AFAs with LGs may be divided into three broad categories:

An AFA for a voluntary project involves cash or other resources voluntarily contributed to a project on the state highway system. LGs may sign these agreements providing they pay for 100 percent of the project costs or 100 percent of a “discrete element” of a project and there is no required state or federal match. A discrete element is a task that is separate or unconnected to other tasks in the project and can be completed independently from other tasks. There is no minimum or maximum dollar amount for these agreements.

For accounting purposes within TxDOT, the agreement may state that the “work under this voluntary agreement is 100 percent paid for by others.” In practice, a voluntary project may be a small part of a larger TxDOT project that may involve other funding sources. Examples of common voluntary projects are feasibility studies, land acquisition, environmental work, plans, specifications and estimates, drainage projects, highway construction and maintenance projects. The AFA for voluntary projects does not contain federal provisions because the contributed resources are not a part of a federal program agreement.

In addition, these AFAs for voluntary projects differ from a Local On-System Agreement (LOSA). The voluntary agreement provides for the LG to contribute funding for TxDOT performed project work. A LOSA applies to a construction project located on the state highway system right of way for which the local government is contributing all funds and managing or performing all engineering and construction activities. The role of districts on LOSA projects is to approve the proposed improvements prior to commencement of construction, to authorize the LG to commence construction on state right of way, and to verify that the completed improvements meet applicable design and construction standards. Local Government Project risk assessment, oversight level, and district verification of LG compliance with state and federal requirements for consultant selection and contracting do not apply to projects with a LOSA.

Federal legislation creates funding programs administered by USDOT through FHWA that allow states to pass federal funds through the state to an LG for coordinated development of transportation projects. TxDOT acts as the conduit in Texas for the funds and is the oversight agency responsible for assuring these federal funds are spent in an allowable manner.

In most cases, the federal programs require a local match to the federal funds in a defined ratio. For example, a project might be funded with 80 percent federal funds and 20 percent local resources. The local match may be paid with state resources, LG resources or, in some cases, private-sector resources. In most cases, the local match is a cash match, but it can also be an in-kind match of resources, such as land, labor or materials if allowed by applicable program regulations. The federal government may also provide funding for specific earmark projects. The specifics of the agreement depend on the program and negotiated agreements among the parties.

Examples of the most common programs funded through FHWA are:

Instead of cash or in-kind services, a LG may choose to use transportation development credits (TDCs) as the non-federal match on a project. TDCs are a financing tool approved by FHWA allowing states, toll authorities or a private entity to earn credits when these entities fund a capital transportation investment with toll revenues earned on existing toll facilities, excluding revenues needed for debt service, returns to investors or the operation and maintenance of toll facilities. In Texas, 75 percent of credits are allocated to the metropolitan planning organization (MPO) in whose region they were earned and 25 percent are allocated on a competitive statewide basis. The methods for calculating the match, for accounting for TDCs and the rules applicable to their use can be found at et seq. The LG will be required to document TDC expenditures, and this documentation will be specified in the AFA. can be found on the TxDOT website regarding TDCs.

TxDOT has adopted rules under the Texas Administrative Code applicable to many of the federal, state and local funding participation programs. These rules are found at

Some other programs have extensive rules specifically applicable to them. For example, TAP rules are found at (implementation and administration of the TAP), TASA rules are found at , as well as (funding categories) and (transportation allocation funding formulas). It is the responsibility of the contract manager of individual contract programs to be familiar with the applicable rules for his/her specific program contract. A contract manager working with federally funded FHWA projects with TxDOT/LG AFAs should be familiar with and with the specific rules affecting his/her program.

Some TxDOT divisions administering various programs have published important guides for reference. For example, refer to the Bridge Division’s for more information on bridge projects and the various found in the TxDOT Online Manual System for projects involving right-of-way acquisition.

The state may allocate funds for local projects involved in specific programs, and these projects may be handled with a unique version of the AFA. These programs are managed through various TxDOT divisions/offices including the Transportation Planning and Programming Division (TPP), Design Division (DES), Bridge Division (BRG), Traffic Operations Division (TRF) and Local Government Projects Section (LGP). LGs are encouraged to contact their local district to obtain current information in these situations. Additional information may be available through the appropriate division’s Web pages on the .