The Federal-Aid Highway Program statutorily requires recipients of Federal assistance to contribute toward the total cost of any given project. In traditional Federal-aid financing, the State typically must provide matching State funds in order to receive Federal funds for a project. Historically, only cash contributed by State and local governments could satisfy the matching requirements. | The Federal -Aid Highway program requires a 10% match for certain projects on the Interstate highways, and a 20% State match for most other projects. |
=> What are the benefits of flexible matches?
Provisions in recent Federal-aid highway laws6 introduced new flexibility to the matching requirements for the Federal-aid program. These provisions allow a wide variety of public and private contributions -- including cash, land, materials, and services -- to be counted toward the non-Federal match of Federal-aid projects. This flexible match provides a new opportunity for a private investor to participate in a highway project. As an example, a private entity may have an interest in seeing a project advance and might be willing to make a contribution toward the project's construction. This could help accelerate the project if the State does not have other funds readily available to provide a match.
=> What types of contributions may be used as flexible matches?
A broad range of contributions may be used as flexible matches under these provisions of law. Whether the contribution is eligible depends generally on the nature of the contribution (cash, materials, land, services or buildings and equipment) and the source of the contribution (private, local State, or Federal). Figure 4 outlines the types and sources of contributions that can be used as a flexible match.
Figure 4: Types and Sources of Flexible Matches
Type of Donation | Source of Donation | Conditions |
Funds | Private, State or Local Government | • Funds must be received during the period between project approval and submittal of final voucher |
Land (right-of-way) | Private, State, or Local Government | • Property must be appraised to determine fair market value • Value must be included in total project cost • Property may be donated anytime during the project development • Land must have been acquired in accordance with the Uniform Relocation and Real Property Acquisition Act • Donation does not influence environmental assessment |
Materials | Private or Local Government | • Materials must be appraised to determine fair market value |
Services | Private or Local Government | • Grantee must document the market value of services |
Services | State | • Publicly-contributed services count toward match for only Transportation Enhancement projects |
Any Federal-aid project for which a non-Federal match is required may employ some form of flexible match, although the project sponsor (usually the State DOT) must first obtain approval from the FHWA Division Office. Any project employing flexible matches must comply with all provisions that apply to any other Federal-aid highway project.
For more information on flexible matches, see the Innovative Finance Primer at http://www.fhwa.dot.gov/innovativefinance/ifp/innoman.htm; the Innovative Finance Brochure at http://www.fhwa.dot.gov/innovativefinance/brochure/manageme.htm; and U.S. DOT Report to Congress, Chapter 2 at http://www.fhwa.dot.gov/reports/pppdec2004/index.htm#2ciii1.
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6 The National Highway System Designation Act of 1995 [Public Law 104-59] and the Transportation Equity Act for the 21st Century [Public Law 105-178; 112 Stat. 107].