oversight

Why Urban System Funds Were Seldom Used for Mass Transit

Published by the Government Accountability Office on 1977-03-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

     R                   T TO THE CONGRESS

 3   BY THE COMPTROLLER GENERAL
_=   OF THE UNITED STATES
                                                         ~~lllllnlll~lllnllllllllnl~llllllll
                                                              ~M101782
                                                                         -


     Why Urban System Funds Were L
     Seldom Used For Mass Transit
     Federal Highway and Urban Mass
       Transportation Administrations
     Department of Transportation
      In 1973 the Congress opened the Highway
     Trust Fund for urban mass transit projects,
     such as purchasing     buses and rail passenger
     cars. Three years later, local governments had
     used only about $74 million, or 3 percent, of
     the funds available for mass transit projects,
     while they used about $1 billion for highway
     projects. More funds were not used for mass
     transit for several reasons, including

          --the large amount   of work   urban high-
            ways needed,

           --less matching shares required for    Fed-
             eral mass transit than for highway   pro-
             grams,

          --more Federal money was obtained by
            using Trust Fund money for highways
            and other   Federal money  for mass
            transit,

          --unissued Federal regulations for imple
            menting mass transit projects, and

          --confusion    or delays experienced     by
            some smaller communities   in obtaining
            project approval.

     CED-77-49
               ~O~PTRCJL,LER     GENERAL      OF     THE      UiUlTED   STATES

                               WASI~INCION.    DC.         20548




B-164497(3)
                                  0
                                  /
To the President of the Senate and the
Speaker of the House of Representatives


       This report discusses     the reasons local communities
seldom used Urban System highway funds for mass transit
projects   as authorized    by the 1973 Highway Actp and
contains   several options which the Congress could take
to provide additional     incentives    for using highway
funds for mass transit     projects.
       During hearings on the Highway Act of 1976, the
Congress expressed concern over the States'           slow prog-
ress in implementing        the Urban System program and
required    the Secretary      of Transportation   to study the
program.      Our review supplements the Secretary's       Urban
System study issued on January 13, 1977, and provides
more detailed     information     on why few highway funds
have been used for mass transit          projects.
     We made our review pursuant to the Budget and
Accounting Act, 1921 (31 U.S.C. 53), and the Account-
ing and Auditing Act of 1950 (31 U.S.C. 67).
       We are sending copies of this                               report        to the Direc-
tarp Office   of Management and
retary  of Transportation,



                                               Comptroller  General
                                               of the United States
COMPTROLLERGENERAL'S                             WHY URBAN SYSTEM FUNDS WEFE
REPORT TO THE CONGRESS                           SELDOMUSED FOR MASS TRANSIT
                                            i,.!Federal   Highway and Urban Mass - t -0
                                                   Transportation    Administrations
                                            5,Department       of Transportation     /
                                             /
       DIGEST
       ---e-e
       Since 1973, few communities have used Highway Trust
       Fund moneys made available   by the Congress for mass
       transit  under the Urban System program.    Only 13
       urban areas in 8 States had used the program for
       mass transit  projects  such as buying buses and
       rail passenger cars.    (See pe 3.)
       The Federal Urban System consists                of about
       125,000 miles of heavily     traveled            roads in urban
       areas, exclusive    of the Interstate             highways and
       major rural   route extensions.
       As of June 30, 1976, about $73.7 million          (3 per-
       cent of the $2.3 billion      authorized)     was obligated
       for mass transit,   XKabout          $1 billion   (45 per-
       cent) was obligated     for urban highways.       The bal-
       ance was either   transferred     to other highway
       programs or remained unobligated.
       Why weren't more of these funds used for mass tran-
       sit in California, Illinois,  Nevada, New Jersey,
       and New York?
       Most communities continued          using Urban System
       funds for local roads because Urban Mass Trans-
       portation    Administration      grants were available   for
       mass transit     projects    and because highways needed
       a lot of work. During fiscal          years 1974-76, the
       five States used over 20 times as much Urban Mass
       Transportation      Administration      money for mass
       transit   projects     as they did Urban System funds.
       (See pp. 5 to 9.)
        Local decisions              to use Urban System funds    for
        highway projects               were influenced by other   factors:
        --Urban System funds were allotted       to communi-
           ties;    grants were given to individual   appli-
           cants.      Therefore, communities got the most
           Federal money by using Urban System funds for
           highways and other Federal funds for mass
           transit.

Tear Sheej. Upon removal,    the report      i
cover date should be noted   hereon.
                                                          CED-77-49
--Federal    cost-sharing    ratios  were greater    for
   42 of the 52 States (including       Puerto Rico and
   the District    of Columbia) under the Urban Mass
   Transportation     Administration   program than under
   the Urban System program. Therefore,        more local
   money was required     for a mass transit     project
   funded through the Urban System program.            In
   addition,    several States had sharing programs
   which often favored highway projects.
--Some communities preferred    highway projects          be-
   cause they contributed  to local employment.
   (See ppO 9 and 10.)
--Some communities did not have        apparent transit
   needs or were concerned about       the additional
   losses that could result    from    expanding exist-
   ing transit  systems.    (See p.    10.)
November 1973 interim       guidelines      for approving Urban
System mass transit      projects,     however, helped deter
the use of funds for such projects.               The guidelines
required    that each project      be approved by State,
Federal Highway Administration,           and Urban Mass
Transportation     Administration      officials.     This in
effect   created two additional        reviews--by     the
State and by the Federal Highway Administration--
not required     in the grants program.
Smaller communities applying        for funds experienced
delays in obtaining    project    approval.    For example,
of the 15 mass transit     projects    approved, 10 were
for municipalities   of over 200,000 population,
such as San Francisco and Chicago, and project
approval took about 8 months. Howeverp project
approval for the 5 smaller communities averaged
over 20 months.
Therefore,    some communities turned to the Urban
Mass Transportation    Administration      for mass tran-
sit projects    because their   procedures were already
established    and the additional     approvals were
not required.     (See p. 12.)
As of February 1977, 3-l/2 years after       the Con-
gress authorized     Urban System funds for mass
transit   projects,   the final  regulations  were
still   not issued.     This was too long a time for
interim   guidelines    to remain in effect.    (See
pa 14.)
                             ii
               The Secretary     of Transportation        should (1) estab-
               lish procedures      for setting     target   dates for
               issuing regulations        which implement Department
               of Transportation       programs,    especially    those re-
               quiring   coordination      by Department agencies and
                (2) require   the agencies to report periodically
               to the Secretary       on their   progress.
               To improve the administration       of the Urban System
               program, the Secretary      should direct  the Federal
               Highway and Urban Mass Transportation        Adminis-
               trators    to issue, as soon as possible,     final
               regulations     on the use of highway funds for mass
               transit    projects.   (See p. 17.)
               If the Congress wants more Urban System funds to
               be used for mass transitr it should provide fur-
               ther incentives to local communities by
               --equalizing     the Federal share of mass transit
                  project   costs under the highway and mass tran-
                  sit programsI except in States where the Fed-
                  eral share under the highway program exceeds
                  that under the mass transit    program;
               --increasing     the    Federal     share of mass transit
                   project  costs     under the     highway program so that
                   it exceeds the      sharing     provision of the mass
                   transit  grants     program;     or
               --requiring   that a specific percent of the Urban
                  System highway funds be spent on mass transit
                  projects,    (See p0 17.)
               The Department of Transportation    agreed with GAO’s
               recommendation to establish    and monitor target
               dates for issuing program regulations.         It  dis-
               agreed with B or would not endorsep two of the
               options presented  to the Congress.     The Depart-
               ment did not comment on the option to equalize
               the Federal share for mass transit     project    costs
               under the highway and mass transit     programs.
               (See pm 18.)




