programs whose sole

justification for CMAQ eligibility is the reduction in PM-10 emissions.

In an area which is nonattainment or maintenance for both PM-10 and one

of the other pollutants, projects which reduce emissions of CO or ozone

precursors in addition to reducing PM-10 emissions are not subject to

these additional requirements.

Congress did not intend CMAQ funding to be the only source of funds

to reduce congestion and improve air quality. Other funds under the

Surface Transportation Program (STP) or FTA's capital assistance

programs, for example, may be used for this purpose as well.

Furthermore, the greatest air quality benefit will accrue not solely

from Federal funds but from a partnership of Federal, State and local

efforts.

III. Project Eligibility

In general, all projects and programs eligible for CMAQ funds must

come from a conforming transportation plan and transportation

improvement program (TIP), and be consistent with the conformity

provisions contained in Section 176(c) of the Clean Air Act. Projects

also need to complete the National Environmental Policy Act (NEPA)

requirements and be included in the appropriate statewide program, and

meet basic eligibility requirements for funding under titles 23 and 49

of the United States Code.

Transportation projects and programs are eligible for CMAQ program

funds only if they meet certain criteria spelled out in the ISTEA as

amended. In determining project eligibility under these criteria,

priority should be given to implementing those projects and programs

that are included in an approved State implementation plan (SIP) as a

transportation control measure (TCM) and will have air quality

benefits. The activity must be eligible under the law and this

guidance, even if it is included as a TCM in a SIP, before CMAQ funds

may be used for it. Any reference to improving air quality contained in

this guidance means reducing ozone precursors in ozone areas, CO

emissions in CO areas or, if applicable, transportation-related PM-10

pollution in PM-10 areas, whether these areas are designated as

nonattainment or maintenance.

In cases where specific guidance is not provided, either below or

in other communications, the following should guide CMAQ eligibility

decisions.

[[Page 50892]]

Capital Investment: Federal contributions to air quality

improvements under the CMAQ program should be used for establishment of

new or expanded transportation projects and programs to reduce

emissions. In most cases this is likely to be capital investment in

transportation infrastructure or establishment of a new demand

management strategy or other program.

Operating Assistance: There are several general conditions which

must be met in order for any type of operating assistance to be

eligible under the CMAQ program. These apply equally to traffic flow

improvements, transit, ridesharing, bicycle and pedestrian programs,

inspection and maintenance (I/M) programs, travel demand management

(TDM) measures and any other project funded under the CMAQ program and

not covered elsewhere in this guidance;

1. Operating assistance is limited to new or expanded services.

2. In extending the CMAQ funds to operating assistance, the intent

is to help start up viable new services which have air quality benefits

and eventually will be able to cover their costs to the maximum extent

possible. Other established funding sources should supplement and

ultimately supplant CMAQ operating assistance. Thus, CMAQ funds must be

used in combination with usual fares or user fees (or reasonable fares/

fees in the absence of an established fare/fee).

3. Operating assistance under the CMAQ program is limited to 3

years, except as noted elsewhere in this guidance.

Emission Reductions: The proposal for funding must be expected to

result in tangible reductions in CO and ozone precursor emissions (and

under certain conditions PM-10 pollution). This can be demonstrated by

the assessment of anticipated emission reductions that is required

under this guidance for most projects. The FHWA and FTA strongly

encourage State and local governments to use CMAQ funds for their

primary purpose under the ISTEA: to assist nonattainment and

maintenance areas to reduce transportation-related emissions.

Public Good: Finally, the proposal for funding should be for the

good of the general public. While the transportation service may be

focused on a specific area, CMAQ funds can be used for services which

benefit a specific entity, such as a major employer, only for short

trial periods to test the viability of the program or project. Public-

private partnerships, however, are allowed if a project will benefit

both the public and elements of the private sector (see Section

III.A.13).

A. Previously Eligible Activities

The kinds of activities that have been, and continue to be,

eligible for CMAQ funds are described below, together with any

restrictions. All possible requests for funding are not covered;

instead this section provides particular cases where guidance can be

given and rules of thumb applied to assist decisions regarding CMAQ

eligibility.

1. Transportation Activities in an Approved SIP or Maintenance

Plan: Transportation activities in approved SIPs and maintenance plans

are likely to be eligible activities and, if so, must be given the

highest priority for CMAQ funding. Their air quality benefits will

generally have already been documented. If not, such documentation is

necessary before CMAQ funding can be approved. Further, the

transportation activity must contribute to the specific emission

reductions necessary to bring the area into attainment.

2. Transportation Control Measures: The TCMs included in Section

108(f)(1)(A) of the CAAA of 1990 are the kinds of projects intended by

the ISTEA for CMAQ funding, and generally satisfy the eligibility

criteria. As above, and consistent with the statute, air quality

benefits for TCMs must be determined and documented before a project

can be considered eligible. Two of the CAAA TCMs, however, are

specifically excluded from the CMAQ program by the ISTEA legislation.

They are: xii--reducing emissions from extreme cold-start conditions,

and xvi--programs to encourage removal of pre-1980 vehicles. Eligible

TCMs are listed below as they appear in Section 108.

(i) programs for improved public transit;

(ii) restriction of certain roads or lanes to, or construction of

such roads or lanes for use by, passenger buses or high-occupancy

vehicles (HOV);

(iii) employer-based transportation management plans, including

incentives;

(iv) trip-reduction ordinances;

(v) traffic flow improvement programs that achieve emission

reductions;

(vi) fringe and transportation corridor parking facilities serving

multiple-occupancy vehicle programs or transit service;

(vii) programs to limit or restrict vehicle use in downtown areas

or other areas of emission concentration particularly during periods of

peak use;

(viii) programs for the provision of all forms of high-occupancy,

shared-ride services;

(ix) programs to limit portions of road surfaces or certain

sections of the metropolitan area to the use of non-motorized vehicles

or pedestrian use, both as to time and place;

(x) programs for secure bicycle storage facilities and other

facilities, including bicycle lanes, for the convenience and protection

of bicyclists, in both public and private areas;

(xi) programs to control extended idling of vehicles;

(xii) EXCLUDED BY ISTEA;

(xiii) employer-sponsored programs to permit flexible work

schedules;

(xiv) programs and ordinances to facilitate non-automobile travel,

provision and utilization of mass transit, and to generally reduce the

need for single-occupant vehicle travel, as part of transportation

planning and development efforts of a locality, including programs and

ordinances applicable to new shopping centers, special events, and

other centers of vehicle activity;

(xv) programs for new construction and major reconstructions of

paths, tracks or areas solely for the use by pedestrian or other non-

motorized means of transportation when economically feasible and in the

public interest. For purposes of this clause, the Administrator shall

also consult with the Secretary of the Interior.

