By Todd McDaniel
The American Recovery and Reinvestment Act of 2009 (ARRA) is making $8.4 billion available for public transportation. This is in addition to the $10.4 billion proposed in the FY2009 budget for a total of $18.8 billion for public transportation capital projects. The ARRA funds do not require a local match from state or operating funds so $1 of ARRA funds is the equivalent of $1.25 of annual appropriation funds. To put this in perspective, The American Public Transportation Association recorded 10.7 billion public transportation boardings, including buses, rail and other modes in 2008. This number includes every time a passenger boarded public transportation, including multiple boardings for transfers in a single trip. The ARRA and the FY2009 appropriation will provide an estimated $1.76 for every public transportation boarding in the United States.
ARRA funds have an important distinction from other federal funding of public transportation. The money appropriated to each agency must be spent within one year. In fact, 50 percent must be committed within the first 180 days or the Secretary of Transportation will withdraw the money and redistribute to agencies that have committed 50 percent of the funds. The remaining 50 percent must be committed by March 5, 2010 or the same withdrawal rules apply. Many states began amending their five year Transportation Improvement Plans before the bill was passed to add or move projects up to the current year to take advantage of ARRA funds before the time limit expired.
ARRA funds must be spent on capital projects. In other words, they cannot be spent on the day-to-day operations providing public transportation like fuel or driver payroll. The funds can be spent on buses, new facilities, planning, preventative maintenance, property acquisition or information technology projects. ARRA funds will not address operating budget crises that many U.S. transit authorities are currently experiencing due to decreases in other tax-based revenue sources.
In addition to time limits, the ARRA funding comes with a new set of reporting and certification requirements. The Obama administration has stressed that stimulus funds will be “subject to unprecedented levels of transparency and accountability.” On the recovery.gov Web site there are five objectives listed for the spending of ARRA funds:
- Recovery funds are awarded and distributed in a prompt, fair and reasonable manner.
- The recipients and uses of all recovery funds are transparent to the public, and that the public benefits of these funds are reported clearly, accurately and in a timely manner.
- Recovery funds are used for authorized purposes and every step is taken to prevent instances of fraud, waste, error and abuse.
- Projects funded under the recovery legislation avoid unnecessary delays and cost overruns.
- Programs meet specific goals and target, and contribute to improved performance on broad economic indicators.
To help meet these objectives, under Section 1511 of the ARRA, transit chief executives will be required to certify in writing that all investments have received the full review and vetting required by law and accept responsibility that the investment is an appropriate use of taxpayer dollars. Transit agencies are also required to segregate ARRA funds from all other funding and report sources and uses separately.
So what does this all mean for transit authorities? First the good news, the rapid infusion of large capital amounts to support the long-term goals of public transportation has the potential to change the future of public transit in the United States. New services and routes and more convenient facilities could make public transportation available to the large percentage of U.S. households that do not currently have access.
The time limits imposed by the ARRA will put new pressure on transit to identify the projects to fund with recovery funds and issue purchase orders quickly to avoid losing funding. Project managers and purchasing staff will still need to meet all the regulatory requirements including EPA approval, disadvantaged business participation and bidding processes but may not have the same amount of time available.
Adding to the pressure of time limits, transit authority executives are coming to grips with personal certifications to taxpayers. These certifications will be posted on the recovery.gov Web site for review by all taxpayers and constituents. This certification process is reminiscent of the Sarbanes Oxley Act that radically changed private sector financial reporting. Transit executives will be forced to both spend money quicker than normal and report and account for that spending at a higher level than ever before. The easiest way to meet the time requirements may be the hardest thing to certify and explain to taxpayers and the easiest expenditures to explain to taxpayers may be the hardest way to meet the time requirements.
Overall, public transit is being pushed into a brighter spotlight than ever before with the American public. More and more people are relying on public transportation, the government is spending more and more of taxpayers’ money to build a public transportation infrastructure, and the taxpayers are requiring more and more information on how their money is being spent. American public transportation is at a crossroads that could lead to a radically different reality a decade from now.
Todd McDaniel CPA, PMP is a senior consultant with Capital Ledger Inc. and blogs at www.transitstimulus.blogspot.com.