Tear   Sheet                                      iii
                       Contents
                       --------
                                                                  Page
                                                                  ---
DIGEST                                                              i

CHAPTER
   1       INTRODUCTION                                             1
               Slow implementation     of transit
                  projects                                          2
               Urban System funds     used for      transit         3
               Scope of review                                      4
           REASONSURBAN SYSTEM FUNDS ARE SELDOM
             USED FOR MASS TRANSIT                                  5
               Other funds available  for transit             ,     5
               Funds needed for highways                            6
               Advantages of using Urban System
                 funds for highways                                 8
               Other reasons for not using Urban
                 System funds                                      10
           NEED FOR TIMELY PUBLICATION OF REGULA-
             TIONS IMPLEMENTING URBAN SYSTEM
             PROGRAM                                               12
               Delayed issuance of regulations                     12
               Interim    procedures                               14
               Delayed issuance of other
                  regulations                                      15
           CONCLUSIONS, RECOMMENDATIONS,AND
             AGENCY COMMENTS                                       16
               Conclusions                                         16
               Recommendations to Secretary  of
                 Transportation                                    17
               Recommendation to the Congress                      17
               Agency comments and our evaluation                  18
APPENDIX
       I   Status of Federal-aid   Urban System funds
             apportioned  to States for fiscal  years
              1974-1976 as of June 30, 1976                        20
  II       Sliding     scale rates of Federal-aid
              participation      in public land States,
              effective     July 1, 1976                           21
                                                           Page
                                                           --
111    Letter     dated January 17, 1977, from
          the Assistant    Secretary  for Admin-
          istration,    Department of
         Transportation                                     22

 IV    Principal    officials       responsible    for
          administering       activities     discussed
          in this report                                    27




                        ABBREVIATIONS
                              -1
GAO    General   Accounting     Office
UMTA   Urban Mass Transportation          Administration
                                CHARTER 1
                                --------
                              INTRODUCTION
                              __--e-----w
       The Federal Aid Highway Act of 1970 (84 Stat. 1713)
created the Federal-aid     Urban System which increased the
number of roads eligible     for Federal funds.       Subsequent
increases    in Federal funds encouraged highway construc-
tion in urban areas.      The system consists    of 125,000
miles of high volume arterial      and collector    routes and
access roads to major activity      centers   in urban areas.
Under this program the Federal Government shares road
construction    costs with the States and local communities.
       To increase the capacity     of federally     funded roads
for moving people, Section 121 of the Federal Aid Highway
Act of 1973 (23 U.S.C. 142) encouraged the development,
improvement,     and use of mass transportation        systems in
urban areas.       The Congress thus authorized      for the first
time the use of Highway Trust Fund moneys for Urban
System mass transit      projects.    For fiscal    years 1974-76,
about $2.3 billion      of Urban System funds were available
for mass transit      and highway projects;       To insure local
involvement    in the program and to emphasize that urban-
ized areas have the capacity       and desire to plan their
own affairs,     the 1973 act required     local officials    to
select projects      and obtain concurrence      of State highway
departments.
        Mass transit      has long suffered       from insufficient
capital    needed to maintain          and increase the effective-
ness of the industry.            The Congress recognized        this as
a national      problem in passing the Urban Mass Transpor-
tation    Act of 1964 (49 U.S.C. 1601) and subsequent
amendments to increase the funding authority                 and scope
of Federal assistance.            In 1968 the Urban Mass Transpor-
tation    (UMTA), Department of Transportation,              was given
the responsibility         of providing      Federal assistance
(grants)     for developing       efficient     and coordinated     mass
transportation        systems in urban areas.           UMTA awards
several types of grants to qualified                State and local
public authorities          for:    capital    improvements,    oper-
ating assistance,         planning,      and research and training.
As of June 30, 1976, UMTA had awarded more than
$5.4 billion       in capital     grants for communities        to
impro?e-xkeir        urban transportation        systems.




                                      1
           All Urban System funds are managed by the Federal
    Highway Administration.        It is responsible   for the
    highway-related      projects  funded by the program, such
    as highway construction,       highway traffic   control  de-
    vices,    and preferential    bus lanes.
            UMTA is responsible         for nonhighway-related         proj-
    ects, such as bus purchases,               and the construction,
    reconstruction,       and improvement of fixed rail             facili-
    ties,    including    the purchase of rolling           stock.     Mass
    transit     projects    referred      to in this report      are these
    nonhighway-related         transit      prolects.   Projects     such as
    bus passenger loading areas and facilities                  and fringe
    and transportation         corridor      parking facilities      can be
    classified      as either     highway-related      or nonhighway-
    related     projects.

    SLOW IMPLEMENTATION OF TRANSIT PROJECTS
           At the request of the Chairman, Subcommittee on
    Transportation,    Senate Committee on Public Works, we
    reported    in June 1974 on the slow progress       in imple-
    menting the mass transit      provisions     of the 1973 Highway
    Act (B-180617, June 13, 1974).         Ten States reviewed
    favored the transit    provisions     but said that insuffi-
    cient time had elapsed since the 1973 act and that the
    delays in submitting     mass transit     project  applications
    were due to the absence of final         Federal implementing
    guidelines.
           While developing     the Federal-Aid      Highway Act of
    1976 (90 Stat. 425), the Congress expressed concern
    that the States had been slow in spending their               Urban
    System funds for either        mass transit     or urban highways.
    Testimony indicated      several reasons for the slow
    implementation,     including    Federal procedures,      differ-
    ences between State and local officials            on project
    selections,     and charges that States gave the Urban
    System program low priority.          As a result,     the Congress
    required    the Secretary     of Transportation     to study the
    Urban System program.
           The studye submitted        to the Congress on January 13,
    1977, addresses the reasons it is taking so long for the
.
    urban areas to obligate         Urban System funds.    The study
    concentrates    on how the program is being implemented,
    including    an analysis      of the representation   of various
    governmental    units within       the urbanized areas; the
    organizational     structure,      size, and caliber  of staff;
    and the relationship        and authority    of State and local
    governmental    entities.
                                          2
        in addition   to concerns over the Urban System pro-
gram's slow startp      the Congress was concerned about why
so few of the projects       were for public mass transpor-
tation.     Testimony provided different        reasons on why
more funds were not used for mass transit.             Some said
a slow start      is normal for a new program; others charged
that States were ignoring        local needs and priorities.
While the Secretary's       study examined the slow implemen-
tation    of the Urban System program, our review focused
on determining      why a larger    share of these funds had
not been used for mass transit.            This report  should assist
the Congress in considering         future   improvements for the
urban System program and should supplement the Secretary's
report.
URBAN SYSTEMFUNDS USED FOR TRANSIT
      For fiscal  years 1974-76, about $2.3 billion        in Urban
System funds were apportioned     to the States.     As  of  June 30,
1976, about $73.7 million,     or 3 percent,    had been obligated
for mass transit   projects   and about $1 billion,     or 45 per-
cent, had been obligated    for highway projects.       The balance,
or 52 percent,   had been either    transferred   to other highway
programs or remained unobligated.
       However, as of June 30, 1976, the Highway Administra-
tion had reserved about $5.2 million,    or .5 percent,  of the
unobligated    balance for mass transit projects needing
UMTA approval.
     The following      table shows by fiscal   year and State the
amounts of Urban System funds obligated       and reserved for
mass transit   projects     as of June 30, 1976.

                                     Obligations       --
Stat&             F Y 1974      F Y 1975           F_ Y 1976      Total         Reserved
New York        $33,019,000    $9,660,700        $19,584,586    $62,264,286     $1,686,094
Illinois          1,547,597     1,874,600                          3,422,197
Californi a                     1,713,374             649,770      2,363,144        485,507
Ohio                               700,000                            700,000
Oregon                          1,727,700             567,560      2,295,260
Minnesota                                           1,511,639      1,511,639
North Dakota                                           30,800          30,800           5,228
Texas                                               1,093,400      1,093,400
Puerto Rico                                                                      3,000,000

        Total   $34,566,597   $15,676,374.
                               ---               $23,437,755    $73,680,726     $5,176,829,



      The status, as of June 30, 1976, of Urban System
funds authorized  by the 1973 Highway Act and apportioned
to the States is shown in appendix I.