(xvi) EXCLUDED BY ISTEA.

3. Bicycle and Pedestrian Facilities and Programs: Bicycle and

pedestrian facilities and programs are included as a TCM in Section 108

of the CAAA (ix, x, xiv, and xv above). In addition, the ISTEA makes

specific mention of the eligibility of bicycle and pedestrian

facilities and programs under CMAQ (see 23 U.S.C. 217 (a)(d)). Included

as eligible projects are:

a. construction of bicycle and pedestrian facilities,

b. nonconstruction projects related to safe bicycle use, and

c. establishment and funding of State bicycle/pedestrian

coordinator positions, as established in the ISTEA, for promoting and

facilitating the increased use of non-motorized modes of

transportation. This includes public education, promotional, and safety

programs for using such facilities.

4. Management and Monitoring Systems: The ISTEA required that 6

management systems be developed, established, and implemented by the

States (see 23 U.S.C. 303(a)). The NHS legislation now makes these

management systems optional. However, 23 U.S.C. 134(i)(3) still

requires that the metropolitan planning process in all Transportation

Management Areas (metropolitan areas

[[Page 50893]]

of 200,000 or more in population) include a congestion management

system. In addition, States are required to develop and implement a

traffic monitoring system for highways and public transportation

facilities and equipment (see 23 U.S.C. 303(b)).

Projects to develop, establish, and implement these management

systems and the traffic monitoring system, whether under the provisions

of 23 U.S.C. 303 or under a State's own procedures, remain eligible for

CMAQ funds where it can be demonstrated that such use is likely to

reduce transportation related emissions.

5. Traffic Management/Congestion Relief Strategies: Traffic

management and congestion relief strategies in both the highway and

transit fields are eligible for CMAQ funding as CAAA Section 108(f)

TCMs provided that they can be shown to improve air quality. In

addition to traffic signal modernization projects designed to improve

traffic flow within a corridor or throughout an area like an urban

central business district, intelligent transportation infrastructure

(ITI) traffic management and traveler information systems can be

effective in reducing traffic congestion, enhancing transit bus

performance and improving air quality. A program of nine components has

been identified as a framework for integrating and deploying ITI in

metropolitan areas of all sizes. The following seven components of the

ITI have the greatest potential for improving air quality:

a. regional multimodal traveler information center

b. traffic signal control systems

c. freeway management systems

d. transit management systems

e. incident management programs

f. electronic fare payment systems

g. electronic toll collection systems.

While interconnected traffic signal control systems and freeway

management systems have been recognized for their air quality

improvement benefits, other user services like electronic fare and toll

collection systems can be useful in reducing or eliminating air quality

``hot spots''. Individually, these core infrastructure elements can

reduce emissions and therefore qualify for CMAQ funding. However, when

linked together in a system, their benefits are likely to be greater.

In recognition of the air quality benefits to be derived from the

efficient and effective operation and maintenance of advance

transportation management and traveler information systems, operating

expenses are eligible for CMAQ funding, where:

a. they can be shown to have air quality benefits;

b. the expenses are incurred from new or additional services; and

c. previous funding mechanisms, such as fees for services, are not

displaced.

The ISTEA requires that CMAQ funded projects contribute to the

attainment of a national ambient air quality standard. Therefore, it

must be found that these operating costs are necessary for the overall

system to contribute to attainment of an ambient air quality standard.

The FHWA/FTA, after consultation with EPA, is empowered to make this

finding on a case by case basis. Furthermore, it is reasonable to

assume that, after several years, a transportation service may no

longer be considered to be an air quality improvement project, but that

it has become a part of the existing transportation network. Hence,

FHWA and FTA field offices are advised to use the consultation process

with EPA to make a determination that operating assistance for traffic

management and control will assist in the attainment of an air quality

standard, particularly for proposals to extend this assistance beyond

an initial 3-year period of eligibility.

6. Transit Projects: Improved public transit is one of the TCMs

identified in Section 108 of the CAA. A wide range of capital

improvements are eligible for CMAQ funding as described below. In

general, CMAQ eligibility is determined on the basis of whether or not

the project represents an expansion or enhancement of transit service.

If the capital project is clearly a system/service expansion, it is

eligible. If it is a reconstruction or rehabilitation of an existing

facility, it is not eligible and the project sponsor should pursue

other funding sources, such as the Section 9 formula grant program or

the Surface Transportation Program. There will be ``gray'' areas; for

example, a major reconstruction of an old, underutilized railroad

terminal might be done in conjunction with new park-and-ride facilities

and a restructuring of bus routes to enhance transit service. In such

cases, the eligibility determination by FTA will focus on whether it is

reasonable to expect a significant gain in ridership due to the

project.

Transit facilities--Eligible capital projects include such

facilities as new stations, terminals, transit centers, transit malls,

intermodal transfer facilities, and preferential treatment for buses/

HOVs on existing roads. Consistent with previous policy, park-and-ride

facilities located adjacent to a transit stop are eligible, although in

a CO or PM-10 nonattainment or maintenance area, air quality analysis

may be required to demonstrate that no localized ``hot-spot''

violations will occur. Major new fixed-guideway and bus/HOV facilities

and extensions to existing facilities are also eligible.

Transit vehicles and equipment--New buses, vans, locomotives and

rail cars to expand the fleet and augment service are eligible. One-

for-one vehicle replacements of the existing bus, rail or van fleet are

eligible, although the caveat in previous guidance still applies: that

is, CMAQ funding for bus replacements in PM-10 nonattainment and

maintenance areas is clearly justified, whereas bus replacements in CO

and ozone nonattainment and maintenance areas will provide much smaller

air quality benefits with respect to the pollutants of concern.

Purchase of new buses, as well as refueling infrastructure, dedicated

to alternative fuels is eligible notwithstanding the conditions in

Section III.A.9. Automobiles used solely by the transit agency are not

eligible.

Determining the eligibility of transit-related equipment will be

handled on a case-by-case basis. Major system-wide upgrades, such as

advanced signal and communications systems which improve speed and/or

reliability of transit service will likely be eligible, whereas in-kind

replacements will not be. Again, the guideline is whether or not the

equipment can reasonably be expected to enhance service and generate

additional ridership.

Transit-associated development--This includes various types of

retail and other services located in or very close to transit

facilities. They offer convenience for the transit patron but are not

required for the functioning of the system. In general, transit-

associated development is not eligible under the CMAQ Program. Child-

care centers located adjacent to a major transit stop have been

proposed in the past as beneficial to air quality. This type of use

could now be funded as an experimental pilot project.

