The territorial highway program is administered as follows:

1. System of Highways

   Under 23 U.S.C. 215, each territory shall establish, with FHWA approval, a system of arterial and collector highways and interisland connectors, to be called the Federal-aid territorial highway system (THS). Each territory should proceed with its functional classification of highways as required by Section 1006(c) of the 1991 ISTEA. This functional classification should be completed by December 31, 1992.

   Once the functional reclassification is completed, the territory will designate a THS and submit it for approval by the division office. This should be completed by June 30, 1993. When the THS is approved, Federal-aid funds can be used for improvements on all routes designated as part of the THS.

   In the interim, Federal-aid funds can be used for improvements on the primary system in existence in the territory prior to passage of the ISTEA.

2. Funding/Obligation of Funds

   The ISTEA establishes NHS funds as the source of Federal-aid funds available to the territories. The FHWA will continue to divide these funds among the territories based on an administrative formula.

   The ISTEA also provides for transferring NHS funds into a Surface Transportation Program (STP). A territory may elect to transfer NHS funds to the STP in accordance with 23 U.S.C. 104(c).

   The obligation of funds will be on a project-by-project basis for all types and sizes of projects, regardless of funding source.

3. Federal Share

   In accordance with the provisions of 23 U.S.C. 120(h), the Federal share of any Federal-aid project in the territories shall be 100 percent.

4. Eligible Activities

   The NHS funds can be used for any activity defined in 23 U.S.C. 103(i). Funds transferred to STP can be used for any activity defined in 23 U.S.C. 133(b) which includes bridges and work activities as described in Section 133(b)(3) and (4) on any public road.

5. Design Standards

   Design standards, including those for traffic control devices, will continue to be approved by the FHWA.

6. Project Development/Administration

   It is expected that projects will be developed and advanced in accordance with standard Federal-aid procedures. The FHWA's role in project review, oversight, and administration will follow the general principles established for NHS funded projects.

7. Toll Facilities

   A territory has the option of using Federal-aid funds to construct toll facilities under 23 U.S.C. 129. The requirements of Section 129 must be complied with.

8. Emergency Relief (ER) Program

   For the purposes of 23 U.S.C. 125, the Federal-aid system in the territories will be the THS as established under item 1 above. Section 125(b) was amended by the ISTEA to increase the annual obligation limitation for ER funds for the territories as a group from $5 million to $20 million.

   Until the THS is established for a territory, in the interim ER funding will be available for repair of damage to the primary system as it existed in the territory prior to passage of the ISTEA.

9. Agreements

   An agreement between the Secretary and Governor as discussed in 23 U.S.C. 215(c) is no longer needed since the THS is now funded from authorizations under 23 U.S.C. 103.

Original signed by Thomas O. Willett for:
Anthony R. Kane

This Policy Memorandum was Canceled June 23, 1999.