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Section 5: Design and Construction Funding Identification

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Overview

This section discusses activities involved in identifying potential design and construction funding sources including state, federal, and outside sources. Outside sources could include local governmental entities, other public agencies, and private sources.

This section includes the following tasks. The tasks are listed in approximate chronological order, but may be performed concurrently in some cases.

10500. Identify potential design and construction funding

10510. Prepare and execute project funding agreements

10520. DEVELOP Authority

10530. CONSTRUCT Authority

10540. Place project in Transportation Improvement Program (TIP)

10550. Develop Statewide Transportation Improvement Program (STIP)

10560. Place project in one-year letting schedule

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10500: Identify potential design and construction funding

Description. The Unified Transportation Program (UTP) is a 10-year, mid-range planning document, approved annually. The UTP authorizes planning, development and construction activities for highways, public transportation, aviation, state and coastal waterway, and rail. Twelve specific purpose categories of funds have been established by federal and state legislation and commission policy for highway transportation programs. Categories have target LET dates and are either allocation programs or project specific.

Authority.

Resource Material.

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10510: Prepare and execute project funding agreements

Description. Project funding agreements are used when entities participate in funding project development along with TxDOT or make improvements within the State Highway System (SHS) right of way. When local government funding is involved, it may be directed toward preliminary engineering, construction, right of way, utility relocation costs, maintenance or any other project expense. Driveway permits and Multiple Use Agreements (MUAs) allow local governments to perform work within the SHS right of way but do not include funding. The funding agreements, driveway permits, and MUAs state the entity responsible for performance of the various project activities. The available project funding agreements, permits and MUAs and the applicability of each in varied situations are indicated in the following chart:

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The remainder of this section focuses on three of the project funding agreements (Local On-system Agreements, Voluntary Advance Funding Agreements, and Advance Funding Agreements). Generally, these three types of project funding agreements should only be executed with governmental entities except for certain work with utilities and railroads. The district or division is responsible for preparing a draft agreement of these types and submitting it to Contract Services Division for review and approval.

Voluntary AFAs and Advance Funding Agreement (AFA) may also be applicable to off-system projects which include FHWA funding. The executed AFA (either type) will state the party responsible to perform each project development activity and the funding obligations of each party to the agreement. Standard templates for Voluntary AFAs and AFAs are available from the standard contracts webpage on the Contract Services Division Crossroads website ( Standard Contracts).

For entities which sign Voluntary AFAs or AFAs with TxDOT on a regular basis, Contract Services Division has developed a contracting system that allows the local government to execute Master Advance Funding Agreement (MAFA) with the department. This MAFA contains all the standard contract clauses contained in a Voluntary AFA or AFA. Once a local government signs a MAFA, future Voluntary AFAs and AFAs only require the inclusion of project specific contract terms and conditions. For these cases, Contract Services Division has developed Local Project Advance Funding Agreement (LPAFA) templates for Voluntary AFAs and AFAs to use along with the MAFA. This eliminates the need to review the standard terms and conditions for individual project agreements. For local government who choose not to use the MAFA/LPAFA system, Contract Services Division has longform Voluntary AFAs and AFAs.

When any element of project work is proposed to be performed by the local government entity for which they will be reimbursed with state or federal funds, the department is required to determine if the local government is qualified and has adequate resources and controls to perform the desired project work elements prior to the department's authorizing the entity to perform the project work. This is accomplished through the Local Government Risk Assessment process. This process is defined in the "LG Risk Assessment and Participation/Responsibilities in AFAs" guidance document ( Local Government Projects).

The Local On-system Agreement (LOSA) is to be used only for a construction project within State right of way when the local government proposes to perform and fund all elements of the project. The template for the Local On-system Agreement is available from the Standard Contracts webpage on the Contract Services Division Crossroads website ( Standard Contracts).

In accordance with 43 TAC 15.52, two payment methods are available for use on the Voluntary AFAs and AFAs:

Fixed Price. The fixed price amount to be paid by the local government will be based on the estimated cost of the work to be performed. The fixed price funding amount is only subject to adjustment, as provided by 43 TAC 15.52 (4)(A)(ii).

Specified Percentage. The local government is responsible for a specified percentage of the actual project costs. In addition to the designated specified percentage, the local government is responsible for the direct cost of any work ineligible for federal or state participation and all project costs that are greater than the maximum federal or state participation amounts specified in the AFA. Upon completion of the project, the department prepares a Statement of Cost to document actual project costs incurred by the department. If any additional funds are owed by the local government, Financial Management Division sends an invoice to the local government. Any overpayment by the local government, after all cost and claims are paid, is returned.