Transit operations--Operating assistance under the CMAQ Program is

limited to the introduction of new transit services. Examples are:

shuttle service feeding a station; circulator service within an

activity center; or fixed-route service linking activity centers. Minor

adjustments in existing routes and service schedules do not constitute

new service. The intent is to support demonstrations of new transit or

paratransit service to try to tap new markets and increase transit use.

Service demonstrations will usually involve buses or vans since the

service should be relatively low-cost and easily

[[Page 50894]]

terminated if sufficient ridership is not achieved. The 3-year period

of funding assistance should be long enough to assess whether the

service is worth continuing with other established sources of funding.

While there is no requirement that the new service be implemented in

conjunction with TDM measures, project sponsors are encouraged to do

this.

Operating assistance under the CMAQ program can also be used for

the start-up of new major infrastructure projects, such as new rail

lines or bus/HOV facilities and extensions to existing systems.

However, CMAQ funds cannot replace previously committed funding from

other sources to support operations, e.g., local financing plans for

operations contained in Federal full-funding grant agreements for major

investment projects. Under the CMAQ program, operating assistance for

new transit services will be funded at an 80 percent Federal share. The

Federal share applies only to the portion of operating costs not

covered by fare revenue or fees for service.

In addition to operating assistance for new transit service, this

guidance also allows partial, short-term subsidies of transit/

paratransit fares as a means of encouraging transit use. This is

subject to the conditions set out in Section III.B.7. Proposals such as

reduced fare programs during periods of elevated ozone levels (so-

called ``ozone alerts'') and discounted transit passes targeted at

specific groups or locations may now be eligible if these conditions

are met.

7. Highway and Transit Maintenance and Reconstruction Projects:

Routine maintenance projects are ineligible for CMAQ funding. Routine

maintenance and rehabilitation on existing facilities maintains the

existing levels of highway and transit service, and therefore maintains

existing ambient air quality levels. Thus, no progress is made toward

achieving the NAAQS. Rehabilitation projects only serve to bring

existing facilities back to acceptable levels of service. Other funding

sources, like the STP and Section 9 formula grant programs, exist for

reconstruction, rehabilitation and maintenance activities. Replacement-

in-kind of track or other equipment, reconstruction of bridges,

stations and other facilities, and repaving or repairing roads are

ineligible.

8. Planning and Project Development Activities: Project planning or

other development activities that lead directly to construction of

facilities or new services and programs with air quality benefits, such

as preliminary engineering or major investment studies for

transportation/air quality projects, are eligible. This includes

studies for the preparation of environmental or NEPA documents and

related transportation/air quality project development activities.

Project development studies would include planning directly related to

a TCM or feasibility/developmental studies for any other eligible

project or program. In the event that air quality monitoring is

necessary to determine the air quality impacts of a proposed project,

which is eligible for CMAQ funding, the costs of that monitoring are

also eligible.

General planning activities, such as economic or demographic

studies, that do not directly propose or support a transportation/air

quality project are too far removed from project development to ensure

any emission reductions and are not eligible for funding. Funding for

preparation of NEPA or other environmental documents that are not

related to a transportation project to improve air quality is also

ineligible. Such activities should be funded with other appropriate

title 23 or Federal Transit Act funds.

Region- or area-wide air quality monitoring is not eligible because

such projects do not themselves yield air quality improvements nor do

they lead directly to projects that would yield air quality benefits.

Air quality monitoring is normally a State air quality agency

responsibility which is funded under Section 105 of the Clean Air Act.

If the MPO or State chooses, air quality monitoring could also be

funded as a transportation planning activity and appropriate title 23

funds used. However, it should be noted that regional air quality

monitoring is subject to EPA guidance on siting and quality assurance.

9. Alternative Fuels: In general, the conversion of individual

conventionally-powered vehicles to alternative fuels is not eligible

under the CMAQ Program. However, the conversion or replacement of

centrally-fueled fleets to alternative fuels is eligible provided that

the fleet is publicly owned (or leased)--such as city or State vehicle

fleets--and one of the following conditions is met;

a. The fleet conversion is in response to a specific requirement in

the CAAA, e.g. the clean fuel vehicle program required of ``serious''

and worse ozone nonattainment areas, or

b. The fleet conversion is specifically identified in the SIP as

part of the emissions reduction strategy of a nonattainment area or in

the maintenance plan for purposes of maintaining the air quality

standards.

Satisfying these conditions assures that the alternative fuel

conversion is aimed primarily at air quality improvement and further

requires that these projects be given the highest funding priority.

There is one exception--replacement of a standard size, conventionally-

fueled transit bus with a new, dedicated alternative fuel vehicle is

eligible under the transit provisions of this guidance and does not

have to meet these requirements. Conversions of existing transit buses

to alternative fuels and replacements with new dual fuel vehicles must

be included in the SIP or maintenance plan to be eligible for CMAQ

funding. As with all CMAQ proposals, it must be demonstrated that the

proposed fleet conversion is effective in reducing the specific

pollutant(s) causing the air quality violation.

The establishment of on-site fueling facilities and other

infrastructure needed to fill alternative-fuel vehicles are also

eligible expenses under the above conditions. This means that the

vehicles and facility must be publicly owned (or leased) and that the

use of alternative-fuel vehicles must be either required under the CAAA

or in the SIP or maintenance plan, with one exception. If private

filling stations, that are reasonably accessible and convenient, exist

to fuel the alternative-fuel vehicles, then CMAQ funds may not be used

to fund publicly-owned fueling stations. Such an activity would

interfere with private enterprise, and needlessly use transportation/

air quality funds for services duplicated in the area.

10. Telecommuting: The DOT supports the establishment of

telecommuting programs. Planning, technical and feasibility studies,

training, coordination and promotion are eligible activities under

CMAQ. Physical establishment of telecommuting centers, computer and

office equipment purchases and related activities are not eligible.

Such activities are not typically transportation projects and funding

them would not meet the requirements in the ISTEA.

11. Travel Demand Management: Travel demand management encompasses

a diverse set of activities ranging from traditional carpool and

vanpool programs to more innovative parking management and road pricing

measures. Many of these measures are specifically referenced in the

legislation creating the CMAQ program. Travel demand management

projects meeting the basic eligibility requirements of the Federal

Highway and Transit programs have always been eligible for CMAQ

funding. Eligible activities include: market research and planning in

support of TDM implementation; capital

[[Page 50895]]

expenses required to implement TDM measures; operating assistance to

administer and manage TDM programs for up to 3 years; as well as

marketing and public education efforts to support and bolster TDM

measures (see also Sections III.B.1-3).

