FEDERAL-AID POLICY GUIDE
September 8, 1992, Transmittal 14

23 CFR 645A

OPI: HNG-12

1. UTILITY COST SHARING PROPOSALS (23 CFR 645.107 (a) AND (d))

   1. The principle of utility cost sharing applies to both mandatory and voluntary contributions which might be made by a utility. Any funds provided by the utility are to be deducted from the total overall costs, and FHWA will participate only in its pro rata share of the remaining balance. Additionally, the principle is also applied on State projects regardless of whether the utility is privately owned or owned by a local political subdivision of the State.

   2. If the utility is owned by the local entity itself and the utility adjustment costs are eligible for Federal reimbursement, the FHWA will reimburse for all the funds paid from that particular political subdivision for the utility adjustment, including those funds from the locally owned utility (see section 23 CFR 645.107(d)). The basic approach is to accept all of the local funding sources as representing the local fund expenditure on a project.

2. APPLICABILITY OF SECTION 202(d) OF THE UNIFORM ACT TO UTILITY RELOCATIONS NECESSITATED BY HIGHWAY CONSTRUCTION (23 CFR 645.107). Section 202(d) does not apply to utility adjustments on Federal-aid highway projects. Hence, pay-ments for public utility relocations on Federal-aid highway projects have been and will continue to be in accordance with 23 U.S.C. 123 and FHWA's implementing regulations.

3. UTILITY ADJUSTMENTS ON HIGHWAY RIGHT-OF WAY ACQUIRED BY A STATE FROM ANOTHER PUBLIC ENTITY (23 CFR 645.107(f))

   1. When a State acquires highway right-of-way from another public entity, it is expected that in regard to existing utility use or occupancy agreements (permits),the State will assume the position held by the public entity.

   2. Federal reimbursement for the adjustment of existingutility facilities on land acquired from other public entities will vary depending on the conditions imposed by the existing permits and by the utility reimbursement statutes under which the State operates. For example, if the existing utility/public entity permit establishes an obligation for the public entity to pay for needed adjustments of the utility facili-ties, the State, in taking the public entity's position, would assume this responsibility and such utility adjustment costs would be eligible for Federal participation. Conversely, if the existing utility/public entity permit either specifically assigned responsibility for these adjustment costs to the utility or was silent on this matter, then as the State assumes the public entity's position, Federal funds would only participate in utility adjustment costs made by the state pursuant to a State statute authorizing such payment.

   3. This would apply to State acquired right-of-way from political subdivisions of a State, such as a city or county, as well as right-of-way acquired from the Federal Government.

4. APPLICABILITY OF THE UNIFORM ACT TO RIGHT-OF-WAY ACQUISITIONS FOR UTILITY RELOCATIONS NECESSITATED BY HIGHWAY CONSTRUCTION (23 CFR 645.111). Both the State and utility may purchase replacement right-of-way for utility adjust-ments. If Federal funds are being used for the utility adjustment and if the State or a political subdivision performs the right-of-way acquisition, then the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (Uniform Act, 42 U.S.C. 4601(1)) apply. However, if Federal funds are not being used for the utility adjustments or if the acquisition is performed by the utility, the Uniform Act requirements do not apply.

5. USE OF FIXED AMOUNT (LUMP SUM) PAYMENTS TO UTILITIES (23 CFR 645.113(f)). See Attachment to this supplement for further guidance.

6. APPLICABILITY OF WAGE RATE, EQUAL EMPLOYMENT OPPORTUNITY (EEO), CLEAN AIR, MINORITY BUSINESS (MBE), AND OTHER CONTRACT PROVISIONS TO UTILITY LET CONTACTS (23 CFR 645.115). The following requirements are not applicable toutility-let contracts:

   1. Wage rate (23 U.S.C. 113)

   2. EEO (23 CFR 230)

   3. MBE (49 CFR 23) for reimbursable utility work on Federal-aid projects.

   4. Required contract provisions (23 CFR 633).

   5. Other Federal laws applying to recipients of Federal assistance. (However, a utility or its contractor is not relieved from complying with any aspects of such requirements which would apply regardless of whether or not Federal assistance is involved.)

7. LOSS OF REVENUE (23 CFR 654.117). A utility's claim that it should be reimbursed for "loss of revenue" during its re-location shutdowns to accommodate construction of a highway project is not eligible for Federal-aid participation. This item is not considered to represent costs expended by the utility and is not a charge properly attributable to the utility relocation.

8. INCOME TAX COSTS (23 CFR 645.117). Federal-aid funds may not participate in reimbursement to a utility for income taxes paid under Section 824 of the Tax Reform Act of 1986 (P.L. 99-514) in conjunction with the adjustment of existing facilities to accommodate a Federal-aid highway construction project. Section 824 indicates that "contributions by a customer or potential customer...to provide or encourage the provision of services to or for the benefit of the transferor..." are taxable. However, under the provisions of 23 U.S.C. 123, the FHWA will not participate in any cost that could be construed as a contribution. Reimbursement may only be provided for costs incurred to restore a facility or to replace its function in kind. Such reim-bursement is not considered in any way to be a contribution and therefore should not be subject to the provisions of Section 824. IRS Notice 87-82, released on December 3, 1987 also makes it clear that such reimbursement does not have to be treated as income to a utility.

9. REIMBURSEMENT TO ADJUST UTILITIES IMPROPERLY INSTALLED ON HIGHWAY RIGHT-OF-WAY (23 CFR 645.107(a))

   1. There are two situations in which the FHWA has authority to make a determination that Federal funds should not be used to pay for adjustment of utility facilities:

      (1) where a State, by permit, has allowed a utility use of highway right-of-way to occur which is not in conformance with its approved policy and the FHWA has not approved the exception to the policy, and

      (2) where it is clearly evident that an unauthorized use of highway right-of-way has occurred.

10. INTEREST COSTS (23 CFR 645.117). Utility interest expenses on funds borrowed for the relocation of utility facilities necessitated by highway construction are not eligible for Federal-aid reimbursement. (Re: Federal Management Circular 74-4)

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