- Briefing Room
Tapered match is a form of Federal-aid matching flexibility that allows a project's Federal share to vary from year to year as long as the final contribution of Federal funds does not exceed the project's maximum authorized share. This tapered match, or delayed local match, as it is commonly called for transit projects, allows states to vary the required matching ratio over the life of a project. For example, the Federal share could start out at 100 percent and taper off to zero as the project nears completion.
Under a tapered match agreement, the non-Federal matching ratio is imposed on the project as defined in the project agreement, rather than individual progress payments. Division Administrators and Division Directors must continue to authorize tapered match based on the merits of each project and ensure the authorized Federal obligation is not exceeded and complies with tapered match requirements.
With tapering, a state can advance a project before fully securing bond and capital market financing. Tapered match may also be useful when the project sponsor lacks the funds needed to match a Federal-aid project at the start, but will accumulate the match over the life of the project. For example, this technique may facilitate a project when a new local tax has recently been enacted. Using tapered match, the project can move forward immediately with 100 percent Federal funds, allowing time for the new tax revenues to accumulate. The use of tapered match also may help a state overcome near-term gaps in state matching funds.
Section 1302 of TEA-21 amended 23 U.S.C. 121, by removing the longstanding requirement for a payment-by-payment match of Federal funds on individual projects. Recipients and subrecipients may seek FHWA approval to exercise a tapered match provision within a project agreement. Under this approach, the non-Federal matching ratio is imposed on the project as defined in the project agreement, rather than individual progress payments associated with the project. As such, Federal reimbursement of project expenditures can range from zero to one hundred percent for eligible costs in the early phases of a project, provided that by the time the project is complete, the overall Federal contribution does not exceed the authorized Federal-aid share for the project in question.
If the non-Federal entity wishes to bill Federal funds in such a manner that results in progress billings that would not equal the Federal pro rata share for costs incurred as identified in the project agreement, it will be necessary to receive FHWA concurrence in the project agreement recording the use of Tapered Match provisions4. If the authorized Federal obligation amount has not been exceeded for project cost incurred at the time of the claim for reimbursement, recipients may apply project costs incurred to the non-Federal share, Federal share, or both, up to the authorized Federal obligation amount. In other words, the recipient may bill Federal funds at a rate less than or greater than the authorized Federal share for eligible costs on a progress payment basis if the total authorized Federal obligation amount has not been exceeded. Authorization for this option may be granted by the FHWA Division Administrator, case-by-case, dependent upon assurance of the existence and effectiveness of necessary procedures and related internal controls to ensure the authorized Federal obligation is not exceeded or otherwise in compliance with tapered match requirements. This includes ensuring the total costs of the project are kept up to date to accurately track the authorized Federal share. Cost savings pose a potential risk that the Federal share could be exceeded if not carefully monitored. Authorization of tapered match is documented under each FMIS project agreement using the State Remarks field.
An example is provided below illustrating a tapered match project with total project costs of $200 million. In this example the required non-Federal match is equal to 20 percent of total project costs, or $40 million. The project construction timeframe is four years. During the first two years of construction, the Federal contribution is equal to 100 percent of project costs. The state begins to provide the non-Federal share starting in year 3 and by the end of year 4 has provided its entire $40 million share of funding for this project, i.e. the entire 20 percent of total contributions to the project.
The project agreement may include tapered match on any project authorized under the provisions of title 23 U.S.C. when the approval would result in one or more of the following:
The process for using a tapered match is as follows: