Six-Year Improvement Program

Formula Fund Consolidation

2016 Appropriation Act Item 436 C.2

Notwithstanding the original programmatic allocation, funds provided by the previous primary, secondary and urban construction formulas prior to fiscal year 2010 that are not committed and expected to be expended as of January 1, 2018 may be consolidated to fully fund and advance priority transportation projects within the respective district or locality. If after taking said actions and the determination of the respective locality and the Department of Transportation that formula funds will remain, the funds may be used for other transportation purposes provided by § 33.2, Code of Virginia. All unspent primary, secondary and urban formula funds allocated prior to 2010 unspent as of January 1, 2018 shall be de-allocated and transferred to the State of Good Repair Program pursuant to § 33.2-369, Code of Virginia, unless such funds are allocated to a fully funded and active project.

Virginia operates under a two-year (biennial) budget cycle.  Each year the Governor prepares the proposed budget bill for introduction by the General Assembly.  The bill is initially adopted in even-numbered years and amended in odd-numbered years.

In 2016, the budget bill, commonly known as the Appropriation Act, included language pertaining to the balance of funds provided by the previous Primary, Secondary, and Urban construction formulas.  Over the past several years, the distribution of transportation dollars has transformed.  Fiscal Year 2010 was the last year in which available funds were distributed through the previous construction formulas.  Since then the formula structure has been changed twice and the original construction formula has been eliminated.  Even though it has been several years since funds have been provided in this manner, many localities have unspent and/or or uncommitted formula funds.

The language in the 2016 Appropriation Act provides an opportunity for localities and VDOT to work together to use these dormant funds to advance priority transportation projects within the respective construction district or locality.

Between now and January 1, 2018, VDOT will distribute guidance to staff and our local partners pertaining to potentially impacted projects, eligible uses for idle formula funds, and other recommended actions to comply with the 2016 Appropriation Act language regarding these funds.

Information pertaining to this effort can be found below.

• Copy of communication sent to localities
• https://budget.lis.virginia.gov/item/2016/1/HB30/Chapter/1/436/

2016 Appropriation Act – Item 436

Frequently Asked Questions (FAQs)

2016 Appropriation Act – Frequently Asked Questions (FAQs)

What is the definition of “formula funds” as outlined in the updated Appropriation Act language?

Formula funds, as referenced in the updated Appropriation Act language, define those allocations that were distributed prior to FY2010 to the primary, secondary, and urban highway systems.  These funds were made up of a combination of federal and state revenues.  In previously adopted Six Year Improvement Programs (SYIP) prior to FY2010, after funds were set aside for administrative and general expenses and pursuant to other provisions related to the disposition of funds prior to allocation for highway purposes, allocations were provided to each highway system with 40% of available allocations programmed to the primary system, 30% to the secondary system, and 30% to the urban system.  Starting in FY2010, there were insufficient revenues to support allocations through the 40/30/30 Formula.  Primary formula funds were allocated by VDOT construction district; secondary and urban formula funds were allocated to individual localities for use on projects deemed to be priorities on a Secondary Six Year Plan (SSYP) or that were identified as an urban priority.  

What is the background behind this effort and where can I find more information?

The 2016 Virginia Acts of Assembly were updated by House Bill 30 (HB30 – 2016) outlining the adopted biennial budget to include additional language regarding unspent or uncommitted formula funds that were previously allocated under the 40/30/30 Formula prior to 2010.  The intent of the updated language, identified in the section for the Office of Transportation, Item 436 C.2, is to ensure that previously allocated formula funds are being maximized to fully fund projects in the SYIP and not sitting idle on completed, cancelled, or stalled projects.

Please coordinate with your VDOT District (District) contact(s) for assistance with identifying any unspent or uncommitted formula funds or for general questions.

A link to Item 436 included in the final version of HB30 can be found at:  https://budget.lis.virginia.gov/item/2016/1/HB30/Chapter/1/436/

How can I determine if there are unspent or uncommitted formula funds that need to be consolidated?

Please coordinate with your District contact(s) to determine if there is unspent or uncommitted formula funding.  They will be able to assist you with identifying opportunities to utilize any remaining idle funds.

What types of transportation projects or activities may be funded with formula funds?

Projects or activities that are eligible to be funded pursuant to § 33.2, Code of Virginia may utilize formula funds.

Formula funds are comprised of a combination of federal and state allocations.  If formula funds are identified for potential transfer to another project in the SYIP or a new/proposed project to be fully funded in the SYIP, it is important to ensure that all federal funds are utilized in a manner consistent with existing guidance related to the use of federal funds.  Common eligible activities that can be funded with formula funding include but are not limited to:

• Roadway construction, reconstruction, rehabilitation, resurfacing, or operational improvements
• Bridge replacement, rehabilitation, or preservation
• New bridge construction on an existing federal aid highway
• Capital costs for transit projects
• Commuter parking lot expansion or construction (must be connected to an eligible route – primary, secondary, urban)
• Bicycle and/or pedestrian facilities (must be connected or adjacent to an eligible route – primary, secondary, urban)
• Surface transportation planning activities
• Intelligent transportation system (ITS) improvements
• Intersection improvements
• Paving unpaved roads (Can only be funded with 100% state formula funds – no federal funds may be used to pave unpaved roads)
• For additional questions relating to project eligibility, please coordinate with your District contact(s).

