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Transportation Funding & Financing

Federal Matching Flexibility

The Federal funds management tools described below are designed to provide more flexibility to the states in their management of Federal funds and to increase investment and accelerate projects. Expediting project construction through the use of these tools can generate real economic returns to highway users and other project beneficiaries by delivering benefits, such as travel time savings and safety improvements, sooner. Also, by improving cash flow, states can pursue multiple projects concurrently, stretching limited Federal dollars.

For most Federal-aid projects, Federal law requires that 20 percent of the costs be derived from a non-Federal source (10 percent for most interstate highway projects). These percentages are reduced in states with large portions of Federally-owned land, adjusted by what is referred to as "sliding scale."

To maximize the use of all available resources, states have a range of options for matching the Federal share of highway projects. By providing flexibility in the form that the nonfederal match might take, Federal dollars can be leveraged more effectively.

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Tapered Match
With tapered match, the non-Federal matching requirement applies to the aggregate cost of a project rather than on a payment-by-payment basis.

Using Federal Funds as Match
Funds from other Federal agencies may count toward the non-federal share of certain types of improvements.

Toll Credits (Soft Match)
States may use revenue from toll facilities as a credit toward the non-Federal matching share of certain highway projects.

Program Match
Allows match requirements to be applied to an annual program rather than individual projects.

Third Party Donations
Allows states to apply the value of third party donated funds, land, material, or services toward their share of project costs.