                                             3
SCOPE OF REVIEW          ’

        We reviewed     the Urban System program’s               mass transit
projects,     approved     and in process,          to determine      why more
mass transit      projects     have not been funded under the
program.      Since highway-related            transit    projects     are
administered      as highway      projects,        our review     concen-
trated    on selected      nonhighway       transit    projects.

        Our review       was conducted      at the headquarters
offices     of the Federal        Highway and Urban Mass Transpor-
tation     Administrations       and at the Federal         field    offices,
State    transportation        and highway     agencies,      and selected
local    organizations       in California,       Illinois,       Nevada,
New Jersey,       and New York 0

          We obtained        the views of Federal,          State,    and local
officials       about the factors           influencing       the selection
of projects          and about problems          in obtaining       approval
of locally         initiated       transit    projects.       We also received
comments from State,               city,   and county     officials      and con-
sidered      their       views   in preparing       this  report.
                            CHAPTER2
                REASONSURBAN SYSTEMFUNDS ARE
                --
                 SELDOMUSED FOR MASS
                 w-c----           ---TRA?GIT
       To increase the capacity     of urban highways for moving
people, the Congress encouraged urban areas to use some
of their highway funds for public mass transnortation
projects.      This program, however, has met with only
limited    success, and since 1973 only 13 urban areas in
8 States have obligated      highway funds for mass transpor-
tation    projects  as of June 30, 1976.
       In deciding how to use Urban System funds, a com-
munity must consider its total        transportation    needs in
relation   to the resources available.         Many communities
chose to use Urban System funds for highways and UMTA
money for their mass transit      needs.      Their decisions
were influenced    by the availability      and advantages of
the UMTA capital    grants program.
OTHER FUNDS AVAILABLE
              -       FOR
                       --I__-TRANSIT
        Because other funds are available      for mass transit
projects,     communities can use Urban System funds for
highways and still        satisfy their mass transit   needs.
During fiscal       years 1974-76, UllTA provided the five
States we reviewed over 20 times as much money for mass
transit    projects     as did the Urban System funds.    The
following     schedule shows the breakdown by State.
                    UMTA capital   grants        Urban System mass
State
--                            &t    projects      transit
                                                  a--     projects
                w-1,               (milli.~Z)
California            $   245.4                          $ 2.4
Illinois                  283.9                            3.4
Nevada                      0                               0
New Jersey                178.8                             0
New York               -- 758.8                           62.3
      Total           $1,466.9
                           --                            $68.1




                                   5
      The 1973 and’1974 amendments to the Urban Mass
Transportation    Act of 1964, as amended, authorized     UMTA
$11.8 billion    in funds through fiscal    year 1980, of
which $7.8 billion     were for communities which individu-
ally applied for funds.       Approximately  $5.6 billion  of
the $7.8 billion    were uncommitted as of June 30, 1976.
       Another source of mass transit         funds is the State
government.    For example, seven California           counties have
elected to use portions        of State sales and highway user
taxes for transit.        During fiscal   year 1976, about
$141 million   of State sales tax revenues were allocated
for mass transit      capital   and operating     needs.    In addi-
tion,   about $1.1 million      of the State highway user taxes
were available     for fixed guideway transit        systems in
fiscal   year 1976 and up to $20.1 million          are available
for these systems in fiscal        year 1977.
         Because of the availability            of other transit        funds,
communities       in four of the five States reviewed gave
priority     to highway needs in using Urban System funds
and obtained UMTA capital             grants for mass transit
projects.        For example, Rochester,           New York, did not
submit any mass transit            projects     for Urban System fund-
ing, but the community received                $8.8 million     in capital
grants from UMTA in fiscal              years 1974 and 1975.         Offi-
cials     in California     and New Jersey also indicated               that
transit     needs generally        have been met through UMTA
grants.      Illinois    officials       stated that UMTA grants
generally      were sufficient        to meet transit       objectives,
except in large urban areas with transit                  systems such
as St. Louis and Chicago.
FUNDS NEEDED FOR HIGHWAYS
        The 1973 Highway Act increased funding for the
Urban System program from $100 million       in fiscal     year
1973 to $780 million     in fiscal  year 1974 and to $800
million    in each of fiscal   years 1975 and 1976, making
it the primary source of Federal financial         assistance
for urban highway needs.       However, the act also expanded
the program# making additional      roads eligible     or the
funds.
       As a result,    States use Urban System funds for many
of the Nation’s     urban highways that require      improve-
ments before they can meet today’s safety and capacity
standards.      In 1972 the Secretary   of Transportation
reported    that the 10,193-mile   Urban System needed about
$12.2 billion     in improvements.    The Secretary’s     report
stated that nearly 85,000 miles of urban arterial           and
collector  roads were below minimum safety and capacity
standards and estimated that by 1976 an additional
35,860 miles would be deficient.    In 1974 the Secretary
estimated that it would cost $95.2 billion    to bring
deficient  Federal-aid urban highways up to standards.
        This backlog in highway improvements is one of the
reasons that as of June 30, 1976, only eight States had
used their Urban System funds for mass transit          projects.
For example, sufficient        funds were not available    to
construct     or rehabilitate    many urban roads in New Jersey
until     the Urban System funds became available.      Local
officials     have directed    these funds toward local road
projects.      But State officials    expect that $13 million
in Urban System money will be used for mass transit
projects     during fiscal    year 1977.
        Other communities,           although considering           mass
transit     projects,      gave higher priority             to their highway
and highway-related           projects      when deciding which of the
competing projects           should be funded.            Alameda County,
California,        for example, established              a point system
for selecting         projects--     including     mass transit        proj-
ects-- to be funded with Urban System funds.                        One of the
selection      criteria,      however, favored highway and high-
way-related       projects       to the exclusion         of mass transit
because points were given to projects                     involving     severe
accident histories,           and mass transit          projects     did not
meet this criterion.               Contra Costa County, California,
evaluated projects           with similar       criteria      but did not
award points.          Local officials         in these counties said
that they considered their project                   selection      procedures
to be fair.
        In November 1976 Alameda and Contra Costa county
officials    stated that about $7 million      of Urban System
funds had been used for highway-related         projects    such
as fringe parking and improving access and traffic
conditions    around mass transit   stations,      The officials
also said that special evaluation        procedures for
selecting    mass transit  projects  had been developed
during fiscal     year 1977.
      Eight mass transit   applicants   for Urban System
funds that we contacted acknowledged the need for urban
highway improvements,    and four,doubted     that significant
amounts of moneys would be diverted       from urban highways.




                                         7
ADVANTAGESOF USING URBAN
SYSTEM FUNDS FOR HIGHWAG
        Communities generally      try to use available   funds
in a manner that will provide them the most benefits,
because seldom are enough funds available           to meet their
overall    transportation      needs.  Communities use Urban
System funds for highways and other sources of funds
for mass transit        because they can
      --maximize    Federal     assistance,
      --minimize    their     matching       fund   requirements,   and
      --increase    local     employment.
Maximizing    Federal   assistance
       Urban System funds are virtually     guaranteed to a
State and its communities because specific        amounts are
apportioned   to the State and allocated     to urbanized
areas.    UMTA discretionary    grant funds, on the other
hand, are not allocated      to States or urban areas but
are awarded to individual      applicants.   Therefore,   a
community can maximize its Federal assistance         by using
Urban Systm funds for highways and UMTA discretionary
grants for mass transit.
        California     Department of Transportation         officials
encouraged local planners and transit              operators     to
maximize the State’s          Federal assistance     by funding
qualified      transit    projects     with UMTA grants.     They
pointed out that UMTA grants are the main source of
mass transit       funding because the use of Urban System
funds for mass transit           does not represent     the best use
of financial       resources.       The same rationale     was also
used by officials         in Illinois      and New York, except for
their larger metropolitan             areas where the opportunities
for providing       public transportation        and the related
costs are so much greater.
       California’s     current  policy   is to maximize the use
of all available       funding sources without     specific
reference     to the type of project      to be financed.       One
local official      said that as long as additional         funds
were available      for transit,   the funding of mass transit
projects     with Urban System funds to the detriment           of
badly needed highway projects          would be foolish.



