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Federal-aid Fund Management Tools

Federal-aid fund management tools are designed to provide states with greater flexibility in managing Federal-aid highway funds. Typically state and local governments must provide 20 percent of the funding for projects benefiting from Federal aid. The principal objective of the management tools described here is to ease restrictions on the timing of obligations and reimbursements and create a broader range of options for meeting matching requirements. While finding money for projects is always a challenge, states and other project sponsors also have to align the flow of projects with the availability of local funding. These cash flow tools help state and local governments to leverage Federal funding and expedite the implementation of projects.

Advance Construction and Partial Conversion of Advance Construction
Advance construction and partial conversion of advance construction are cash flow management tools that allow states to begin projects with their own funds and only later convert these projects to Federal assistance. Advance construction allows a state to request and receive approval to construct Federal-aid projects in advance of the apportionment of authorized Federal-aid funds. Under normal circumstances, states "convert" advance-constructed projects to Federal aid at any time sufficient Federal-aid funds and obligation authority are available, and do so all at once. Under partial conversion, a state may obligate funds for advance-constructed projects in stages.

Federal-aid Matching Strategies
The Federal funds management tools described in this section are designed to provide more flexibility to the states in their management of Federal funds and to increase investment and accelerate projects. These tools include flexible match, tapered match, and toll credits.

Other Federal Tools
Other Federal tools include using Federal-aid grants to pay the capital portion of availability payment installments or pass-through tolls (shadow tolls).

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