Experience to date suggests that new transportation service has the

greatest chance of success if offered along with complementary measures

which discourage single-occupant vehicle use, such as parking

restrictions or differential parking fees. Several provisions in ISTEA

require metropolitan areas to consider TDM measures in the planning

process and this guidance seeks to encourage their development and

implementation.

12. Intermodal Freight: The CMAQ funds have been, and may continue

to be, used for improved intermodal freight facilities where air

quality benefits can be shown. Capital improvements as well as

operating assistance meeting the conditions of this guidance are

eligible. In that many intermodal freight facilities include private

sector businesses, several of the proposals that have been funded have

been under public-private partnerships.

13. Public/Private Initiatives: The CMAQ program may be used to

fund projects or programs that are owned, operated or under the primary

control of the public sector, including public/ private joint ventures.

A State may use CMAQ funds for initiatives that are privately owned

and/or operated, including efforts developed and implemented by

Transportation Management Associations, as long as the activity is one

which: (1) normally is a public sector responsibility (such as facility

development for enhanced I/M programs), (2) private ownership or

operation is shown to be cost-effective, and (3) the State is

responsible for protecting the public interest and public investment

inherent in the use of Federal funds. Activities which are the mandated

responsibility of the private sector under the Clean Air Act, such as

vapor recovery systems at gas stations, are not eligible.

Implementation of employer trip reduction programs is also a private

responsibility, but general program assistance to employers to help

them plan and promote these programs is eligible. Further assistance to

support trip reduction programs in the form of new public

transportation services is also eligible as outlined in Section

III.A.6.

14. Other Eligible Transportation Projects and Programs: Other

transportation projects and programs, even if they are not included

under one of the categories above may also be funded under CMAQ.

Innovative activities based on promising technologies and feasible

approaches to improve air quality will also be considered for funding.

This would include such ventures as new efforts to identify and curtail

the emissions of gross emitters, planning and development of parking

management programs, and preferential treatment for high- occupancy

vehicles. Like all proposals, the State must provide documentation of

air quality benefits, and FTA/FHWA, in consultation with EPA, must be

satisfied that the project or program will help attain a NAAQS.

15. Limitation on Construction of Single-Occupant Vehicle Capacity:

Construction projects which will add new capacity for single-occupant

vehicles are not eligible under this program unless the project

consists of a HOV facility that is only available to single-occupant

vehicles (SOV) at off-peak travel times. For purposes of this program,

construction of added capacity for single-occupant vehicles means the

addition of general purpose through lanes to an existing facility,

which are not HOV lanes, or a highway on new location.

B. Newly Eligible Activities

1. Outreach Activities: Outreach activities, such as public

education on transportation and air quality, advertising of

transportation alternatives to SOV travel, and technical assistance to

employers or other outreach activities for Employee Commute Option

program implementation have been, and continue to be, eligible for CMAQ

funds. The previous policy allowing up to 2 years of CMAQ funding for

these activities has been changed. Now, outreach activities may be

funded under the CMAQ program for an indefinite period.

Outreach activities differ fundamentally from the establishment of

transportation services. They are communication services that are

critical to successful implementation of transportation measures,

especially demand management measures. As such, they reach new

audiences each time they are implemented, and the restriction on the

length of time they may be funded seems contrary to one of the

program's goals of effecting behavioral changes to reduce

transportation emissions. Outreach activities may be employed for a

wide variety of transportation services. They may equally affect new

and existing transit, shared ride, I/M, traffic management and control,

bicycle and pedestrian, and other transportation services.

Marketing programs to increase use of transportation alternatives

to SOV travel and public education campaigns involving the linkage

between transportation and air quality are eligible operating expenses.

Transit ``stores'' selling fare media and dispensing route and schedule

information which occupy leased space are also eligible. These

activities are not subject to the 3-year limit.

Based on information from the 1994 program review, there appears to

be a great need to educate the public on the impacts of their travel

behavior. States and MPOs are encouraged to give due consideration to

outreach activities in the programming of their CMAQ apportionments.

2. Rideshare Programs: Previous guidance restricted eligibility to

the implementation of new or expanded services. Rideshare services

consist of carpool and vanpool programs, and important activities of

these programs are computer matching of individuals seeking to carpool

and employer outreach to establish rideshare programs and meet Clean

Air Act requirements. These are outreach activities even if they are

part of an existing rideshare program and are now eligible for CMAQ

funding under the same rationale as above.

New or expanded rideshare programs, such as new locations for

matching services, upgrades for computer matching software, etc.

continue to be eligible and may be funded for an indefinite period of

time.

Many expenses related to vanpooling are different from the above

activities, and a distinction needs to be drawn from the above policy.

Unlike carpool matching services the implementation of a vanpool

operation entails purchasing vehicles and providing a transportation

service. These activities are not communication services and not

different from other transportation services. Therefore, proposals for

vanpool activities such as these must be for new or expanded service to

be eligible and are subject to the 3-year limitation on operating

costs.

Under the CMAQ program, the purchase price of a publicly-owned

vehicle for a vanpool service does not have to be paid back to the

Federal Government. Requiring payback would place an additional

constraint to wider implementation and usage of rideshare programs.

Nonetheless, CMAQ funds should not be used to develop vanpool services

that would be in direct competition with and impede private sector

initiatives. Consistent with the metropolitan planning regulation of

October 28, 1993 (23 CFR 450.300),

[[Page 50896]]

States and MPOs should consult with the private sector prior to using

CMAQ funds to purchase vans, and if local private firms have definite

plans to provide adequate vanpool service, CMAQ funds should not be

used to supplant that service.

3. Establishing/Contracting with TMAs: Transportation Management

Associations (TMAs) are comprised of private individuals or firms who

organize to address the transportation issues in their immediate

locale. Previous guidance allowed the funding of transportation

projects generated by TMAs if air quality benefits were demonstrated

but did not allow funding for the TMA itself. This guidance now allows

the use of CMAQ funds for the establishment of TMAs. Eligible expenses

for reimbursement are associated start-up costs for up to 3 years. As

with previous guidance, the TMA must still be sponsored by a public

agency, and the State (or other public agency) is still ultimately

responsible for ensuring that funds are appropriately used to meet CMAQ

program objectives.

During the program review, representatives from several States felt

that existing policy prevented them from contracting with TMAs to

provide services and develop projects that have air quality benefits.