                                         8
Minimizing    matching    requirements
        In funding transportation           projects,     communities   tend
to seek programs which require              the least local matching funds.
The Federal share of Urban System               highway and mass transit
projects    ranges from 70 to 95 percent              (see app. II for
details    by State),       depending on the amount of public           lands
in each State,       but    remains a flat      80 percent for UMTA capital'
grants.     Differences       in the proportion        of local matching
funds required       under the various         Federal programs and between
highway and mass transit           projects     by some    States provide
communities      incentives     to use Urban System         funds for highways
and UMTA capital         grants for mass transit.
        In Illinois,      for example, the Federal share of Urban
System projects       was about 70 percent during fiscal            year 1976.
The State normally          funds two-thirds     and local organizations
one-third      of the matching requirements          for all federally-
funded mass transit          projects.      As a result,    communities had
to provide 10 percent of Urban System               project   costs and about
7 percent      of the project       costs funded with UMTA capital
grants.      This cost difference         to the communities      is one
reason transit       officials      in Chicago preferred      to use UMTA
grants for their projects.
       Nevada provided communities     an incentive  to use Urban
System funds for highways by providing        all the matching funds
for highway projects    but none fo r mass transit    projects.
Nevada law requires    highway funds to be used exclusively        for
highways; consequently,     communities are required     to provide
all the matching funds required      for Urban System mass transit
projects.
        In 42 States (including   Puerto Rico and the District
of Columbia) during fiscal      year 1976, the State and local
share was greater     for Urban System funded projects        than for
UMTA capital    grant projects.     As a result,   the differences
in the Federal shares under the various programs and the
differences    in State matching policies      have provided many
communities incentives      to use Urban System funds for highways.
Highway construction       contracts
increase_employment        -
        New York and California     officials     stated their   prefer-
ence for Urban System funds f.or highway projects            because
highway construction      generally     creates more local employment
than mass transit     projects.     According to Highway Adminis-
tration    estimates,  each $1 million        of Federal-aid   construc-
tion funds creates about 48 jobs and induces another 67 jobs;
while the U.S. Congressional        Office of Technology Assessment
                                       9
estimates  that local transit projects   generate 56 jobs and
induce an additional  27 per $1 million.    Mass transit   proj-
ects under the Urban System program usually     require  equipment
to be purchased from other geographical    areas so the money
spent does not have as great an impact on local employment.
         In Syracuse, New York, for example, transportation
planning officials       gave a bus purchase project           high priority
on its Urban System projects          list,     but the transit      authority
did not have local matching funds available                 for the project.
A highway project,       however, with a lower priority            than the
bus project      had already been funded.           Public transit     author-
ity officials      said obtaining     the matching funds was
difficult     since local officials         preferred    to fund high-
ways because of the many highway needs and the employment
that highway construction         contracts      generated.

 OTHER REASONSFOR NOT
-USING URBAN SYSTEMFUNDS
         Some of the smaller communities     in the five States
reviewed had no existing      public transit    systems and did
not consider mass transit      projects  in selecting    Urban
System projects.      For example, no community in Nevada has
used either     Urban System or UMTA capital     grants for mass
transit.      Las Vegas has the only urban area bus system
in the State.
         While some communities have no transit         systems,
others face the perennial         problem of operating      deficits
commonly associated        with mass transit.      Some California,
Illinois,      New Jersey,    and New York officials     cited the
increased operating        losses that may result     from expanding
mass transit       systems as one of the reasons for communi-
ties'     reluctance    to use Urban System funds for mass
transit.
        Since 1963 the transit        industry     has been experienc-
ing operating      costs in excess of revenues.              Insufficient
revenues to cover rising         fuel and labor costs have caused
transit    operating    deficits    to soar in recent years.              To
keep mass transit       running,    transit      authorities     are divert-
ing local funds from ordinary            capital     purchases to pay
for operations       and maintenance.
        In California,      officials      of local Urban System
project    selection     committees,       metropolitan    planning
organizations,       and the State Transportation            Board cited
transit    operating     losses as a problem.           One official    of
an Urban System project            selection    committee said that
mass transit      projects     had not been favorably         considered

                                       10
by the committee           because  if funds were spent to purchase
buses,   additional         funds would be required       to operate and
maintain    them.        He also pointed       out that the buses would
need good roads          to operate    effectively.

        An official        in New Jersey         said the present          financial
condition       of the State         and its     localities       precluded
expanding       existing      transit     systems        and incurring       addi-
tional      operating      costs.      He added that           UMTA capital
grants      had been obtained          for bus replacements             and the
rehabilitation           of existing      transit        systems.




                                             11
                                  -CHAPTER 3
          -NEED FOR TIMELY ---
                           PUBLICATIONS OF----
                                            REGULATIONS
               IMPLEMENTING THE URBAN
                                   - SYSTEMPROGRAM
        The option of using highway funds for mass transpor-
tation    projects    has been available          to local communities
for over 3 years.           During that time, communities have
been processing        their applications         in accordance‘with
interim    guidelines       issued by the Federal Highway Admin-
istration      and UMTA. The guidelines             were a patchwork of
existing     regulations       from the two agencies and required
reviews and documentation            by officials      of the State
government and both Federal administrations.                    In addition,
Federal officials         in the local offices         were unfamiliar
with the requirements            and, consequently,      the few com-
munities     that did apply for these funds were not able
to obtain help or experienced            confusion      and delays in
obtaining     approval for their projects.              As a result,
communities turned to UMTA for their mass transit                    proj-
ects because its procedures were clearly                 established     and
the process did not involve either                the State or the
Highway Administration.

.-DELAYED ISSUANCE OF REGULATIONS
        The Highway Administraticn         and UMTA established        a
task force responsible         for issuing regulations         to imple-
ment the Urban System's provision            of the 1973 act.
Neither    the Department of Transportation           nor the two
agencies have guidelines          specifying    how soon after      leg-
islation     is passed the implementing         regulations      should
be issued.      However, the task force planned to issue regu-
lations    to implement Urban System-funded           mass transit
projects     by March 30, 1374.        It issued preliminary
guidance in November 1973.           These guidelines       set forth
the legislative      requirements      and instructed      applicants
for mass transit      projects     to process their applications
sequentially     through the Federal Highway Administration
and UMTA.
        Because of delays in developing       the regulations,
the Highway Administration       and UMTA did not publish or
request comments on proposed regulations            for using
Urban System     funds for mass transit      projects   until
September 5, 1974.       The proposed regulations       described
eligible    projects,  project   application     submissions,    and
the Highway Administration       and UMTA review process;        but
                                       12
numerous comments on the proposed regulations            sought
clarification        on the definition of eligible    projects,
and several local governments objected          to the predomi-
nant role given to State highway departments.             One
transit     group objected to the roles given to State and
Federal highway agencies and suggested that UMTA assume
a stronger      role.                                                5.
      As a result of the comments and experience     with the
program, UMTA became concerned over several aspects of
the proposed regulations.   The resolution    of the fol-
lowing issues delayed the publication     of the regulations.
1.   UMTA objected to the review of applications         for
     mass transit     projects   by the State highway depart-
     ments and the Highway Administration        before UMTA's
     review.      The Highway Administration   believed it
     needed to be involved because the projects         were
     to be financed from highway funds, which are its
     responsibility.       The matter was resolved by having
     the State highway departments submit the applica-
     tions directly      to UMTA and request the Highway
     Administration      to reserve the funds for the projects.
2.   UMTA wanted to be involved in approving Urban System
     highway projects.   The Highway Administration  ob-
     jected and UMTA was not given a role in approving
     such projects.
3.   UMTA wanted the definition       of a nonhighway project
     to be clarified.   Clarification      was provided in
     the preamble to the regulations.
4.   UMTA wanted and was given a consultative    role when
     highway rights-of-way  were to be considered    for
     transit use.
       The two agencies were nearing completion           of the
regulations    in August 1975 when UMTA changed        Administra-
tors.     This further   delayed the regulations'       issuance
because I according to an UMTA official,        the   incoming
Administrator     considered other high priority       matters
before he reviewed the regulations.
      In February 1977, 3-l/2 years after the 1973 high-
way act was passed, both agenoies still   were reviewing
the proposed regulations.




