The Kansas Department of Transportation is reducing the exchange rate offered to local jurisdictions from 90 cents on the dollar to 75 cents for road projects financed through its Federal Fund Exchange Program.
The previous exchange rate did not fully take into account the match requirement KDOT needed to pay to use the federal funds if local public agencies chose to exchange them for state dollars, said KDOT spokeswoman Brianna Landon.
“After a review of the FFE program, it has been determined that the new exchange rate is necessary in order for KDOT to administer the FFE sustainably, without it costing the agency more to provide the exchange than the amount of federal funding received in the first place,” she said.
The change should add $150,000 to $200,000 a year to Shawnee County’s annual costs to do projects it carries out using the exchange program, provided the county continues with its standard practice of doing $1 million to $1.2 million worth of such projects annually, Shawnee County public works and solid waste department director Tom Vlach said this past week.
The move takes effect Oct. 1, the first day of the federal fiscal year, Vlach told county commissioners Bob Archer, Kevin Cook and Shelly Buhler Thursday.
KDOT representatives plan to schedule meetings with their local partners around the state to provide more details about the change, Vlach said.
KDOT has also decided to no longer permit the “banking” of federal or state funds in the program, according to a letter Vlach received last month from Michael J. Stringer, the chief of KDOT’s bureau of local projects.
After re-evaluating the program as it was originally established in the 2011 federal fiscal year, KDOT had determined the need to adjust its guidelines, Stringer wrote.
Commissioners voted 3-0 Thursday to acknowledge KDOT had notified them of the changes.
The commission voted in March to exchange the county’s 2017 allotment in federal transportation funds for state transportation project funds totaling nearly $1.14 million, which was 90 percent of the federal amount.
The county benefits from having the state funds instead of the larger federal fund amount because the federal funds require a local match — while the state funds do not — and the federal funds also come with a lot more “red tape,” Vlach told commissioners.
He said he was “not quite convinced” of KDOT’s assertion its administrative costs were greater than the 10 cents per dollar needed to maintain the program at its past funding level.
Landon said the new exchange rate still provides local agencies with access to funds they would not otherwise have, without burdening them with federal obligations.
She stressed KDOT voluntarily offers the program; it isn’t statutorily required to share federal funds or offer a chance for local agencies to exchange them for state money.
KDOT provides the program to help local governments meet their communities’ needs because it is committed to maximizing opportunities for transportation improvements across the state, Landon said.
She said federal funds come with specific requirements for how they can be used, meaning local public agencies can only spend them on approved federal aid routes and projects.
“However, those approved routes may not be the areas that meet local needs and priorities, or the federal regulations tied to those dollars might make a project too expensive,” Landon said.
The federal money also comes with a match requirement that local agencies must meet in order to use it, she said.
“(Local agencies) can still choose to use the federal money if they wish and receive the full amount, or they can request state money in place of the federal funds and KDOT will administer the federal funds for projects instead,” Landon added. “In the latter case, KDOT must then also meet the federal match requirement with state dollars.”
Vlach told county commissioners Thursday he thinks using the state funds result in lower bid prices and less construction administration costs for Shawnee County.
He said he’ll likely evaluate on a year-by-year basis whether to exchange the federal funds for state money, adding he might go back to just using straight federal funds instead of exchanging them.
Contact reporter Tim Hrenchir at (785) 295-1184 or @timhrenchir on Twitter.