A Guide to Transportation Funding Options

Transit Funding – Programs

Federal Transit Programs

Metropolitan & Statewide Planning (5303, 5304, 5305)

These grants are provided to support planning efforts. State departments of transportation receive the funds and allocate them to Metropolitan Planning Organizations and other statewide entities. Funds are apportioned by the federal government based on formulas that take into account, among other numerous factors, each state's urban population in relation to the population of the nation as a whole. Each state is guaranteed to receive at least 0.5 percent of the apportioned funds.

Metropolitan & Statewide Planning Grant funds may be used for activities that:

support the economic vitality of the metropolitan area, especially by enabling global competitiveness, productivity, and efficiency;
increase the safety of the transportation system for motorized and non-motorized users;
increase the security of the transportation system for motorized and non-motorized users;
increase the accessibility and mobility of people and for freight;
protect and enhance the environment, promote energy conservation, improve the quality of life, and promote consistency between transportation improvements and State and local planned growth and economic development patterns;
enhance the integration and connectivity of the transportation system, across and between modes, for people and freight;
promote efficient system management and operation; and
emphasize the preservation of the existing transportation system.

Large Urban Cities (5307)

These grants are made available for transit capital and operating assistance in urbanized areas with a population of 50,000 or more. Urban areas with a population of over 200,000 must have a designated recipient to receive funds under this program while areas with a population of less than 200,000 receive funds under this grant program from their respective state governor's office. Areas with a population of under 200,000 that have been designated a Traffic Management Area (TMA) may receive funds directly.

Large Urban Cities Grant funds may be applied for, received and dispensed by public bodies with legal authority to receive and dispense Federal funds and includes local officials, publicly owned operators and transit services. Funding is apportioned by Congressional formula based on population and population density for areas with a population between 50,000 and 200,000 and for larger areas is based on a combination of bus revenue vehicle miles, bus passenger miles, fixed guideway revenue vehicle miles, fixed guideway route miles as well as population and population density.

The Federal match may not exceed 80 percent of the net project cost unless the project relates to equipment purchases attributable to compliance with the Americans With Disabilities Act and the Clean Air Act or projects related to bicycles, in both cases of which the Federal share may be 90 percent of the net project cost.

Large Urban Cities Grant funds may be used for:

Planning, engineering design and evaluation of transit projects and other technical transportation-related studies.
Capital investments in bus and bus-related activities such as replacement of buses, overhaul of buses, rebuilding of buses, crime prevention and security equipment and construction of maintenance and passenger facilities.
Capital investments in new and existing fixed guideway systems including rolling stock, overhaul and rebuilding of vehicles, track, signals, communications, and computer hardware and software. Capital costs include costs for preventive maintenance and some Americans with Disabilities Act complementary paratransit service costs.

Clean Fuels Grant Program (5308)

This program is aimed at assisting non-attainment and maintenance areas in achieving and maintaining National Ambient Air Quality Standards for ozone and carbon monoxide and to support clean fuel and advanced propulsion technologies for transit.

The Federal Transit Administration is responsible for allocating funds under this grant program. The federal match may not exceed 90 percent of the net incremental cost of the clean fuels component or 83 percent if vehicles are being purchased. FTA will not approve deferred local share under this program.

Funds from Clean Fuels Grant program may be used for:

Purchasing or leasing clean fuel buses including buses that employ a lightweight composite primary structure and vans for use in revenue service. (The purchase or lease of non-revenue vehicles is not an eligible project.)
Constructing or leasing clean fuel (not including clean diesel) bus facilities or electrical recharging facilities and related equipment.
Projects relating to clean fuel, biodiesel, hybrid electric, or zero emissions technology buses that exhibit equivalent or superior emissions reductions to existing clean fuel or hybrid electric technologies.

Clean fuel vehicles include vehicles that are powered by compressed natural gas, liquefied natural gas, biodiesel fuels, batteries, alcohol-based fuels, hybrid electric technology, fuel cells, or clean diesel. They may also include vehicles powered by other low or zero emissions technology that the Administrator of the Environmental Protection Agency has certified as sufficiently reducing harmful emissions.

