TEA-21 - Transportation Equity Act for the
Moving Americans into the 21st Century
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Question 1303-1: Does the net income received from the sale or lease of real property acquired with Federal funds have to be applied to a project of like nature, or can the funds be used on any kind of Title 23 eligible project?
Answer: The net income received from the sale or lease of real property can be used on any Title 23 eligible project, including transit. (December 16, 1998)
Question 1303-2: What should the State do with the net income received from the sale or lease of real property acquired with Federal funds if the funds cant be used right away?
Answer: The Federal share of net income should be held in an appropriate state account. It does not have to be a unique account, as long as records are adequate to document ultimate use of the funds. When the State is ready to use the funds, the total amount of such funds shall be used on Title 23 eligible projects.
Question 1303-3: Would a sale of excess real property initiated prior to June 9, 1998 and closed on or after that date require a credit to Federal funds as required by 23 CFR 713.307 or 49 CFR 18.31?
Answer: There would be no credit to Federal funds provided the sale closed on or after June 9, 1998. (Note: 23 CFR Subchapter H is currently being revised to address this and other real estate program issues.)
Question 1303-4: Do the changes in the right-of-way sales and lease provisions apply to mineral sales and royalties from Federal-aid purchased property (i.e., can proceeds be used for Title 23 purposes and not credited back to the Federal funds)? Can these funds be used on Title 23 eligible projects that do not follow Federal requirements?
Answer: Oil, gas, and other mineral interests are real property interests. When States acquire real property with Federal assistance from the Highway Trust Fund, 23 U.S.C. 156 permits States to sell or lease such interests for fair market value and retain the Federal share of net income (gross proceeds less sale or lease costs) for use on Title 23 eligible projects. A credit to Federal funds is not required. With regards to the second question, the project would only need to be a Title 23 eligible project. The State-retained Federal share of net income must be used on either a Federal- aid project or a State-funded project that is eligible for Title 23 funding.
Question 1303-5: In order for an acquiring agency to retain the proceeds from the sale, lease, etc. of property acquired with Federal assistance, Section 1303 provides that the agency shall charge, at a minimum, the fair market value of the property to be leased or sold. Considering that an acquiring agency rarely, if ever, receives more than the fair market value of property sold or leased, what was the intent of Congress by including the language at a minimum?
Answer: It is unclear what the specific intent of Congress was in requiring States to charge, at a minimum, fair market value for the sale or lease of real property acquired with Federal assistance. The previous 23 U.S.C. 156, enacted in 1987, required States to charge, as a minimum, fair market value for the sale or lease of airspace acquired with Federal assistance. One possible explanation is that Congress wanted States to be able to negotiate or dispose of properties via public sale for amounts in excess of the approved appraisals.
Question 1303-6: Can expenses associated with the sale or lease of real property acquired with Federal funds be deducted from the gross proceeds for the purpose of calculating the proceeds subject to use on Title 23 projects?
Answer: Yes. The Federal share of net income, to be retained by the States and used for Title 23 eligible projects, is calculated by deducting the disposition or leasing costs from the gross proceeds from the sale or lease.
Question 1303-7: Can income from the sale or lease of real property acquired with Federal funds be credited to an account or project that would benefit transit?
Answer: The net income may be used for any project that is eligible for assistance under Title 23. This would include transit projects that are eligible for assistance under the surface transportation or CMAQ programs.
Question 1303-8: If the State chooses, can income from the sale or lease of real property acquired with Federal funds be credited to a past or future project instead of making a showing that the income was credited to their transportation program?
Answer: The net income should be deposited in a state transportation fund or credited to a current Title 23 eligible project.
Question 1303-9: Neither the old or amended section 156 of Title 23 addresses the status of a project relative to being open or closed. How does Section 1303 of TEA-21 affect 23 CFR 713, Subpart C and 49 CFR 18.31? If the referenced CFR sections are eliminated, and all income can now be handled under the amended section 156 procedures, is it necessary to be concerned whether a project is open or closed? If so, if disposal income is received for property originally purchased with Federal funds which have since lapsed, what effect, if any, would that have on the policies as outlined in section 1303? Would there ever be a time in project delivery when a credit would still be required, i.e., acquisition phase/post construction phases?
Answer: The credit to Federal funds requirements of 23 CFR 713.307 and 49 CFR 18.31 have been superceded by the amended 23 U.S.C. 156, i.e., a credit to Federal funds is no longer required for disposals of real property which close on or after June 9, 1998. Regardless of the status of the project, the Federal share of net income would be retained by the States and used for Title 23 eligible projects.
