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DOT Logo Memorandum
U.S. Department of Transportation
Federal Highway Administration

ACTION: Additional Allocation of FY 1998 Funding
for High Priority Projects (Demonstration Projects) - 
TEA-21 Technical Corrections in IRS Reform Act
September 4, 1998
Chief, Federal-Aid and Design Division
Regional Administrators
Division Administrators 

The IRS Restructuring and Reform Act of 1998 (P.L. 105-206), which was signed into law by the President on July 22, 1998, included technical corrections to the Transportation Equity Act for the 21st Century (TEA-21, P.L. 105-178). These technical corrections included modifications to the 1850 High Priority Projects in Section 1602 of TEA-21. The sum of the authorization amounts for the individual projects in Section 1602 now agrees with the total amounts authorized in TEA-21 Section 1101(a)(13), as amended by these technical corrections. The FY 1998 allocations for all of the projects have therefore changed, because the proportional reduction of the allocations in our June 26, 1998, memorandum is no longer necessary.

TEA-21, as amended, authorizes $9,359,850,000 from the Highway Trust Fund over a 6-year period for the 1850 High Priority Projects listed in Section 1602. Of these funds, $1,029,583,500 is to be allocated in FY 1998. Our June 26, 1998, memorandum allocated $1,025,695,000 to the States. Subsequently, at the State's request, we withdrew $296,158 from California and allocated that amount to Federal Lands for Project 320. This resulted in a total previous allocation of $1,025,398,842 to the States. We are hereby allocating the additional $3,887,658 to the States for 1849 of the designated projects as shown in Attachment 1, resulting in a total FY 1998 allocation to the States of $1,029,286,500. The additional $842 for Project 320 will be allocated to Federal Lands in a separate memorandum.

The Demo IDs assigned to each project are based on the information the Division Offices have provided regarding their new and existing demonstration projects. These Demo IDs are used to track expenditure of funds in FMIS at particular locations.

The appropriation code for these funds is Q92. The funds are available until expended and are subject to obligation limitation. The technical corrections resulted in a recalculation of the obligation limitation for FY 1998. The FY 1998 obligation authority is now 89.1 percent of the allocation, rather than the 90 percent calculated previously. This results in a net decrease in obligation authority for all States but Minnesota and Missouri, which received significant allocation increases in the technical corrections. Kentucky has also received an increase in obligation authority due to the revised distribution of funds for Project 436 requested by Kentucky and Indiana. The changes in FY 1998 obligation authority by State for the high priority projects are shown in Attachment 2.

We will not be assigning designated Federal project numbers or prefixes for these projects. Federal project numbers should be assigned by the Divisions and States. We track funding by the appropriation code and Demo ID. The Demo ID, therefore, must be reported on the FHWA-37 for each project. Since many of the assigned Demo IDs have more than one project number in TEA-21, we will not be able to track the funding for each of these projects, since they will have the same appropriation code and Demo ID. For States that have a desire to track funding by each TEA-21 project number under a Demo ID, they should assign Federal project numbers as they see fit to accomplish this.

The following implementing guidance for the High Priority Projects Program under TEA-21 and 23 U.S.C. 117 is provided.


In accordance with 23 U.S.C. 117(g), as revised by TEA-21, this special obligation authority is only available for these high priority projects, and it shall remain available until obligated. This obligation authority is distributed by State, not by project, and it is the State's decision on which projects it may be used in accordance with the provisions of 23 U.S.C. 117.

This special obligation authority is less than 100 percent of the allocated amounts. To fully utilize the allocated amounts for high priority projects, States may use some (for FY 1998, up to 10.9 percent of the allocated amounts for the high priority projects) of its regular obligation authority available for the Federal-aid Highway program. To use the regular obligation authority, the funds must be transferred to appropriation code Q93 to distinguish it from the special obligation authority. To request the transfer, please contact the Office of Budget and Finance.

FEDERAL SHARE In accordance with 23 U.S.C. 117(c), the Federal share for these funds is 80 percent. There are only two exceptions:

    1. Section 1212(h) of TEA-21, as re-designated by the technical corrections, provides a Federal share of 100 percent for Project 1020 in Maryland on the Baltimore Washington Parkway.

    2. 23 U.S.C. 120(h) provides that the Federal share for any project under Title 23 in the Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands shall be 100 percent. Accordingly, the high priority projects in American Samoa and the Virgin Islands are 100 percent Federal share.
For all of the other projects the Federal share is 80 percent, and the 20 percent match must come from non-Federal sources.

Costs, including eligible donated services and materials, incurred prior to FHWA authorization of the project, cannot be applied to the non-Federal matching share of the project. Right-of-way that is donated in accordance with the requirements of 23 U.S.C. 323 can be applied to the matching share.