Funds made available under this program cannot be used to fund operating expenses or preventive maintenance. Funds made available under this program may also not be used to reimburse projects that have incurred prior eligible expenses without a Letter of No Prejudice (LONP) issued by FTA for the project. A LONP is a document issued by the FTA that allows a grantee to be reimbursed (with federal funds) for activities that occurred prior to being awarded a grant. For example, with a LONP a transit agency may receive federal reimbursement for activities such as real estate acquisition, utilities relocation, site preparation, and procurement if these activities occurred prior to receiving a grant award. A check list for applying for a LONP may be found online.

Major Capital Investments (5309)

This program provides capital assistance for three primary activities:

The development of new fixed guideway system (New Starts and Small Starts Programs)
The modernization of existing rail systems (Rail and Fixed Guideway Modernization Program)
Development and purchase of new buses and bus related facilities or the replacement of old buses and bus related facilities (Bus and Bus Facilities Program)

New Starts

New Starts is a component of the Major Capital Investments federal grant program and provides funds for capital assistance for the construction of:

New fixed guideway systems or the extension or replacement of existing fixed guideway systems such as light rail, heavy rail, commuter rail, monorail, automated fixed guideway systems (such as a "people mover"); or
HOV facilities for transit use.

Projects that do not utilize a fixed guideway to some extent, in that the service does not run on exclusive or controlled rights-of-way, are not eligible for New Starts funding. Projects seeking New Starts funding must clear various capital investment planning and project development processes.

The "Small Starts" program refers to grants awarded under New Starts that are less than $75 million with a total project cost of less than $250 million. Non-fixed guideway improvements, such as a Bus Rapid Transit (BRT) system, are allowed under Small Starts.

The Federal match for New Starts funding is generally 80 percent. However, FTA encourages project sponsors to request a Federal share that is as low as possible as FTA has been instructed to not to sign any new full funding grant agreements that have a maximum Federal share of higher than 60 percent.

Entities eligible to receive New Starts funding include:

Transit authorities and other related state and local public bodies and agencies;
States, municipalities, or other political subdivisions of states
Public agencies and instrumentalities of one or more states;
Certain public corporations, boards, and commissions established under state law.

Rail and Fixed Guideway Modernization Program

The Rail and Fixed Guideway Modernization Program is another sub-program within the Major Capital Investments program.

Grant recipients may use Rail and Fixed Guideway Modernization funds for capital projects that modernize or improve existing fixed guideway systems including the purchase and rehabilitation of rolling stock, track, line equipment, structures, signals and communications, power equipment and substations, passenger stations and terminals, security equipment and systems, maintenance facilities and equipment, operational support equipment including computer hardware and software, system extensions, and preventive maintenance.

Funds are allocated by the FTA by a statutory formula to urbanized areas that have rail systems that have been in operation for at least seven years.

Entities eligible to receive these funds include:

Transit authorities and other related state and local public bodies and agencies;
States, municipalities, or other political subdivisions of states
Public agencies and instrumentalities of one or more states;
Certain public corporations, boards, and commissions established under state law.

Bus and Bus Facilities

The Bus and Bus Facilities program is also a component of the Major Capital Investments federal grant program.

This grant program provides capital assistance for the purchase or replacement of buses, related equipment and facilities. Eligible projects include:

The purchasing of buses for fleet and service expansion,
Facilities for bus maintenance and administration, transfer facilities, bus malls, transportation centers, intermodal terminals, and park-and-ride stations,
Acquisition of replacement vehicles,
Bus rebuilds,
Bus preventive maintenance,
Passenger amenities such as passenger shelters and bus stop signs,
Accessory and miscellaneous equipment such as mobile radio units, supervisory vehicles, fare boxes, computers and shop and garage equipment.

The Bus Testing Facility program is also part of this grant program.

The Secretary of Transportation allocates funding for this program at his discretion, but Congress fully earmarks all available funding.

