CITY COMMISSION AGENDA ITEM

Department:	Public Works		Commission Meeting Date:  February 6, 2018
Staff Contact:	Charles F. Soules, Director of Public Works
Recommendations/Options/Action Requested:
Authorize the Mayor to execute Supplemental Agreement No. 1 to the Federal Fund Exchange Master Agreement with the Kansas Department of Transportation (KDOT).
Executive Summary:		Annually the City of Lawrence receives an allotment of federal funds for transportation improvement projects that are administered and distributed through the Kansas Department of Transportation (KDOT). The city’s allotment varies depending on federal appropriations for the nation’s transportation system but typically is slightly less than $1 million annually. Regulations tied to federally funded projects result in higher costs for design, administration and construction. KDOT provides a Federal Fund Exchange Program in which cities/counties may exchange their allotted federal funds for state funds at a certain reimbursement rate. The exchange enables municipalities to avoid federal regulations, and corresponding costs, on eligible projects. KDOT withholds an amount determined to be the state’s cost to use the federal funds. In the past this amount (the exchange rate) was 90%/10%, with cities receiving $0.90 and the state retaining $0.10 of eligible dollars. The state recently re-evaluated the Federal Fund Exchange Program and announced revisions to the guidelines. The exchange rate will be reduced by 15%, with cities/counties now receiving just $0.75 and the state retaining $0.25 of eligible dollars. Additionally, the state will no longer allow the practice of banking, which had previously enabled cities/counties to accumulate these exchange funds for up to three (3) years before spending on eligible projects. Supplemental Agreement No. 1 revises the original city-state Federal Fund Exchange Program agreement to reflect these changes to the exchange provisions. The new exchange rate (75%/25%) shifts costs to cities and counties. The change will result in an approximate reduction of $150,000 annually to the City of Lawrence. The exchange rate will be reviewed and established annually by the KDOT Secretary. The revised rule regarding banking of exchange funds is expected to have a negligible effect on the city. The ability to avoid federal regulations by participating in the fund exchange program is still advantageous to the city and staff recommends executing Supplemental Agreement No. 1.
Strategic Plan Critical Success Factor		Innovative Infrastructure and Asset Management Core Services Sound Fiscal Stewardship
Fiscal Impact (Amount/Source):		Executing Supplemental Agreement No. 1 will have no fiscal impact on the city, but the new exchange rate will reduce revenues by approximately $150,000 annually.
Attachments:		KDOT Correspondence Master Agreement Supplemental Agreement No. 1

Reviewed By: (for CMO use only)

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