Created by the Urban Mass Transportation Act of 1964, the Federal Transit Administration (FTA) oversees thousands of grants to state and local providers of transit programs. FTA financial assistance is used to develop new transit systems as well as improve, maintain and operate existing systems. Grantees must manage their projects in accordance with federal requirements, enforced by the FTA.
Buses, heavy rail, and commuter rail services consume the largest portion of operating expenses. Other modes of transportation funded by the FTA include light rail, monorail, passenger ferries, trolleys, inclined railways and people movers. Operating costs can vary greatly depending on the type of service provided (see graph below)
At its inception, the aim of the FTA was to provide an alternative to federal spending on highways. The largest funded programs between the years 2000 to 2009 were formula grants for construction in urban areas ($34.9 billion); capital investment grants for equipment and improvement of facilities, ($26 billion); and formula grants for administration and operating expenses in non-urban areas ($2.8 billion).
Nearly all FTA programs are funded through the Mass Transit Account within the Highway Trust Fund. The fund is supported by fuel taxes and other excise taxes on motorists. The Mass Transit Account currently receives about 19 percent of the total fund or about $10.3 billion. Only one FTA program — for public transportation research — is supported by the general fund.
In 2009, an additional $7.65 billion was allocated to the FTA under the American Recovery and Reinvestment Act, bringing total transit funding for 2009 to approximately $18 billion. Most of the recovery money will fund capital assistance grants.
The FTA also provides direct loans, loan guarantees, lines of credit, and credit enhancement support such as bond insurance for transit through the Transportation Infrastructure Finance and Innovation Act (TIFIA) and the State Infrastructure Bank program. TIFIA is aimed at attracting private and non-federal investment in transportation projects by offering loans and loan guarantees. The program is designed to complement federal grants with financing for infrastructure. Since 1998, more than $500 million in direct loans were issued to two transit programs and one intermodal project with a strong transit component under the TIFIA program. A $600 million loan guarantee was issued to the Washington Metropolitan Area Transit Authority Capital Improvement Program in 1999 – making it the single largest recipient of a TIFIA loan guarantee thus far.
Source: National Transit Database (1991-2007).
* A transit mode in Puerto Rico of privately-owned passenger vans or small buses that are unsubsidized but regulated by local governments
Exempt Facility Bonds also give private investors, who fund transportation and other public infrastructure projects, a tax break on interest they might earn on such bonds. The tax-exempt bond allows private investors to receive significant tax benefits.
The American Recovery and Reinvestment Act also created the Build America Bond program for 2009-2010, under which the federal government covers 35 percent of the interest that a public entity must pay to private investors on taxable bonds for infrastructure projects. This is a direct subsidy from the U.S. Treasury to state and local governments that issue such bonds for capital projects.