Transportation for Elderly Persons or Persons with Disabilities (5310)

This program provides funding to public transportation providers and private nonprofit groups to meet the needs of the elderly and persons with disabilities. States are responsible for submitting grant applications and receiving funds under this program.

Eligible expenses include buses, vans, paratransit vehicles, communication equipment, vehicle shelters, and wheelchairs lifts and restraints. Local providers may also, with the consent of the state, use 5310 funds to lease equipment, conduct certain types of preventative maintenance, and contract for transportation services with private providers. The states utilize local planning processes to assist in determining how money should be used by recipient agencies.

Federal funds may be used for up to 80 percent of expenses and the remaining local share may not come from federal sources unless the federal program specifically permits the funds to be used in such a manner.

Rural and Small Urban Areas (5311)

This program funds capital, operating and administrative expenses in areas with a population of less than 50,000.

This program also includes the Rural Transit Assistance Program which provides technical training services and materials on transit-related subjects such as driver education, operations, maintenance and management. It also includes the Public Transportation on Indian Reservations program. Under this program, Indian Tribes are awarded grants (that may be used for similar purposes as Rural and Small Urban Area grants) on a competitive basis for planning, capital and operating assistance for rural transit services and support of intercity bus services.

Public transit providers, local government agencies, Indian Tribes, non-profit organizations and public transit operators are all eligible to receive funds under this program.

Federal law requires that at least 15 percent of program funds be used to support intercity bus services, unless the state governor has certified that such needs are already being met. States may use up to 15 percent of funding for state administration, planning and technical assistance activities.

The maximum Federal match for capital and project administration is 80 percent, but projects meeting the requirements of the Americans With Disabilities Act, the Clean Air Act, or bicycle access projects may be funded with a 90 percent federal match. The maximum Federal share for operating assistance is 50 percent of the net operating costs.

Funding is apportioned based on formulas that take into account a states rural population.

Transit Cooperative Research Program (5313)

The Transit Cooperative Research Program (TCRP) works to promote operational effectiveness and efficiency in public transportation by conducting practical, near term research. The TCRP program has many products including transit security guidelines, new transit paradigms, transit industry best practices, and new planning and management tools.

The program is administered by the Transportation Research Board (TRB) which maintains a publications list and description of all TCRP projects on its website. Materials may also be found at the TCRP website where hard copies may also be ordered without charge.

The TCRP solicits problem statements annually from the transit community and TRB awards competitive contracts for research and synthesis studies. Projects of the highest priority are selected and funds are awarded. Funds are allocated under this program by transit industry consensus via the TRB.

Job Access and Reverse Commute (JARC) Program (5316)

The Job Access program is targeted at developing new and/or expanded transportation services for low income persons such as shuttles, vanpools, bus routes, mass transit connector services, and guaranteed ride home programs. The Reverse Commute Program provides transportation services to suburban centers from urban, suburban and rural areas. Capital and operating expenses for projects are eligible for funding and require a 20 to 50 percent matching non-federal share.

SAFETEA-LU turned the JARC program into a formula program, whereas in the past funds were distributed on a competitive basis. Sixty percent of funds are distributed to TMAs in MPO areas, and 20 percent is targeted to urbanized areas with a population of less than 200,000. The remaining 20 percent of funds go to rural transit projects. TMAs in MPO areas decide which projects will be selected in their area and State Departments of Transportation select projects for the remainder of their state.

New Freedom Program (5317)

New Freedom projects provide transit services to individuals with disabilities above and beyond the requirements of the Americans with Disabilities Act. Capital and operating expenses for projects are eligible for funding and matching requirements are flexible to encourage coordination with other Federal programs such as the Department of Health and Human Services or the Department of Agriculture. Ten percent of funds may be used for planning, administrative and technical assistance.

Sixty percent of funds are distributed to TMAs in MPO area, and 20 percent is targeted to urbanized areas with a population of less than 200,000. The remaining 20 percent of funds go to rural areas. Recipient agencies within TMA's or MPO areas decide which projects will receive funding in their area and State Departments of Transportation select projects for the remainder of their state. Projects receiving New Freedom program funding must be included in a locally developed human service transportation coordinated plan.

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