The TMAs can play a useful role in brokering transportation services to

private employers, and this guidance clarifies that CMAQ funds may be

used to contract with TMAs for this purpose, including coordinating

rideshare programs, providing shuttle services, developing parking

management programs, etc. Sufficient care must be taken to specify the

goals and deliverables before granting the use of CMAQ funds for this

activity.

4. Maintenance Areas: Under the NHS legislation, CMAQ funds may now

be obligated for projects in maintenance areas, thereby lifting the 2-

year limitation contained in the previous program guidance of July 13,

1995. CMAQ funds may be used to reduce transportation-related emissions

in maintenance areas as well as nonattainment areas within a State with

no time limit. CMAQ funds cannot be used for projects in areas

designated as ``transitional,'' ``submarginal,'' or ``incomplete data''

nonattainment areas for ozone or in ``not classified'' nonattainment

areas for carbon monoxide.

If a State has a maintenance area and no nonattainment areas, the

air quality needs of the maintenance area should be given first

priority. Since the existence of maintenance areas was taken into

account when the NHS legislation froze the distribution factors at FY

1994 levels, it is clear that the intent of the change was to continue

to provide funding for projects which reduce transportation emissions.

Before using CMAQ funds elsewhere, a State must show that the

maintenance area status is not endangered by the shift of funds. This

can be done by demonstrating to FHWA, FTA, and EPA that the decision

was made in consultation with the affected MPO along with an

examination of the maintenance plan for CMAQ needs. A State could make

a case for ``continued maintenance of the standard,'' for example, if

it can be shown that any transportation activities contained in the

maintenance plan have sufficient funding commitments to carry out such

activities without the use of CMAQ funds.

5. Expansion of I/M Eligibility: Emission I/M programs show strong

potential for improving air quality and related activities are cost-

effective uses of CMAQ funds. Recognizing this, FHWA/FTA's previous

policy indicated that construction of facilities and purchase of

equipment for I/M stations in test-only networks were eligible.

Projects necessary for the development of these I/M programs and one-

time start-up activities, such as updating quality assurance software

or developing a mechanic training curriculum, were also described as

eligible activities. Operating expenses were also determined to be

eligible for CMAQ funding subject to the general conditions applying to

all new transportation services. Specifically, the I/M program must

constitute new or additional efforts; existing funding (including

inspection fees) should not be displaced, and operating expenses were

only eligible for 2, now expanded to 3 years.

When implemented, the policy to allow expenditures for the

establishment of I/M programs was in line with EPA's rationale that

test-only I/M programs are the most effective way to realize emission

reductions. Hence the policy was restricted to test-only I/M programs.

Since that time, EPA has allowed some I/M programs to go forward that

include elements of test-and-repair, provided that the overall

estimated emission reductions necessary to meet the State's targets are

still met. Thus, the CMAQ policy regarding I/M is now similarly

revised.

Funds under the CMAQ program may be used for the establishment of

I/M programs at publicly-owned I/M facilities. This is true whether the

I/M program is test-only or test-and-repair. Publicly-owned I/M

facilities may be constructed, equipment may be purchased, and the

facility operated for up to 3 years with CMAQ funds, provided that the

conditions covering operations described above are met.

The establishment of I/M programs at privately-owned stations, such

as service stations that conduct emission test-and-repair services, can

only be funded under the CMAQ program under the provisions covering

``public-private partnerships'' contained in this guidance. However, if

the State relies on private stations, State or local administrative

costs for the planning and promotion of the State's I/M program--

whether test-only or test-and- repair, or both--may be funded under the

CMAQ program.

The establishment of ``portable'' I/M programs is also eligible

under the CMAQ program, provided that they are public services,

contribute to emission reductions and do not conflict with statutory I/

M requirements or EPA implementing regulations. These programs must be

included in the area's TIP before they can be funded.

6. Experimental Pilot Projects/Innovative Financing: States and

local areas have long experimented with various types of transportation

services--and different means of employing them--in an effort to better

meet the travel needs of their constituents. These ``experimental''

projects may not meet the precise eligibility criteria for Federal and

State funding programs, but they may show promise in meeting the

intended public purpose of those programs in an innovative way. The

FHWA and FTA have supported this approach in the past and funded some

of these projects as demonstrations to determine what the benefits and

costs actually are.

The CMAQ provisions of ISTEA allow experimentation provided that

the project or program can reasonably be defined as a

``transportation'' project and that emission reductions can reasonably

be expected ``through reductions in vehicle miles traveled, fuel

consumption or through other factors.'' This is in addition to the

broad flexibility allowed under the ISTEA to fund a wide variety of

projects. A more flexible approach makes particular sense given the

magnitude of the air quality problem in the most severe nonattainment

areas in the country and the lack of substantial emission reductions

gained from traditional transportation projects and programs.

This guidance encourages States and MPOs to creatively address

their transportation/air quality problems and to experiment with new

services, imaginative financing arrangements, public/private

partnerships and

[[Page 50897]]

complementary approaches that constitute comprehensive strategies to

reduce emissions through transportation programs. The CMAQ program can

now be used to support a well conceived project even if the proposal

may not otherwise meet the eligibility criteria of this guidance.

Proposals submitted for funding under this provision should show

promise in reducing transportation emissions and should have the

concurrence of FHWA/FTA and State transportation agencies, and the MPO.

The proposal must also be coordinated with EPA and State/local air

quality agencies. A particular example that might be funded under this

approach could be to use CMAQ funds for capital improvements to transit

stations for the establishment of day care centers.

Certain projects may not be funded under the CMAQ program under any

circumstances. Activities which are legislatively prohibited, including

scrappage programs, programs to reduce emissions from extreme cold

start conditions, and highway capacity expansion projects, may not be

funded under the CMAQ program, despite the enhanced flexibility under

this policy. Similarly, rehabilitation and maintenance activities as

described in Section III.A.7 of this guidance show no potential to make

further progress in achieving the air quality standards and may not be

funded under the CMAQ program even under this provision. Program funds

may also not be used for projects which are outside of nonattainment or

maintenance area boundaries (in States with nonattainment and/or

maintenance areas (see also Section III.B.4)) except in cases where the

project is located in close proximity to the nonattainment or

maintenance area and the benefits will be realized primarily within the

nonattainment or maintenance area boundaries. Finally, projects not

meeting the specific eligibility requirements under titles 23 or 49 may

also not be funded under this provision.

There is risk in employing this approach, and States and MPOs

should do so cautiously. While the CMAQ provisions of ISTEA were

written broadly to encourage an innovative approach, the principles of

sound program management must still be followed. Under this approach,

there will likely be proposals for funding with which transportation

agencies have little experience. As such, before-and-after studies are

required to determine the actual project impacts on the transportation

network (measured in VMT or trips reduced, or other appropriate

measure) and on air quality (emissions reduced). An assessment of the

project's benefits should be forwarded to FHWA or FTA documenting the

immediate impacts as well as a projection of what the project's long-

term benefits will be.