                                  13
L   .




        INTERIM
        _---1       PROCEDURES

                Interim     guidance     on Urban System projects         required     mass
        transit      applications      to be processed        and approved     sequen-
        tially     by the State,       the Federal       Highway Administration,
        and UMTA. In contrast,              UMTA capital      grant applications
        are not processed          through    either     the State or the Fed-
        eral Highway Administration.                 Both Urban Systems proj-
        ects and UMTA capital            grant projects       are processed      in
        the same manner by UMTA.

                 Because the interim              procedures      required      approval
        of three separate              organizations,         Federal    officials       at
        the field         offices      had to be familiar           with the require-
        ments of each organization                   before    they could accurately
        guide communities              requesting       assistance.        However, cor-
        respondence           within     the California        Federal     Highway Admin-
        istration         office     indicated       that Highway Administration
        field     officials’         unfamiliarity         with UMTA’s process           con-
        tributed        to the applicants’             confusion     and delays.
                 Officials      of the larger     metropolitan       areas,      such
        as San Francisco,            New York City,     and Chicago,        indicated
        that requirements            by several    agencies    did not create
        any serious         problems     for them because they were already
        familiar        with the procedures        of the individual          approval
        agencies.          However,    a San Francisco      transit     official
        said that while           State officials     provided      oral guidance,
        written       guidance     would have been more helpful.               He
        stated      a preference       for obtaining      UMTA capital        grants
        because of familiarity              with the requirements         for UMTA
        grants      and because applications          are processed         quicker
        since approval          is not needed from State and Federal
        highway officials          e

              Of the 15 mass transit       projects    approved    as of
        June 30, 1976, 10 were from municipalities             of over
        200,000 population,     such as San Francisco,         Chicago,
        and New York City.      Projects    from these communities
        were approved    in about 8 months.        However, project
        approval   for the five    smaller    communities    averaged
        over 20 months.

               One California        transit   operator      was unable to initi-
        ate an Urban System-funded            project     for the purchase     of
        25 buses because he did not know how to prepare                  and
        process     the application.         The transit      operator  sought
        help in submitting         his application        from the Highway
        Administration’s        and UMTA’ s field       off ices but, according
        to the operator,       was unable to obtain           adequate guidance.


                                                    14
The transit   operator    finally   got assistance  from another
community that had successfully         processed a project   appli-
cation,   but the transit     operator was late in submitting
the project   application      to a local selection   committee
and the application      was not considered.
DELAYED ISSUANCE OF OTHER REGULATIONS
      Previously    we reported on delays by the National
Highway Traffic     Safety Administration    in issuing regula-
tions covering motor vehicle safety standards and tire
grading systems.       (Report to the Committee on Commerce,
United States Senate, "Improvements Needed In Planning
And Using Motor Vehicle Safety Research,"         Sept. 16,
1974, B-164497(3),      and Report to Senator Gaylord Nelson,
"Delay In Establishing      A Uniform Quality   Grading System
For Motor Vehicle Tires,"      Mar. 28, 1975, RED-75-344.)
In both instances we reported on the need for closer
coordination     among the agency's staff.
        In August 1976 we reported   to the Highway Admin-
istrator    on the need to issue regulations    implementing
section 157 of the Federal-Aid      Highway Act of 1973.
The notice of proposed rulemaking was,not issued because
of problems in obtaining     a consensus within   the Highway
Administration    and UMTA.




                                   15
                             CHAPTER4
   CONCLUSIONS, RECOMMENDATIONS,
                               AND AGENCY-COMMENTS
CONCLUSIONS
        To increase the capacity of the Nation's       urban
roads for carrying      people, the Congress 3 years ago
authorized     local communities to use their Urban System
highway funds for mass transportation       projects.      Since
that time few communities had taken advantage of the
authorization,      and only 15 projects had been approved
as of June 30, 1976. Most communities have continued
using their Urban System funds for local roads.            In
general,    this decision has been the result      of the avail-
ability    of other funds for mass transit    projects    and a
large backlog of highway needs.
      The local decisions   to use Urban System funds for
highway projects  were influenced   by many other factors.
      --Urban System funds are allotted     to the communi-
         ties,  whereas UMTA capital  grants are available
         to individual  applicants.   Therefore,  communi-
         ties obtain the maximum amount of Federal money
         when they use Urban System funds for highway and
         UMTA funds for mass transit.
      --For 42 States Federal cost-sharing    ratios are
         greater under the UMTA program than they are under
         the Urban System funds.   Therefore,   it takes less
         local money for a project  funded through UMTA
         than one funded with Urban System money. In
         addition,  several States have sharing programs of
         their own which often favor highway projects.
     --Some communities prefer highway projects         because
        they contribute to local employment.
      The interim guidelines      for approval of Urban System
mass transit    projects  required that each project     be
approved by State, Federal Highway Administration,          and
UMTA officials,      This in effect   creates two review levels,
the State and Federal Highway Administration,        which are
not included in the UMTA capital       grants program.
      When a program requires   the coordination  of two or
more agencies within the Department,     interim guidelines
understandably   represent  a patchwork of the processes


                                16
used by the agencies.          However, we believe   that 3-l/2
years is too long for such guidelines          to remain in effect
and that final      regulations    should be issued.     This situa-
tion may have discouraged         some communities   from divert-
ing their    Urban System funds from highway work to mass
transit   projects.
       If new grant programs are to get started           effec-
tively    and benefit    the intended recipients,       implementing
regulations    must be issued expeditiously.           We recognize
the difficulty     in establishing       a standard governing     the
issuance of regulations        implementing     Federal laws.     How-
ever, we believe      that after    legislation    has been passed,
it should be reviewed and target           dates should be estab-
lished for issuing final        regulations.
RECOMMENDATIONS
              TO THE SECRETARY
m TRANSPORTATIOJ
      The Secretary    of Transportation    should (1) estab-
lish procedures     for setting  target  dates for issuing
regulations  which implement Department of Transportation
programs, especially     those requiring    coordination     by
Department agencies and (2) require       implementing     agen-
cies to report periodically      to the Secretary      on their
progress.
        To improve the administration     of the Urban System
program, the Secretary      should direct   the Federal Highway
and UMTA Administrators      to issue, as soon as possible,
final    regulations  on the use of highway funds for mass
transit    projects.
RECOMMENDATION
             TO THE CONGRESS
       The Urban System provision      of the Federal Highway
Act does not provide local communities sufficient           incen-
tive to use Urban System money on mass transit          projects.
As a result,    communities   use this money for roads in
preference    to mass transit   projects.    If the Congress
wants more Urban System funds to be used for mass tran-
sit,   we recommend that it amend Section 142 of Title           23
of the United States Code to provide further         incentives
to local communities.
      The following are several options,  along with some
advantages and disadvantages,   from which the Congress
could choose:




                                    17
      --Equalize     the Federal share of mass transit        project
         costs under the Urban System and UMTA proqrams,
         except in States where the Federal share under
         the Urban System program exceeds the Federal share
         under the UElTAprogram.        States,  however, could
         continue providing      local officials    financial
         incentives     to use Urban System funds for highways
         by varying the proportion       of State-provided     matching
         funds.     Other factors    such as the maximization
         of Federal assistance       and highway construction
         employment will     continue to provide some communi-
         ties incentives     to use the funds for highways.
      --Increase       the Federal share of mass transit    project
          costs under the Urban System program so that it
          exceeds the sharing provision      of the UMTA capital
         grants program.       This could offset   those factors
         which would continue to provide communities incen-
          tives to use the funds for highways in the above
          alternative     but would reduce local options and
          flexibility.
      --Require    that a specific     percent of the Urban
         System funds be spent on mass transit            projects.
         This alternative       would eliminate    the local flexi-
         bility  provided      in the current   legislation      and
         in the two preceding alternatives;           however, it
         would make sure that the funds are spent for
         mass transit     projects.
AGENCYCOMMENTSAND OUR EVALUATION
                              -
      The Department of Transportation     (see app. III)
agreed with the substance of our recommendations,         and
stated that in the future    it would approve agency target
dates for developing   and implementing    the regulations
necessary under new legislation.       The Department also
agreed to monitor agency progress to assure that the
regulations  are issued on a timely basis.
      The Department does not believe,              however, that the
lack of final     regulations      for the Urban System program
was a major problem because a number of urban areas had
funded mass transit       projects.       Nevertheless,     the Depart-
ment expressed a concern about the delays some smaller
communities suffered        in obtaining      project    approval and
will  investigate     the causes of the delays.,           Further,  the
Department stated the final           regulations,     when issued,
will make clear that UMTA procedures               and format are to
be used for Urban System transit            projects     and that the

                                     18
State and the Highway Administration   are to receive
timely notification  to permit a determination   on avail-
ability of funds.
        Our intent   was not to single out the lack of final
procedures     as a major cause for the limited        use of Urban
System funds for mass transit       projects.     Rather, we in-
tended to illustrate       the need for a process to insure
the timely issuance of regulations.           We believe   the
Department's      promised actions,   when implemented,      should
result    in more timely issuance of regulations         in the
future.
       The Department acknowledged that meeting transit
operating   costs was a problem, but stated that if it
were prevalent    nationwide,    use of UMTA's capital       assis-
tance funds would have declined.          California    State offi-
cials also believed     that transit     costs,   while a problem,
were not a serious deterrent         to use of Urban System
funds for mass transit      projects.
         The Department's     and California's    comments, however,
refer to the rehabilitation         or replacement     of transit
facilities     and equipment,     which could result      in some
increased efficiencies.          However, the issues addressed
by local officials        during our review related       to system
expansions which would add to operating            costs.    Further-
more, in commenting on this report,            New York and Illinois
State officials      advised us that they were becoming more
concerned with transit         expansions because of its rap-
idly increasing      operating    costs.
       The following   are the Department's  reactions    to the
options presented     to the Congress for providing    further
incentives     to use Urban System funds for mass transit:
      --Disagreed   that a specific percentage  of urban
         System funds be set aside for mass transit    be-
         cause this would create a new categorical   pro-
         gram.
      --Could not endorse making the Federal share under
         the Urban System program greater than the UMTA.
      --Did not comment on making the      Federal       share of
         mass transit project  cos.ts equal under        the Urban
         System and UMTA programs.




                                    19
I        APPENDIX I                                                                                                              APPENDIX I
                                                              STATUS OF FEDERAL-AID URBAN SYSTEM FUNDS
                                                          APPORTIONED To STATES FOR FISCAL TEARS 1974-1976
                                                                       AS OF JUNE 30, 1976


         State                         Fiscal yeara               Net  transfers                   Obligations                          Unobligated
                                        1974-1976                 to (from) other          nonhighway             highway-               balance as
                                         apportionments           highway programs         mass transit           related                of 6130176
                                             (note a)
         Alabama                      g 28.288.278                $3,024,095                                      $20,531,923           $ 4;732,260
         Alaska                           11,302,959                                                                 6,507,5oa            4,795,451
         Arizona                         zoj451j309                                                                16,133,323             4,317,986
         Arkansas                        L2,989,538                1,750,000                                        .6,942,497            4,095,041
         California                    267,849,184                (3,273,OOO)              $ 2,363,144            123.400.999           145,356,041
         Colorado                        25,219,752                1,341,lia                                       19;133;229             4;745;405
         Connecticut                     34,480,564                                                                16,504,728            17,975,836
         Delaware                         11.302.959                                                               10,617,325                685,634
         Dist. of Col.                    11;423;446                  578,000                                       5.678.251             5.167,195
         Florida                         77,984,42a                4,134,517                                       92,925;087                924,824
         Georgia                         38,235,333                5,033,ooo                                       23,723,640             9,478,693
         Hawaii                           11,302,959                                                                4,103,366             7,19Y,593
         Idaho                           11,302,959                1,381,254                                        9,502,540                419,165
         Illinois                      134,673,417                84.500,OOO                  3,422,197            40,001,000             6.750.220
         Indians                         48,165,796                9,000,000                                       23,928,215            1712371561
         Iowa                            21,998,156                                                                11,199,576            10,798,580
         Kansas                          29,209,238                                                                 8,841,330            11,367;908
         Kentucky                        23,539,449                                                                15,095,629             a,443,c20
         Louisiana                       34,014,874                i.748,524                                       10,594,362            21,671,988
         Maine                           11,302,Y59                                                                 3,138,552             8,164,407
         Maryland                        44,920,366               29,000,000                                        !5,859,863            9,862,503
         Wsssachusetts                   70,624,367                7,313,382                                       49.023,255            14,287,730
         Michigan                        95,347,654                5,000,000                                       94,025,026            16,322,628
        Ninnesota                        35,878,147                   461,337                 L,511,639            1; 3;;: '386024       y9;;;$&7
        I¶fesissippi                     13,177,002
        Hissouri                         46,922.246                3,000,000                                      1413321686            29:589:560
        Hontana                          11,302,959                   743,244                                      3,442,813              7,116,YO2
        Nebraska                         12,926,943                1,351,279                                       9,535.007              2,040,657
        Nevada                           11;302;959                                                                91795,596              3,507;363
        New Hampshire                    11,302,959                     900,000                                    5.148,268              5,254,6Yl
        New Jersey                       94,835,079                                                               18;276;788             76,558.289
        New Mexico                       11,302,959                                                                4,620,602              6,682,357
        New York                       230,359,388                 5,000,000                62,264,286            51.873.663            B%1,221,439
        North Carolina                   31,443,553                                                               24;061;581              7,381,972
        North Dakota                     11,302,959                                              300,8C0           8,676,424              2,595,735
        Ohio                           117.651,966                                              900,000           28,960,103             87,991,863
        Oklahoma                         24;292;359                                                               12,154,868             12,139,491
        Oregon                           19,626,839                2,202,800                 2,295,260             8,582,842              4,818,235
        Pennsylvania                   121,394,382                 8,065,965                                      39,546,418             73,782,199
        Rhode Island                     12.316.789                1,363,839                                       5,512,226              5.440.926
        South’ Carolina                  16;581;205                                                                9,834,154              6;749;051
        South Dakota                     11,302,959                                                                8,814,665              2,488.294
        Tennessee                        32.688,444                                                               12.487,366             20;201;078
        Texas                          128,400,328                                           1,093,400            54;899;261             92.409.669
        Utah                             12,255,363                                                                9.275.836              4,979,527
        Vermont                          11,302,959                                                                     70;901           li,232.058
        Virginia                         42,908,178                                                               32,ia2,590             10,725,588
        Washington                       35,599.397                   779,820                                     12,207,256             22,532,321
        West Virginia                    11,302,959                1,442,862                                        1,163,431             8,696,666
        Wisconsin                        41.485.136                                                               27,930,630             13,554,506
        Wyoming                          11,302,959                                                                 9.554,726             1,748,233
        Puerto Rico                      21,596.509                                                                 2,559,399            19,037,108
    .                                                                                     $ 93,680,926ti      $1,022.774,489
           Totals               $2,260,591,802                 $173,841,834                                                          $ 990.294*953
           (note b)

        a/Excludes       l# percent      highway   planning   and research        funds
        b/
        -Hey        not add due to rounding
        @ccludes        about $3.9 million    in passenger facility  and fringe             parking    prefects   which sre
          clessified      as highway prefects    under 23 U.S.C. 142(e)