Question 1303-10: Will property management disposition costs now be considered eligible for Federal participation and chargeable to Federal-aid projects? If so, will it be necessary for State agencies to credit Federal-aid projects which have had disposition costs billed to them prior to depositing a net proceed amount into a State Road Fund? If not, should disposition costs be deducted from sale proceeds to arrive at a net income amount which would be deposited in the State Road Fund or can the total gross amount of sale income be deposited for use on Title 23 eligible projects?
Answer: Real property disposition and leasing costs should be deducted from gross sales or lease proceeds to arrive at a net income amount that would be deposited in an appropriate state fund until used on Title 23 eligible projects. Net property management costs for maintenance, protection, clearance, and improvement disposition until final project acceptance are eligible for Federal participation.
Question 1303-11: Will FHWA Headquarters be issuing guidance on what FHWA considers to be an acceptable method(s) of State certification regarding the Federal share of net income that has been deposited in the State Road Fund during the fiscal year and the amount of the Federal share of net income that was expended on Title 23 eligible projects during the fiscal year?
Answer: 23 U.S.C. 156 does not require State certification regarding the amount of the Federal share of net income deposited in a transportation fund and subsequently expended on Title 23 eligible projects. However, as a practical matter, States should have an accounting system in place which documents: (1) the amount of the Federal share of net income deposited in the a state transportation fund during the fiscal year, and (2) the amount of the Federal share of net income expended on Title 23 eligible projects during the fiscal year.
Question 1303-12: Can States retain the net income from dispositions of withdrawn Interstate segments or would a credit to Federal funds in accordance with 23 CFR 480.109 be required?
Answer: States may retain the net income for dispositions of withdrawn Interstate segments provided that: (1) such title transfers occur on or after June 9, 1998, and (2) the Federal share of net income is used on Title 23 eligible projects.
Question 1303-13: Our state has and continues to reimburse FHWA for their participation in the purchase of excess lands at the time of sale. We are proposing to payback FHWAs financial investment in our excess land inventory as soon as we can reach an agreement. One aspect of our proposal is that we deposit 100% of the sales revenues to our State Highway Account until used for Title 23 eligible projects. Does this aspect of our proposal comply with the intent of TEA-21? With the implementation of our proposal, will we be required to continue to sell Federal excess land parcels prior to submission of the final voucher or not later than 2 years from the time the highway is open for traffic, whichever is earlier? Will we be required to track Federally eligible sales, and if so, to what degree do they need to be tracked? Will it be necessary to track the exact amount of the Federal billing portion? (Note: Any FHWA requirements for the preceding two questions would require complex and time-consuming modifications to our computer systems. Any such required modifications to our computer systems would not be accomplished in the foreseeable future due the amount of computer programming required for the year 2000.) TEA- 21 has been in effect since June 9, 1998, however, we understand that it will take some time to revise the CFRs. What are the risks involved if we decide to implement procedures to comply with TEA-21 prior to the completed revision of the CFRs?
Answer: TEA-21's amendment of 23 U.S.C. 156 eliminated the required credit to Federal funds for disposals of real property acquired with Federal assistance. The Federal share of net income from excess land disposals should be deposited into an appropriate state account until used on Title 23 eligible projects. The answer to the second question is no. 23 CFR 713.306 (c) outlines the time frame for excess land disposals when a credit to Federal funds is required in accordance with 23 CFR 713.307. As noted above, the amended 23 U.S.C. 156 eliminated this required credit. Excess lands should, however, be disposed of as soon as it is determined that such lands are not required for a present or future transportation use. To answer the third question, while not required by current Federal regulations, as a good business practice, your State should maintain a current inventory of its excess lands regardless of whether such properties were acquired with Federal funds. To answer the fourth question, the amended 23 U.S.C. 156 requires that the Federal share of net income from the sale or lease of real property acquired with Federal assistance be used by the State for Title 23 eligible projects. To account for the Federal share of net income generated from the sale or lease of such real property, your State should have an accounting system in place which documents: (1) the amount of the Federal share of net income deposited in a state account during the fiscal year, and (2) the amount of the Federal share of net income expended on Title 23 eligible projects during the fiscal year. To answer your final question, there is little risk if your procedures are consistent with the statute, but they will also have to be consistent with the revised CFR. It is not expected that the revised CFR will be more prescriptive than TEA-21 language.
Question 1303-14: If a state law requires the state DOT to sell or lease property at less than the current fair market value, does the state law take precedence over federal law requiring fair market value for property or access control previously obtained with Title 23 funds?
Answer: No, the state law does not take precedence. Federal law governs the sale or lease of real property that was obtained as apart of a Federal-Aid project. If Federal funds are used to purchase real property, or if Federal credit is received for real property used in a federally funded project, the sale, use or lease of such property rights are subject to Federal law. State laws do not take precedence over Federal property disposition standards where Federal funds or credits were involved in the property acquisition. (December 16, 1998)