All projects funded under this section should be explicitly

identified in the annual report of CMAQ activities as required under

Section V.B of this guidance. In future years, when before-and-after

studies are complete, a summary of the actual project benefits should

also be included in the annual report.

Finally, it is appropriate to place limits on the amount of CMAQ

funds given the speculative nature of these proposals. As such, the

amount obligated for proposals made pursuant to this section should not

exceed 25 percent of a State's yearly CMAQ apportionment.

Another way that States and local agencies are encouraged to

experiment is through the FHWA's or FTA's Innovative Financing Programs

which can employ CMAQ funding. These programs allow FHWA and FTA

greater latitude to use Federal transportation funds to set up

revolving loan programs, employ creative approaches in meeting State or

local match requirements, and other financial matters. Many innovative

financing tools were adopted statutorily in the NHS legislation and now

may be used in any title 23 program, including CMAQ:

a. Expanded use of bonds and other forms of debt management,

including eligibility of bond interest and other bond costs for Federal

reimbursement;

b. Allowing privately donated funds, materials and services to

constitute the required State and local match on Federal projects; and

c. Use of Federal funds as loans to revenue-generating facilities.

The NHS legislation allows States to receive matching credit for

donations of privately donated funds, materials and services on a

specific Federal-aid project. Before this change, States could only

receive credit for State and local funds, and the value of privately

donated right-of-way used as the local match. Now, however, any donated

funds, or the fair market value of any privately donated materials or

services that are accepted and incorporated into a CMAQ project or

program by the State, are credited to the match requirements on that

CMAQ project or program.

As a particular example of how the loan provision under the

Innovative Financing program might be used in connection with CMAQ

funding, a proposal has already been approved to construct an

intermodal freight facility using CMAQ funds, in part, as a loan which

will be paid back to the State from user fees. As the loan is repaid,

the revenues will be used for transportation purposes. Similarly, there

have also been inquiries about the use of CMAQ funds to convert

privately-owned diesel trucks to alternative fuels, thus substantially

reducing oxides of nitrogen (NOx) and PM-10 emissions. While this

proposal would not be eligible under usual circumstances, a feasible

approach could be developed to use CMAQ funds for the incremental cost

of converting or replacing the diesel engines as a loan to private

truck owners. Such a program would have to be fairly administered under

direct State supervision and be open to all owners located in

nonattainment and maintenance areas who are interested in

participating.

In addition to the statutorily-adopted innovative financing tools,

FHWA continues to solicit proposals from States for other flexible ways

to finance projects, including CMAQ projects. Under ``Test and

Evaluation'' authority in ISTEA, FHWA can approve new and innovative

concepts for moving projects forward which otherwise might not be

permitted under title 23. States should contact their FHWA Division or

FTA Regional offices to discuss any proposals of this nature.

7. Fare/Fee Subsidy Programs: Previous guidance allowed short-term

operating assistance to support the initiation of new transportation

services but did not allow demand-side incentives, such as fare or fee

subsidies as a means of reducing transportation emissions. Now, the

CMAQ program is being expanded to allow funding for partial user fare

or fee subsidies in order to encourage greater use of alternative

travel modes (e.g. carpool, vanpool, transit, bicycling and walking).

This more expansive policy has been established to encourage areas to

take a more comprehensive approach--including both supply and demand

measures--in reducing transportation emissions.

The CMAQ funds can be used to subsidize fares or fees if the

reduced fare/fee is offered as a component of a comprehensive, targeted

program to reduce SOV use. Other components of such a program would

include public information and marketing of non-SOV alternatives,

parking management measures, and better coordination of existing

transportation services. The intent of this policy is to focus on

situations where alternate transportation modes are viable, but

nonetheless, heavy reliance on single-occupant

[[Page 50898]]

vehicles exists, such as at major employment or activity centers.

Examples of how the fare/fee subsidy might be used include: a

discounted transit fare program developed through a cooperative

arrangement between a transit operator and a major employer; a program

subsidizing empty seats during the formation of a new vanpool; reduced

fares for shuttle services within a defined area, such as a flat-fare

taxi program; or providing financial incentives for carpooling,

bicycling and walking in conjunction with a demand management program.

An underlying tenet of this provision is to support experimentation

but always with the goal of identifying projects which are viable

without the short-term funding assistance provided by the CMAQ program.

Thus, the subsidy must be used in conjunction with reasonable fares or

fees to allow the greatest chance of holding on to ``trial'' users.

While the fare/fee subsidy program itself is not limited in time,

specific groups or locales targeted under the program must be rotated

and the subsidized fare/fee must be limited to any one entity or

location for a period not to exceed 2 years.

The CMAQ program was never envisioned as a source of long-term

support for transportation operations. However, FHWA and FTA believe

this new policy is highly supportive of implementing and evaluating the

effectiveness of a variety of demand management measures.

IV. CMAQ Programming Priorities

The Clean Air Act requires that FHWA and FTA give priority to the

implementation of transportation portions of applicable SIPs, and TCMs

from applicable SIPs are provided the highest priority for funding

under the CMAQ Program. The SIPs and the control measures they contain

are necessary to assist a State to attain and maintain the NAAQS. If

States are failing to implement TCMs in approved SIPs, adverse

consequences can ensue. A basic criterion for making conformity

determinations is the timely implementation of TCMs in the SIP, and

conformity determinations are necessary before transportation plans,

programs, or projects can be adopted and approved. If States fail to

give priority to such TCMs, their conformity determinations and

transportation initiatives will be in jeopardy. In addition, failing to

implement TCMs is also the basis for application by EPA of the Clean

Air Act's highway funding sanctions. Under certain circumstances,

sanctions may be expanded even beyond the nonattainment area to cover

an entire State. Once CMAQ projects and programs are identified, States

need to insure that sufficient obligation authority is reserved to

implement these projects and programs so that nonattainment areas make

progress toward attainment of the NAAQS. While the continuation of CMAQ

funds into the maintenance period under NHS legislation now makes it

possible to look at longer term strategies, States and MPOs are still

encouraged to consider and give priority to strategies that would help

them meet their attainment deadlines.

States and MPOs should make strategic use of the CMAQ funds

allotted to them even if they will not be used for TCMs in their SIPs.