The use of fixed price or specified percentage shall be based upon the recommended funding type specified in the following chart:

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The use of any funding type other than the recommended type in the above chart for any element of the project development and delivery process requires special approval by the Executive Director (which has been delegated to Deputy Executive Director).

The minimum local government funding participation percentages for various state and federally funded programs are specified in Appendix B. Local governments may choose to overmatch (contribute a higher percentage of funding than the minimum included in the attached chart).

TxDOT rules allow for a local government to make periodic payments if the local government is unable to pay its total funding share prior to the department's scheduled date for contract letting. The use of periodic payments requires special approval by the TxDOT Executive Director. (which has been delegated to Deputy Executive Director)

Accurate estimates are essential for preparing Voluntary AFAs and AFAs. Local governments may not be able to afford the project at letting if an inaccurate, low estimate was used to determine participation amounts. If the scope of work involving the local government changes after the execution of the original AFA, the AFA must be amended.

The AFA must be executed and the funds provided to TxDOT before the required services are performed unless periodic payments are approved.

Pertinent Project Types. Projects containing local funding participation. Other projects legally required to match participation (i.e. required to match state or federal funds).

Responsible Party. District Director of Transportation Planning and Development or Division Director depending upon project type.

Subtasks.

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  • Prepare a draft AFA or LOSA.
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  • Prepare local government risk assessment and set oversight level (if required, AFA only).
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  • Originating district/division obtain review by appropriate divisions (when applicable).
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  • Originating district/division ensure that all internal stakeholders concur with business terms in the agreement prior to submittal to CSD (for AFA only).
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  • Send the draft LOSA or draft AFA with AFA Checklist, SPA(s), division review(s), resolution or ordinance and other required documents, to CSD for review and revision as needed.
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  • Submit Funding Structure Special Approval form (if required, AFA only) and Oversight Level Special Approval form (if required, AFA only) to Contract Services. CSD will review and forward appropriate documents to Deputy Executive Director for approval.
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  • Upon CSD approval of AFA or LOSA, obtain local government signature (preferably using DocuSign), and send the partially executed AFA or LOSA to CSD or proper signatory (i.e. off system bridge AFA to BRG).
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  • Proper signatory executes the AFA or LOSA for TxDOT.
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  • Proper signatory sends an original of the fully executed AFA or LOSA to the district or division (based upon project type) for return to the local government.
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  • Complete DCIS and PeopleSoft or other electronic tracking reports relating to AFA or LOSA.
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  • District or division managing the AFA or LOSA is responsible for collecting the funds in accordance with the terms of the AFA or LOSA (when applicable).

Helpful Suggestions.

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  • Start the AFA process as early as possible. The district should contact the local government as soon as it appears an AFA is required.
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  • The estimate should be accurate to allow the local government opportunity to budget for the project. This will help ensure that funds will be available when they are required.
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  • Entities may need additional time to schedule meetings (i.e. city council) necessary to accept AFA provisions and to transfer funds.
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  • CSD and the administering divisions are available to assist districts.
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  • The district or division (depending upon project type) is responsible for ensuring that all provisions of any agreement comply with all applicable laws, policies, and procedures.

Critical Sequencing.

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  • Execute AFA at the beginning of project development to ensure that the responsibilities of each party and the funding responsibilities of each party are agreed to before incurring preliminary design costs.
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  • Execute LOSA prior to district approving project plans and specifications and prior to authorizing local government construction activities within the State right of way.

Authority.

Resource Material.

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  • Transportation Programs Division - Local Government Projects Section (LGP)
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10520: DEVELOP Authority

Description. DEVELOP Authority phase is for projects in the years 5 to 10 of the UTP. The districts perform advanced planning, engineering, environmental studies, surveying, initial utility and right of way planning, and preliminary design.

Pertinent Project Types. Projects authorized for project development, but not for CONSTRUCT Authority

Responsible Party. District Director of Transportation Planning and Development.

Resource Material.

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10530: CONSTRUCT Authority

Description. All phases of work are permitted for projects with CONSTRUCT Authority. Generally, projects with CONSTRUCT Authority are the highest ranked projects that have proposed letting dates within the next four years, and are eligible to be selected for the 2-year letting schedule based on readiness.

Pertinent Project Types. Projects with environmental and right of way clearance and secured funding.

Responsible Party. District Director of Transportation Planning and Development

Resource Material.