ADVANCE CONSTRUCTION Under 23 U.S.C. 117(b), these funds are to be allocated as follows: 11 percent in FY 1998, 15 percent in FY 1999, 18 percent in each of FY 2000 and FY 2001, and 19 percent in each of FY 2002 and FY 2003. Under 23 U.S.C. 117(e), Advance Construction, a State may construct a high priority project without the aid of Federal funds and be reimbursed with Federal funds as they become available. The authorization of an Advance Construction project does not constitute a commitment of Federal funds, until the project is converted to a regular Federal-aid project. The Advance Construction code 0AG has been assigned to identify funds used by the States for costs incurred for high priority projects in advance of allocations. (Please note, the first character in the code is a numeric 0 (zero). Our June 26, 1998, memorandum erroneously indicated this code to be 0QA.  POOLING OF FUNDS The allocated funds can only be used for the particular project for which they are provided. With the exception of Minnesota, States cannot pool these funds to use for any of the high priority projects in their State. Under Section 1212(g) of TEA-21, as re-designated by the technical corrections, Minnesota may pool their funds provided that no project's authorized amount is reduced. ELIGIBLE WORK / USE OF FUNDS The project descriptions, as shown in Section 1602 of TEA-21, define the project on which the funds may be legally expended. Funding for a project can only be used for the activities within the scope and the physical limits defined by the project description. If a project description includes an obvious typographical or technical error, it may be possible to accept legislative intent; however, this should be coordinated with my staff for each involved project.

Many States have projects with descriptions of "State priority projects" or "High priority highway and bridge projects." These descriptions allow the State to expend these funds on any eligible Title 23 project, or any of the other designated high priority projects within the State with the following exception. For "High priority highway and bridge projects," the project for which these funds are used would have to be a highway or bridge project.

These high priority project funds cannot be used for costs incurred prior to June 9, 1998, the date TEA-21 was enacted, unless the project was previously authorized under 23 U.S.C. 115, Advance Construction. Additionally, these funds cannot be used to replace other Federal funds previously obligated on a project. The only exception may be when it can be demonstrated that, for a project advanced prior to June 9, 1998, unless a waiver is approved, the high priority project funds could not otherwise be utilized. This exception can only be approved by my office.

These projects cannot be financed with a Section 129 loan under 23 U.S.C. 129(a)(7) when the source of repayment is the future allocations of demonstration project funds. These funds are not considered a dedicated revenue source which is required by the Section 129 loan provisions.

MULTIPLE STATE PROJECTS The funds are being distributed for each project to the State that is listed for that project in TEA-21. There is only one multi-State project listed, Project 436 in Kentucky and Indiana. In our June 26, 1998, memorandum, the funds for that project were distributed equally to each State. Since that allocation, Kentucky and Indiana have indicated a desire to have the funding distributed differently. Based upon their written request, Kentucky will receive $28.6 million of the $40 million 6-year authorization, and Indiana will receive $11.4 million. The amounts in the FY 1998 allocation table in Attachment 1 and in the obligation limitation table in Attachment 2 reflect this revised distribution.

If there are other projects that are a multi-State effort, and the States desire distribution of funding different from the 100 percent allocation to the State listed in TEA-21, a written agreement from the involved States indicating the desired distribution between the States will be necessary before we can reallocate the funds.

TRANSFER OF FUNDS TO FEDERAL AGENCIES For States that wish to transfer their allocated funds to a Federal agency that is administering the project, there are two options. Section 132 of Title 23 allows a State to make payments directly to the Federal agency in accordance with an agreement between the State and Federal agency. The other option would be for the State to request that we withdraw the funds, including an equal amount of obligation authority, from the State and transfer them to the Federal agency. In either case, the non-Federal share of the project funding must still come from non-Federal sources. Section 117 of Title 23 is now titled "High Priority Projects Program" and a copy is included in Attachment 3 for your information. Also included are the other provisions of TEA-21 that apply to the high priority projects.

Attachment 4 is a list of the Demo ID and the TEA-21 Section 1602 project number changes that resulted from the technical corrections included in the IRS act. This is provided for easy identification of these projects in the allocation table.

By copy of this memorandum, the Budget Division of the Office of Budget and Finance is requested to process these allocations.

If you have any questions, please call Mr. Larry Beidel (202-366-1564) of my staff.

Signed by
Dwight A. Horne 
Attachment 1 
TEA-21 High Priority Projects - FY 1998 Allocations (As Amended By Technical Corrections) 
Attachment 2 TEA-21 High Priority Projects (As Amended By Technical Corrections) FY 1998 Special Obligation Limitation 
Attachment 3 Title 23, United States Code, Section 117 - High Priority Projects Program 
Attachment 4 Technical Corrections Changes to TEA-21 Demo Projects 


This page last modified on September 4, 1998
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