Limited resources and the low levels of effectiveness in reducing

emissions through transportation measures that have been the experience

to date argue for maximizing the impact of Federal, State and local

expenditures to improve air quality. The FHWA and FTA continue to

recommend that States and MPOs put together their transportation/air

quality programs using complementary measures that simultaneously

provide alternatives to SOV travel while reducing demand through

pricing, parking management, regulatory or other means.

V. Program Requirements

Proposals for CMAQ funding should include a precise description of

the project, providing information on the project's size, scope and

timetable. Also, an assessment of the proposal's expected emission

reductions in accordance with the provisions described below is

required. States are also required to submit annual reports detailing

the obligations made under the CMAQ program during the previous fiscal

year.

A. Air Quality Analysis

1. Quantitative Analyses: Quantitative assessments of how the

proposal is expected to reduce emissions is extremely important to

assist areas in developing and funding the most effective projects in

nonattainment and maintenance areas. They also provide an objective

basis for comparing the costs and benefits of competing proposals for

CMAQ funding. In that States are required to submit annual reports,

analysis of air quality benefits for individual project proposals will

assist their preparation, as well. It is particularly important to

assess the benefits of projects that improve or increase basic

transportation services, including transit, traffic flow improvements,

ridesharing, and bicycle and pedestrian improvements, and quantified

emission reductions are expected for these projects. Similarly,

analyses are expected for conversions to alternative fuels and I/M

programs, as well.

Decisions regarding the level and type of air quality analysis

needed, as well as the credibility of its results, are left to FTA and

FHWA field staff, in consultation with EPA. Across the country, State

and local transportation/air quality agencies have different

approaches, analytical capabilities and technical expertise with

respect to such analysis. At the national level, it is not feasible to

specify a single method of analysis applicable in all cases. While no

single method is specified, every effort must be taken to ensure that

determinations of air quality benefits are credible and based on a

reproducible and logical analytical procedure that will yield

quantitative results of emission reductions. Of course, if an air

quality analysis has been done for other reasons, it may also be used

for this purpose.

2. Qualitative Assessments: Although quantitative analysis of air

quality impacts is required whenever possible, some improvements may

not lend themselves to rigorous quantitative analysis because of the

project's characteristics or because practical experience is lacking to

adequately analyze the project. In these cases, a qualitative

assessment based on a reasoned and logical examination of how the

project or program will decrease emissions and contribute to attainment

of a NAAQS is appropriate and acceptable.

Public education, marketing and other outreach efforts fall into

this category. The primary benefit of these activities is enhanced

communication and outreach that is expected to influence travel

behavior, and thus, air quality. Yet tracing the benefits to air

quality through the intervening steps requires a multi-disciplinary

approach that incorporates market research analysis which is often

beyond many transportation and air quality agencies' area of expertise.

As such, these projects which can include advertising alternatives to

SOV travel, employer outreach, public education campaigns, and

communications or outreach to the public during ``ozone alerts,'' or

similar programs do not require a quantitative analysis of air quality

benefits.

3. Analyzing Groups of Projects: In many situations, it may be more

appropriate to examine the impacts of more comprehensive strategies to

improve air quality by grouping TCMs. A strategy to reduce reliance on

single-

[[Page 50899]]

occupant vehicles in a travel corridor, for example, could include

transit improvements coupled with demand management. The benefits of

such a strategy should be evaluated together rather than as separate

projects. Transit improvements, ridesharing programs or other TCMs

affecting an entire region may be best analyzed in this fashion.

B. Annual Reports

To assist in meeting statutory obligations, States are required to

prepare annual reports for FHWA, FTA, and the general public that

specify how CMAQ funds have been spent and what the air quality

benefits are expected to be. Annual reporting makes the States and

local agencies accountable to the general public. Also, the annual

report enables FHWA and FTA to be responsive to the Congress on the

utilization of the funds and their impact.

This report should be provided by the first day of February

following the end of the previous Federal fiscal year (September 30)

and cover all CMAQ obligations for that fiscal year. The report should

include;

1. A list of projects funded under CMAQ, best categorized by one of

the following seven project types;

a. experimental pilot projects.

b. transit: facilities; vehicles and equipment; operating

assistance for new transit service, etc.

c. shared-ride: vanpool and carpool programs, and parking for

shared-ride services, etc.

d. traffic flow improvements: traffic management and control

services, signalization projects, intersection improvements, and

construction or dedication of HOV lanes, etc.

e. demand management: trip reduction programs, transportation

management plans, flexible work schedule programs, vehicle restriction

programs, etc.

f. pedestrian/bicycle: bikeways, storage facilities, promotional

activities, etc.

g. I/M and other TCMs (not covered by the above categories).

Project planning and other developmental activities, as well as

public education, marketing and other outreach efforts which are

eligible under the CMAQ program should be categorized the same way as

the project or program they support.

2. The amount of CMAQ funds obligated for the year, disaggregated

by the type of project listed above; and

3. A tabulation of the estimated air quality benefits for the year

summed from project-level analyses and expressed as reductions of ozone

precursors (volatile organic compounds and NOX, CO, or PM-10.

These reductions should be expressed as kilograms per day removed from

the atmosphere. This information will be important in monitoring and

reporting to Congress on CMAQ program effectiveness.

Note that the annual report should now specifically include and

identify any projects funded under the Experimental Pilot Projects/

Innovative Financing provision of this guidance (see Section III.B.6).

Summaries of before-and-after studies should be included as they become

available.

VI. Federal, State and MPO Responsibilities

A. Federal Agency Responsibilities/Coordination

As noted in previous guidance, the FTA and FHWA regional offices

should establish a consultation and coordination process with their

respective EPA regional offices for early review of CMAQ funding

proposals. Review by EPA is critical to assist the determination of

whether a project will have air quality benefits and to assure that the

most effective projects and programs are approved for CMAQ funding.

Proposals for funding should be forwarded to EPA as soon as possible to

insure timely review.

Either the local FTA or FHWA office will be responsible for project

management. In cases where the project is clearly related to transit,

FTA will determine the project's eligibility and manage the project.

Similarly, traffic flow improvements that improve air quality through

operational improvements of the road system would be managed by FHWA.

For projects that include both traffic flow and transit elements, such

as park-and-ride lots and intermodal projects, the managing agency will

be decided on a case-by-case basis. Following initial review by the

managing agency and consultation with EPA, the managing agency makes

the final determination on whether the project or program is likely to

contribute to attainment of a NAAQS and is eligible for CMAQ funding.

