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(b) Lease of Vehicles. The lease of vehicles acquired with financial <br />assistance authorized for 49 U.S.C. 5311 to any third party is contingent upon approval of the <br />Department. It is allowable to lease vehicles to another Community Transportation System <br />providing general public service in the State of North Carolina, upon approval of the <br />Department. It is also allowable for vehicles to be leased to a third party operator or <br />transportation management company that operates the transit service within a county /region <br />under contract to the Contractor, upon approval of the Department. The Contractor agrees to <br />use the vehicle lease agreement provided by the Department when vehicles are leased, even if <br />on a short-term basis, to another Community Transportation System or a management <br />company. The Contractor agrees to obtain written approval from the Department before the <br />lease is executed and forward a copy of the signed, executed lease agreement to the <br />Department. The Contractor, as a Community Transportation System, shall not lease vehicles <br />to human service agencies, county agencies /government, community agencies or school <br />systems. The Contractor agrees not to loan vehicle(s) to other agencies /individuals for short - <br />term use, even during hours that the transportation system is not providing service, as the <br />vehicle(s) will generally be used to provide service that is "closed- door," i.e., not open to the <br />general public. <br />i. Disposition of Project Property. With prior Department approval, the <br />Contractor may sell, transfer, or lease Project property and use the proceeds to reduce the <br />gross project cost of other eligible capital public transportation projects to the extent permitted <br />by 49 U.S.C. § 5334(h)(4). The Contractor also agrees that the Department shall determine <br />"useful life" for all Project property and that the Contractor will use Project property continuously <br />and appropriately throughout the useful life of that property. Upon the end of the period of <br />useful life, the Contractor may dispose of Project property after notifying and receiving <br />disposition instructions from the Department. <br />(1) Project Property Whose Useful Life Has Expired. When the useful life <br />of Project property has expired, the Contractor agrees to comply with the Department's <br />disposition requirements. <br />(2) Project Property Prematurely Withdrawn from Use. For Project <br />property withdrawn from appropriate use before its useful life has expired, the Contractor agrees <br />as follows: <br />(a) Notification Requirement. The Contractor agrees to notify the <br />Department immediately when any Project property is prematurely withdrawn from appropriate <br />use, whether by planned withdrawal, misuse, or casualty loss. <br />(b) Calculating the Fair Market Value of Prematurely Withdrawn <br />Project Property. The Contractor agrees that the Federal /State Government retains a <br />Federal /State interest in the fair market value of Project property prematurely withdrawn from <br />appropriate use. The amount of the Federal /State interest in the Project property shall be <br />determined by the ratio of the Federal /State assistance awarded for the property to the actual <br />cost of the property. The Contractor agrees that the fair market value of Project property <br />prematurely withdrawn from use will be calculated as follows: <br />1. Equipment and Supplies. The Contractor agrees that the <br />fair market value of Project equipment and supplies shall be calculated by straight -line <br />depreciation of that property, based on the useful life of the equipment or supplies as <br />established by the Department. The fair market value of Project equipment and supplies shall <br />be the value immediately before the occurrence prompting the withdrawal of the equipment or <br />supplies from appropriate use. In the case of Project equipment or supplies lost or damaged by <br />fire, casualty, or natural disaster, the fair market value shall be calculated on the basis of the <br />condition of that equipment or supplies immediately before the fire, casualty, or natural disaster, <br />or the amount of insurance coverage, whichever is greater. <br />Page 24 of 36 <br />