                                                                                   LU
APPENDIX II                                                                                                                                                      APPENDIX II
                                                                     IL”-
                                                                       Feaeral       Hlghway        Administration

                                       Sliding      Scale   Rates   of     Federal-aid          Partlcipetion           in   Public         Lands       States
                                                                                                                                                --
                                                                     gates   for    Non-Interstate                 Programs
                                                               Pursuant    TV Title     23 U.S.C.                12O[al Clause          B

                                                                                         -ive             July     1.   1976

                                                                                                Hatlo  of deslgnatcd
                                                                                                public    land area 1/                                           Percentage    of cost
                                                                                                 to total     area of-                                           payable    by Federal
                                                                                                       state                                                          Covemme"t
             state

 Alabama                                                                                            0.0197
 Al aska                                                                                             .9394
 Ar1 zc.na                                                                                           .7072                                                            91.22
 Arkansas                                                                                            .0743                                                            72.23

 California                                                                                           .4332                                                           83.00
 Colorado                                                                                             .3644                                                           80.93
 Co""ectlcut
 Delaware

  Florida                                                                                             .0743                                                            72.23
  Georgia                                                                                             .0235                                                            70.71
  Hawaii                                                                                              .0659                                                            71.98
  Idaho                                                                                               .6388                                                           '89.16

  Illinois                                                                                            .0070                                                           70.21
  lndlana                                                                                             .OD79                                                           70.24
  Iowa                                                                                                .OOOl                                                           70.00‘
      KP.“SSS                                                                                         .0031                                                           70.09

      Kentucky                                                                                        .0275                                                            70.83
      Louisiana                                                                                       .02DO                                                            70.60
      wane                                                                                            .0040                                                            70.12
      Maryland                                                                                        .0046                                                            70.14

      Massachusetts                                                                                   .OOSl                                                            70.15
      Hlchigan                                                                                        .0886                                                            72.66
      Hl"".SSOta                                                                                      .0693                                                            72.08
      Mlsslssippi                                                                                      .0410                                                           71.23

      Hlssourl                                                                                           .0344                                                         71.03
      Montana                                                                                            .3226                                                         79.68
      Nebraska                                                                                           .009D
      Nevada                                                                                             .a734                                                         2:;:     11

      New Hampshire                                                                                      .1148                                                         73.44
      New Jersey                                                                                         .0034                                                         70.10
       New      MeXiCO                                                                                   .4078                                                         82.23
       New      York                                                                                     .OOll                                                         70.03

       North  Carolina                                                                                   .0459                                                         71.38
       North  Dakota                                                                                     .0467                                                         71.40
       Ohio                                                                                              .0062                                                         70.19
       Oklahoma                                                                                          .0332                                                         71.00

       Oregon                                                                                            .5268                                                         85.80
       Pennsylvania                                                                                      .0179                                                         70.54
       Rhode Island
       South Carolina                                                                                    .0308                                                         70.92

       South Dakota                                                                                      .1483                                                          74.45
       Tennessee                                                                                         .0324                                                          70.97
       Texas                                                                                             .0096                                                          70.29
       Utah                                                                                               6793                                                          90.38

       Vermont                                                                                           .0413                                                          71.24
       Virginia                                                                                          .0715                                                          72.15
       Washington                                                                                        .3188                                                          79.56
       West Virginia                                                                                     .0619                                                          71.86

        Wisconsin                                                                                        .0525                                                          71.58
        Wyoming                                                                                          .5047                                                          85.14
        Dist.   of Cal.                                                                                  .1642                                                          74.93
        Puerto Rico                                                                                      .0128                                                          70.38


 i/          Area of         non-taxable         Indian    Lands and reserved      and unreserved    public                    domain        lands
             inclusive         of national         forests     and national   parks   and monwnents.

 z/          Maxinun         amount.

 NUTE:               Based    on latest      available       area   data     furnished          by the     Department        of   the       Interior.




                                                                                                  21
APPENDIX        III                                                                               APPENDIX   III




                            OFFICE   OF THE   SECRETARY            OF TRANSPORTATION
                                          WASHINGTON,        D.C     20590




 ASSISTANT SECRETARY
  FOR ADMINISTRATION

                                                                                January 17, 1977



 Mr. Henry Eschwege
 Director
 Community and Economic Development                     Division
 U. S. General Accounting Office
 Washington,  D. C. 20548

 Dear Mr.       Eschwege:

 This is in response     to your letter  of October 26, 1976, requesting
 comments on the General Accounting      Office  (GAO) draft report  entitled,
 "Why Federal-Aid    Urban System Funds Were Seldom Used for Mass Transit."
 We have reviewed    the report  and prepared   a Department of Transportation
 (DOT) reply,    and two copies are enclosed    herein.

 In addition    to the enclosed         reply,   we offer     the following     comments on one
 recommendation      contained     in the report.        We concur with the substance            of
 the GAO recommendation         that the Secretary         establish    procedures      whereby all
 legislation    will    be reviewed       for the purpose of establishing            target   dates
 for issuing    implementing       regulations.       Thus we will      henceforth      review new
 legislation     in order to approve target           dates and schedules         established     by
 those DOT elements        responsible       for developing      and implementing       the regu-
 lations.     Further,     we will     monitor   the progress       to assure that implementing
 regulations    are issued on a timely           basis.

            ,                                                                Sincerely,


                                                             p---L                        -(-   @jfp-yy--k
                                                                             William       S. Heffelfinger

 Enclosures




                                                        22
APPENDIX    III                                                APPENDIX        III




                      DEP~OFTRAMSpoHIlATIoN         REPLY
                                     m
                                     -
                              GAODRAFTREPORT
                                    ON
                        WHYFEDERAL-AIDURBANSYSTEM
                    FUNDSWERESELDOMUSEDFORMASSTRANSIT



                  SUMMARYOF
                          GAOFINDINGSANDRE~TIONS
 The GAOconducted a review of the use of Urban System funds to finance mass
 transit projects.   Through the 1973 Federal-Aid Highway Act, the Congress
 gave local ccxmtnmities the flexibility     of using their Urban System Highway
 EVnds for mass transportation projects.       The GAOrepcrt states that since
 that time only 15 IMSS transit projects had been approved as of June 30,
 1976, with most communities having elected to continue using their Urban
 System funds solely for local roads. The GM found that in general, this
 decision has been the result of the availability       of alternate funds for
 mass transit projects andalarge        backlogofhighwayneeds.
 mre specific reasons cited in the report for the local decisions to use
 Urban System funds for highway projects wxe:
 1.   Urban System funds are allocated to the axmunities and UMTAcapital
      grants are available to any arm which submits individual applications.
      Therefore, coranunities obtain the maxirrmmamount of Federal money when
      they use Urban System funds for highway and UMTAfunds for mass transit.
 2.   Federal cost-sharing ratios are greater for 42 of the States under
      the UMl!Aprogram than they are under the Urban System funds. There-
      fore, it takes less local n-oney for a project funded through UMTAthan
      one funded with Urban Systems monies. In addition, several States
      have sharing programs of their own which favor highway projects.
 3.   Sone conmunities prefer highway projects because they contribute    to
      local erfplo~nt.
 The report also concluded that the interimguidelines   for the approval of
 Urban System mass transit projects were a factor which discouraged sorw
 ccxnmmities from diverting their Urban System funds frcm highway work to
 mass transit projects.