The consultation process should provide for timely review and

handling of CMAQ funding proposals considering the tight attainment

deadlines facing many areas. A project category list should be

developed for expedited funding under CMAQ without further review by

the other agencies. As EPA will evaluate all TCMs in an approved SIP,

they can be included on such a list. It is strongly recommended that

the FHWA, FTA and EPA regional offices develop and implement a

memorandum of understanding that specifies which projects can go

forward without further coordination. It should also include deadlines

for review beyond which it will be assumed that the review agencies

have no comments on the proposal. For Federal agency review of

individual proposals, that consultation period should be approximately

2 weeks. For review of multiple proposals, such as a draft TIP, Federal

review should be completed as expeditiously as possible so that the

response time by Federal Agencies to CMAQ funding proposals is

generally limited to about 1 month.

B. State and MPO Responsibilities

Decisions over which projects and programs to fund under CMAQ

should be made through a cooperative process involving the State

departments of transportation, affected MPOs, and State and local air

quality agencies. This process serves to develop a pool of potential

CMAQ projects to be considered for funding in a State's nonattainment

and maintenance areas. The programming of CMAQ projects should follow

the procedures for TIP development noted below.

Projects to be funded with CMAQ funds must be included in the TIPs

that are developed by the MPOs in cooperation with the State and

transit operators. Under the metropolitan planning regulations of

October 28, 1993 (23 CFR 450.300), TIPs must contain a priority list of

projects to be carried out in the 3-year period following adoption. As

a minimum, projects must be grouped by year and proposed funding

source. For projects targeting CMAQ funds, priority in the TIP should

be based on the projects' estimated air quality benefits.

Since the TIPs must be consistent with available funding, it is

important that the State advise the MPOs of its proposed approach to

utilize CMAQ funds in a timely manner. Once CMAQ projects are included

in a TIP (approved by the MPO and the Governor), and included in a

FHWA/FTA-approved statewide TIP, those projects in the first year may

be implemented. Projects in the second or third year of the TIP could

be advanced for implementation using the specified project selection

procedures in the planning regulation.

It is the State's responsibility to manage its obligation authority

made pursuant to title 23 to ensure that CMAQ (and other Federal-aid)

funds are obligated in a timely fashion and do not lapse. Other

provisions affecting the overall Federal-aid program, such as

[[Page 50900]]

advance construction authority, apply to the CMAQ program as well.

Close coordination is needed between the State and MPO to assure

that CMAQ funds are used appropriately and to maximize their

effectiveness in meeting the Clean Air Act requirements. States and

MPOs must fulfill this responsibility so that nonattainment areas are

able to make good-faith efforts to attain the NAAQS by the prescribed

deadlines. State and MPO actions should include consultation with air

quality agencies at the State and local levels to develop an

appropriate project list of CMAQ programming priorities which will have

the greatest impact on air quality.

C. Apportionments and State Suballocation

According to the ISTEA legislation, CMAQ funds are apportioned to

the States primarily based on the severity of their ozone pollution and

the number of people affected by it. Each State is guaranteed a minimum

of 0.5 percent of the total yearly apportionment even if it has no

nonattainment areas.

Under the CMAQ Program as amended by the NHS legislation, States

which have ozone nonattainment areas that are classified as

``marginal'' or worse during any part of FY 1994 (October 1, 1993--

September 30, 1994) are apportioned funds based on the population in

these areas and the severity of the ozone problem at that time. If the

ozone nonattainment area was also a CO nonattainment area classified as

``moderate'' or worse during FY 1994, the State is apportioned

additional CMAQ funds. If a State contains a CO nonattainment area that

was not a nonattainment area for ozone as well, no additional funds are

apportioned to the State. Areas redesignated to attainment status

before FY 1994 would not be included in the apportionment factors.

Changes to nonattainment classifications (from marginal to moderate for

example) occurring during FY 1994 would affect the distribution. Any

changes occurring before or after FY 1994 will have no effect on the

distribution of CMAQ funds for FY 1996 or FY 1997.

The CMAQ funds can be used in all areas designated as nonattainment

under Section 107(d) of the Clean Air Act, including any areas later

redesignated as maintenance areas. CMAQ funds cannot be used for

projects in areas designated as ``transitional,'' ``submarginal,'' or

``incomplete data'' nonattainment areas for ozone or in ``not

classified'' nonattainment areas for carbon monoxide.

Despite the statutory formula for determining the apportionment

amount, the State can use its CMAQ funds in any ozone, CO or PM-10

(under certain conditions) nonattainment or maintenance area. It is

under no statutory obligation to suballocate CMAQ funds in the same way

as they were apportioned. States may retain funds for use in specific

nonattainment or maintenance areas or fund CMAQ projects on a case-by-

case basis. However, it is clear from the program review that there

must be a collaborative process between the State and MPOs in

nonattainment and maintenance areas for selecting projects to maximize

emission reductions. Thus, States are strongly encouraged to consult

with affected MPOs to determine CMAQ priorities and allocate funds

accordingly.

The Federal share for most eligible activities and projects is 80

percent or 90 percent if used on certain activities on the Interstate

System. Under certain conditions (including sliding scale rates), the

Federal share under title 23 can even be higher. Certain activities

identified in Section 120(c) of title 23, including traffic control

signalization, and commuter carpooling and vanpooling, may be funded at

100 percent Federal share if they meet the conditions of that section.

Pedestrian and bicycle projects and programs previously limited to an

80 percent Federal share, without the use of sliding scale rates, are

now treated exactly the same as general Federal-aid projects (i.e. the

Federal share payable on pedestrian and bicycle projects now includes

the sliding scale rates) as a result of the NHS legislation. The NHS

legislation also makes it easier for States to receive matching credit

for donations of privately donated funds, materials, and services on a

specific Federal-aid project (see Section III.B.6)

VII. States That Are in Attainment

States that do not have any ozone or CO nonattainment areas may use

their funds for any eligible projects under the STP or the CMAQ

program. If a State has a maintenance area and no nonattainment areas,

the air quality needs of the maintenance area should be given first

priority (see Section III.B.4). States with PM-10 areas only are

encouraged to use CMAQ funds for projects and programs that contribute

to reduction of PM-10 emissions. This priority should be given only if

mobile sources are considered significant contributors to such

nonattainment.

States that are in attainment or achieve attainment of

transportation-related NAAQS, are further encouraged to give priority

to the use of CMAQ program funds for the development of congestion

management systems, public transportation facilities and equipment, and

intermodal facilities and systems, as well as the implementation of

projects and programs produced by those systems.

Authority: 23 U.S.C. 315; 49 CFR 1.48.

Rodney E. Slater,

Federal Highway Administrator.

Gordon J. Linton,

Federal Transit Administrator.

Dated: September 20, 1996.

[FR Doc. 96-24793 Filed 9-26-96; 8:45 am]

BILLING CODE 4910-22-P