Use of Proceeds from the Sale of Real Property Purchased with Federal Highway Funds
Highlights
A Congressional officer requested GAO's opinion on whether the proceeds from real property sales retain their character as federal funds under 23 U.S.C. 156, as well as how the states have applied this law. GAO found that Section 156 permits states to apply the federal share of proceeds of excess property dispositions to other Federal Highway Trust Fund projects in lieu of returning those funds to the Highway Trust Fund. The federal interest in such funds is not extinguished. Consequently, states may not convert federal money to state money by buying and selling property or use the federal share of recaptured funds to reduce or avoid their obligation to provide matching funds.
B-290744, Use of Proceeds from the Sale of Real Property Purchased with Federal Highway Funds, September 13, 2002
B-290744
September 13, 2002
The Honorable John McCain
Ranking Minority Member
Committee on Commerce, Science and Transportation
United States Senate
Subject: Use of Proceeds from the Sale of Real Property Purchased with Federal Highway Funds
Dear Senator McCain:
This is in response to your letter dated April 3, 2002, requesting our views regarding the Federal Highway Administration's (FHWA) interpretation of 23 U.S.C. 156 (2000). As explained below, 156 authorizes states to use the proceeds from sales of real property purchased with federal funds for other eligible projects. Your letter asks whether the proceeds from real property sales retain their character as federal funds under 156; you also ask questions about how the states have applied 156. This opinion addresses the proper interpretation of 156. The remaining issues you raise will be addressed in a separate GAO report.
Under 156, and in particular, 156(c), states disposing of excess property acquired with Federal Highway Trust (title 23) funds are authorized to reapply the federal share of the proceeds to other eligible title 23 projects. The FHWA construes 156 as allowing states to treat the proceeds of excess property sales as state funds. FHWA believes that the federal government retains no residual interest in those proceeds. It has informed the states that projects funded through proceeds from such transactions are not subject to restrictions that would otherwise apply if such funds were treated as federal funds.
As your letter points out, the Department of Transportation's (DOT's) Office of Inspector General (DOT-IG) questioned FHWA's interpretation of 156 in its report, October 2001 Finance Plan for the Central Artery/Tunnel Project, IN-2002-086, March 11, 2002. You ask us to examine the issues raised in the DOT-IG's report and determine whether FHWA's interpretation is correct. In this regard, you would also like us to consider whether states (1) can convert federal money to state money by buying and selling property, (2) can use such means to reduce or avoid their obligation to provide matching funds, and (3) can thus avoid normal safeguards on the use of federal funds.
As explained below, we disagree with FHWA's interpretation of 156. Section 156 permits states to apply the federal share of proceeds of excess property dispositions to other title 23 projects in lieu of returning those funds to the Highway Trust Fund. The federal interest in such funds is not extinguished. Consequently, states may not convert federal money to state money by buying and selling property or use the federal share of recaptured funds to reduce or avoid their obligation to provide matching funds.
Background
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FHWA's Comments
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Analysis
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Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc., United States v. Mead Corp. Skidmore v. Swift & Co., Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc.,
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[2] See Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments,
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