                                      23
APPENDIX    IX%                                                APPENDIX   III




  This conclusion is based on the fact that the interim guidelines required
  that each project be approved by State, Federal Highway Administration,
  and WA officials.     This in effect creates tm review levels, the State
  and Federal Highway Administration,  whichare llotincluded  in theUMl?A
  capital grant program. The GAOfurther states that while it is reason-
  able for the interim guidelines to be a patchmrk of the tm agencies'
  processes1 three years is too long for such guidelines to remain in
  effect, and that final regulations should be issued.
 Based on its review, GAOrecomends that the SecYetary of Transportation
 establish procedures which set target dates for the issuance of regulations
 to irf@emnt legislation    in the Department's purview, especially those
 regulations requiringccmdinationwithin      the Department. Affected Depart-
 mental agencies should be directed to report to the Secretary periodically
 on their programs. In the specific case of the Urban System program, the
 Secretary shxild direct the Federal Highway and. UMTAAdministrators to
 issuer as soon as possible, final regulations on the use of Highway funds
 for mass transit projects.
 The GAOalso found that the Urban System statutory provisions do not
 provide local communities sufficient incentive to use Urban System mney
 for mass transit projects.  The GAOtherefore suggests that should the
 Congress desire that Urban System funds be used to a greater extent for
 mass transit, it should consider the following options:
  1.   Equalize the Federal share of mass transit project costs under
       the Urban Systemand UMCAprogram, except in States where the
       Federal share under the Urban Systemprogramexceeds tlz Federal
       share under the UMTApmgram.
  2.   Increase the Federal share of the cost of mass transit projects
       under,the Urban System program so that it exceeds the sharing
       provision of the WA capital grants program.
  3.   Require that a specific percent of the Urban System funds be
       spent on mass transit projects.



 In general we found the draft report to be basically accurate. The
 findings, while somewhatrmxe detailed, are generally consistent with
 tlmse of the recently completed Urban System Study mandated by Section 149
 of the Federal-Aid Highway Act of 1976. Hcmever, there are two areas in
 which we have differing views.




                                       24
APPENDIX    III                                                      APPENDIX     III


                                                                             3

First,webelieve       the lackof final FH@&QAregulationsgo~g                    the
use of urban system funds for mass transit projects, is not a major
problemas cited in Chapter 3 of the report.           Interimguidelineswhich             :
were issued in b$xmber 1973, shortly after passage of the Act, pm-
videdsufficientguidance        tienableurbansyslx5nfundedmss           transit
projects tobepmgramsd          in a number of ur&n areas. mefinalregula-
tionsare in thelaststages          of ~epartmolltalcoordinationandapprmml.
Theremaybeamisaxceptioninthe              reportabutthereviewofproposed
transitprojects,      as contained inthe interimprocedures.          The procedures
donotreguire      FHWAtechnicalzeviewandapproval           of transit projects;
andtheycall      foronly theadviceand       ccmmltoftllestate.         Thefinal
regulations will not permit cizmmven i5ngboththestateandFrsminthe
programning and approval cycles, because both those agencies ham a
statutoryresponsibilityunderFederal          highway legislation     indetermin-
ingwhether sufficient      Urban Systems funds are available to support any
project, be it a high-way or trausitproject.
Weare~rkinginthefinalregulatians~~eitclearthat~u~
System transit project application is to use the UMIlAprt3Edums and format,
while insuring that the state andI;wIJAreceive timlynotificationwhich
will allow them to meet their statuixxy responsibilities.
Thereare severalother,        mre relevantdeterrents       to theuseofUrba.nSystem
funds formss     transit projects.        !Cheseinclude legitimate highway needs
which local officials      are atteqting     to meet using Federal assistance thmugh
the UrbanSystempmgram.           !mediffmanceinlocalmawlingshaIesbetxS?rl
the Urban Systempmgrsmand tha UMI!Acapitalgrantsprcgram                (30%versus 20%)
makes itmre    attractive touse urban Systemfunds forh.igMays and UMI!A
capital grants for transit.        Ebecauseofthediscretionarynatureofthe~
program and the apportionment of Urban System funds, local officials             can
"maximise" Federal assistance by denting Urban !Sy.stemfunds ti highways
andcmmentratingtransitassistance             in the UMcAprogram.
          ,
~secondareainwkich~disagreewiththe~findingsis~r~
mendation that a specificpercentof           the urban system funds be required
tibe spentonmss         transitprojects.       ThismiLduxateyetamthwcate-
goricalpmgramcm&mry            to cmrmtatm            to reduce categoricalrestric-
tions cmpmjectfunding.           Also,wewouldnotendorse        the reaxmw&tion
th2LttheFederals~~the~sys~programexceedthatunder
the LMTAcapita1grantpmgx-m.              Thesepraposalsmuldonly      serve to further
constrain local options and reduce the desiredlocalflexibility.




                                           25
I
     APPENDIX    III                                                 APPENDIX         III


                                                                         4

    In a matter not directly related to the GAO's reccxtmendations, U'MFA is
    concerned that the 5 communities surveyed with less than 200,000 popu-
    lation suffered a delay in Urban System project approval when ccmpared to
    larger cities.   We will investigate the causes of the delay. We do know
    that one applicant from a smaller area has been delayed because the labor
    protective (13(c)) agreement required for both Urban System and UMI Act
    funded projects has notbeenmet.
    Wewouldlike    to -t     on scxre of the reasons for not using Urban Systems
    funds for transit which were given to the GAOby local officials.
    The GADstates in Chapter 'Iwop thatscme local governtwnts prefer to fund
    Urban Systems highway projects because they have a greater impact on local
    employment. This is, of course, true when you cqxkre a transit equipsrant
    purchase project (the usual Urban System transit project), to a construc-
    tionprojectt.      Ec%ever, in the August 23, 1974 edition of "Science" magazine
    an article titled "Fnergy, Manpcxer and the Highway 'Trust Fund," states
    thatrailtransitconstruction        generatedrtrxe employmentthanhighway
    constructicn.      Research by UMIA staff showed that generally highway and
    transit construction projects appear to generate the same level of employ-
    ment. This research was based upon an Office of Technology Assessment
    report, "Energy, the Econcany,and Mass Transit (Dec. 1975)."
    Further, the report states that one of the factors influencing local decisions
    against Urban System funding of mass transit projects is the fear of operating
    losses which may result frcan expaMing existing transit systems. While
    problems exist in meeting transit operating costs, it does not follow that
    local officials    should not consider using Federal capital assistance funds
    for the rehabilitation    or replacement of transit facilities    and equipxnant.
    Capital projects provide a m-oreefficient     plant which requires less maintenance
    than the items replaced. Wewouldtend todiscountthis            reasonbecause
    of the rather small sample of local officials      contacted for this study. If
    this attitude werein fact, prevalent nationwide, it would have affected
    UMIA's capital assistance activities    nationwide. However, UMTAhas made
    1,016 grants valued at $5.8 billion    since 1965 for more than         of the
    nation's urbanized areas.                          >



                                             Administrator
                                             Urban Mass Transportation       Administration




                                             26
APPENDIX IV                                               APPENDIX IV




                      PRINCIPAL OFFICIALS

                 -RESPONSIBLE FOR ADMINISTERING
              ACTIVITIES   DISCUSSED IN THIS REPORT
                                       Tenure of office
                                       From         -To


                  DEPARTMENTOF TRANSPORTATION

SECRETARYOF TRANSPORTATION:
    Brock Adams                        Jan.   1977   Present
   William Coleman                     Mar.   1975   Jan. 1977
    John W. Barnum (acting)            Feb.   1975   Mar. 1975
    Claude S. Brinegar                 Feb.   1973   Feb. 1975
ADMINISTRATOR, FEDERAL
  HIGHWAYADMINISTRATION:
    Lester P. Lamm (acting)            Jan. 1977     Present
    Norbert T. Tiemann                 May 1973      Jan. 1977
ADMINISTRATOR, URBAN MASS
  TRANSPORTATIONADMIN-
  ISTRATION:
    Robert H. McManus (acting)         Jan.   1977   Present
    Robert E. Patricelli               Aug.   1975   Jan. 1977
    Judith T. Connor (acting)          July   1975   Aug. 1975
    Frank C. Herringer                 Feb.   1973   July 1975




                                  27
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