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10540: Place project in Transportation Improvement Program (TIP)

Description. The Transportation Improvement Program (TIP) is a central component of the multimodal transportation planning process developed by the MPO in cooperation with the department and local public transportation operators The TIP is a four-year list of transportation projects approved for development and prioritized by project within each UTP funding category. The TIP for rural areas and urban areas outside an MPO is developed by the responsible TxDOT district in cooperation with local government entities. The TIP is a list of priority projects to be funded and likely implemented within a four year period.

A new TIP shall be updated and approved at least every two years and in a format consistent with the STIP. Modifications to a currently approved TIP can be made as defined in 43 TAC §16.101(k).

The TIP is approved by the MPO and the Governor's designee (TTC or TxDOT Executive Director). After approval, the TIP shall be included without modification, directly or by reference, in the STIP program except that in nonattainment and maintenance areas, a conformity finding by the FHWA and the FTA must be made before it is included in the STIP.

All TIPs must be financially constrained and are merged into the Statewide Transportation Improvement Program. See Task 10550: Develop Statewide Transportation Improvement Program (STIP). Generally, a project's letting year is established as part of placing it in the TIP.

Pertinent Project Types.

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  • Federal regulations require that projects proposing to use FHWA or FTA funds are shown in the TIP before project approval.
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  • Projects that will not use FHWA or FTA funds, but that will require approval by these agencies (such as new access to an interstate) should also be in the TIP.
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  • In non-attainment areas or maintenance areas, all regionally significant projects, regardless of funding (federal, state or local), must be in the TIP.
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  • In all areas, locally funded, regionally significant projects let in the previous fiscal year, should be listed in the Annual Project List provided to the FHWA/FTA at the end of the fiscal year for every year in the TIP/STIP.

Responsible Party. District Director of Transportation Planning and Development

Helpful Suggestions.

Critical Sequencing.

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  • All projects listed in the STIP must be included in a TIP and MTP (MTP only where applicable).
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  • Projects must be in the STIP before federal reimbursement of work will be authorized.

Resource Material.

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  • Transportation Planning and Programming Division - Systems Planning Office
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10550: Develop Statewide Transportation Improvement Program (STIP)

Description. The Department must develop a comprehensive intermodal statewide transportation plan for all areas of the state including metropolitan planning bound by federal requirements. The STIP is a compilation of Transportation Improvement Programs and projects selected by districts. See Task 10540: Place project in Transportation Improvement Program (TIP).

For non attainment areas, the MPO must prove conformity with the Statewide Implementation Plan (SIP) before the TIP can be included in the STIP. See Task 10420: Determine if Texas Statewide Implementation Plan requirements apply. As with each TIP, the STIP is financially constrained.

TPP compiles the STIP, which is then approved by the Texas Transportation Commission acting for the governor. The Commission forwards the STIP to the Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA) for review and approval. All federal-aid projects must be included in the STIP before federal funds may be authorized for the phase of project development.

Pertinent Project Types.

Responsible Party. Transportation Planning and Programming Division

Helpful Suggestions.

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  • The STIP must be consistent with expected funding levels.
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  • Before STIP approval, there must be reasonable opportunity for public comment.

Critical Sequencing.

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  • Federally funded projects must be included in the STIP before issuance of an FPAA.
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  • FPAA to obligate federal funds must be obtained before incurring reimbursable project costs.

Resource Material.

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  • Transportation Planning and Programming Division - Systems Planning Office
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10560: Place project in one-year letting schedule

Description. On an annual basis, the Letting Management Section of the Financial Management Division (FIN) requests that districts formulate a three-year letting schedule to meet specific letting volumes provided for each District. This involves updating PeopleSoft and various fields in DCIS in accordance with specific instructions provided by the Letting Management Section. The “LET SCH FY” field on the DCIS Project Identification Screen (P01) are opened, or ‘unlocked’, for changes during a six-week period for districts to enter let years for their projects. Other fields requested to be updated, including the “PRES DIST EST LET DATE” are open for changes throughout the year.

From DCIS data in the LET SCHEDULE YEAR and the PRES DIST EST LET DATE fields, the Letting Management Section forms a one-year letting schedule. Letting Management reviews the schedule on a statewide basis to ensure funding goals are met. The schedule is also reviewed for completeness, funding eligibility, federal oversight, etc. and any necessary changes are coordinated with the district. The schedule is then submitted to the administration for their approval. The one-year letting schedule is a planning document and is subject to change. Letting schedules are posted on the Internet.

Financial Management Division tracks letting volumes by district and by funding category. This information is sent to the Texas Transportation Commission monthly and summarized in a quarterly report (with cumulative results) to districts.

Pertinent Project Types. All projects.

Responsible Party. Financial Management Division (FIN) - Letting Management Section

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