Can new projects be established and added to the SYIP utilizing idle formula funds?

Yes – new projects may be established utilizing idle formula funds after accounting for deficits on completed projects. Please reference Question # 4 for more information about types of eligible transportation projects and activities that may utilize formula funds.

Can formula funds be used in conjunction with an application for one of VDOT’s application based funding programs such as Smart Scale (formerly HB2), Revenue Sharing, Transportation Alternatives (TAP), or Highway Safety?

• Yes – Formula funds may be used in conjunction with an application for one of VDOT’s application based funding programs.  To use Primary formula funds as leveraged funds for an application, they must be existing programmed funds on the project.
• All project deficits and other project closeout issues eligible to be programmed with appropriate formula funds must be accounted for prior to utilizing formula funds in conjunction with one of VDOT’s application programs.
• For existing projects in the SYIP, coordination with the District office should occur to have the funds transferred to the project PRIOR to submitting an application for funding in one of the above mentioned programs.
• For proposed projects that are not in the SYIP, the District office will coordinate with VDOT Central Office staff to set aside the identified amount of formula funds to be programmed to the project pending the release of approved projects from each application program.
• For proposed projects that plan to utilize formula funds in conjunction with an application for one of VDOT’s application programs, if the proposed project’s application does not receive sufficient funding to fully fund the project in the SYIP, additional coordination with District staff should occur to identify other opportunities to utilize the set aside funding.

How will projects be impacted that are funded by a combination of formula and other fund types in the event unspent formula funds are transferred from the project?

• If a project is fully funded with a combination of formula and other fund types as of January 1, 2018, there should be no impact to the project. 
• If an existing project in the SYIP is not currently fully funded and has a combination of formula and other fund types, additional funding should be identified in order to fully fund the project.  If formula funds are transferred from the project AND the project will remain partially funded in the SYIP with other fund types, the District and/or locality should identify additional funding to fully fund the project.  This may require delaying the project schedule or reducing the project scope to assist with identifying sufficient additional funding.
• If additional funding cannot be identified and the project’s schedule cannot be delayed or scope cannot be reduced in order to identify additional funding, the project may need to be canceled and have any remaining funding reallocated to other eligible projects in the SYIP.  Please see reference Question # 8 for more information regarding cancellation of a project.
• Project eligibility for federal funding may apply.

Will localities be responsible for payback of expenditures for federal and/or state dollars spent to date on projects in which unspent formula funds are transferred from the project?

• Every effort will be made to continue to advance existing projects in the SYIP and identify replacement funding.  In the event a project has incurred expenditures against federal and/or state funds and is canceled as a result of transferring unspent formula funds from the project, VDOT staff will review the project for potential payback implications and make every effort to mitigate potential repayment of funds.
• If a locality requests the termination of a project, and VDOT does not agree to the termination, or if a locality does not advance a project to the next phase of construction when requested by the Commonwealth Transportation Board (CTB) and VDOT has expended state or federal funds, the locality may be required to reimburse VDOT for all funds expended on the project pursuant to § 33.2-214, Code of Virginia.

Can transportation studies be funded with unspent or uncommitted formula funds?

• Eligible transportation studies may be funded with formula funds.
• All project deficits must be accounted for prior to utilizing formula funds for any studies.
• Priority should be given to fully funding active eligible projects in the SYIP before considering the establishment of any studies.
• Any studies added to the SYIP must have the total cost and funding identified for the study at the time it is added to the SYIP – work for the study must be initiated prior to January 1, 2018 and should not require additional funding for supplemental efforts.  Ongoing and recurring planning activities such as operational assistance, metropolitan planning, rural long range plan updates, etc. should not be funded with formula funds.
• Examples of suggested efforts may include but are not limited to:
• Interchange Justification/Modification Reports (IJR/IMR)
• Corridor Study
• Roadway Safety Study
• Feasibility Study
• Access Management Study
• Bicycle/Pedestrian Improvements Study

What is definition of a fully funded and active project as of January 1, 2018 as discussed in the Appropriation Act language

For formula funded projects in the program, as of January 1, 2018, to be considered a fully funded and active project, at least one phase of work must have been initiated and the project must be fully funded for construction in the Live Six Year Improvement Program (SYIP) by FY2024.  Projects must be funded in accordance with existing programming rules which require full funding for each phase before start of a subsequent phase and full funding for construction being identified in the program within 12 months of construction completion.  For additional programming rules that may apply, please coordinate with your VDOT District contact(s).