7.1 The Role of the States
State governments play a key role in providing public funding for mass transit, both in the administration of the Federal formula programs for small and nonurbanized areas and through their own transit assistance programs. The role played by the states has several features that are relevant to the discussion of the formula program.
7.1.1 The Governor's Apportionment
As noted in the description of the formula programs, one important difference between large urbanized areas (those over 200,000 in population) and small urbanized areas is that large urbanized areas receive their formula allocations directly, while the formula allocations attributable to small urbanized areas are apportioned to the Governor of the respective state. The exception for small urbanized areas occurs when they are part of a designated Transportation Management Area. In this case, formula funds attributed to the area must be obligated within the small urbanized area. In practice, many states do simply "pass through" the formula allocations to the small urbanized areas, in part because the amounts attributable to each small urbanized area are published annually in the Federal Register. However, this is not required, and some states do allocate the Section 5307 Governor's Apportionment at least in part according to their own discretion or formulas. As a result, some commenters raised the possibility that any formula change increasing the allocations attributable to small transit intensive cities would not necessarily flow through to the targeted area, but could instead be used by the state in other areas. An obvious solution to this possibility would be for the small urbanized area to create a Transportation Management Area.
7.1.2 The Nonurbanized Area Formula Program and State Transit Assistance
As noted above, states also receive federal formula funding under Section 5311 based on their nonurbanized area population. Since these funds are not attributable to any specific sub-state region, states must develop their own mechanisms for transferring them to local operators. Many states also have their own transit assistance programs, focusing on both capital and operating needs. Such state programs are generally available for both urbanized and nonurbanized areas.
These state-administered transit assistance programs (both Section 5311 and state programs) allocate funds on either a discretionary or formula basis. Under discretionary programs, transit operators are invited to compete for the available pool of funds by submitting proposals to a selection committee, which awards funds based on a variety of factors, including outstanding needs. State funding formulas show enormous variety in their scope and complexity, but typically include some measures of existing service levels and/or financial conditions. In either case, whether discretionary or formula-based, state allocations are based on factors in addition to population and population density. Examples of three formula-based state transit funding programs and state administration of Section 5307 and 5311 programs are found in Appendix B.
7.2 The 2000 Census
The population figures used in the Section 5307 and 5311 formula programs are drawn strictly from the decennial census figures. Urbanized areas are also defined by the Census Bureau based on the decennial census population counts. As a result, the population and population density figures used in the formula, as well as the location and number of urbanized areas eligible for Section 5307 funding, are updated only once every 10 years, and the resulting changes have a significant effect on the formula programs.
It is expected that population figures from the 2000 Census will be incorporated into the formula apportionments beginning in FY 2002. Relative changes in population and density among urbanized areas will cause significant changes in the shares of formula funds received by each urbanized area. Some urbanized areas which are now classified as small urbanized areas will have grown to exceed the 200,000 population threshold, and will thus be subject to the formula provisions applied to large urbanized areas. Some of these will likely be areas that are now considered small transit intensive cities; the new census counts will push them into the higher category, allowing their formula apportionments to reflect the high levels of service that they provide. New urbanized areas will be created, increasing the number of potential recipients of Section 5307 funds and increasing the competition for those funds. At the same time, population growth may lead to some urbanized areas being combined together. This is particularly likely for small urbanized areas adjacent to major urbanized areas. Such combinations will create an entirely new structure for the way in which transit operators in these (currently) small urbanized areas receive and spend their formula allocations.14,15
7.3 Reporting Requirements
The Federal Transit Administration is concerned about the reporting requirements that it imposes upon the recipients of federal transit assistance as the agency attempts to collect data to support the policy formation and decision-making process. Indeed, a review of the National Transit Database program is currently underway to determine what changes might be made to the information that local operators and agencies are required to report, with an eye toward limiting this burden. Any increase in the number of factors considered in the formula for small urbanized areas would lead to some additional reporting requirements that are not currently faced by operators in small urbanized areas, particularly small operators. This concern was raised by a number of commenters to the study. One advantage of using discretionary program funds to assist small transit intensive cities is that only the applicants for such funds would bear additional reporting requirements.
7.4 Small Operators in Large Urbanized Areas
One commenter on the study noted that small transit operators in large urbanized areas have issues that are in some ways the reverse of those faced by small transit intensive cities. These small operators are frequently located in smaller population clusters near large cities that have grown together with the larger urbanized area. As noted above, recent urban growth patterns are likely to result in some currently small urbanized areas becoming part of larger urbanized areas once 2000 Census figures have been incorporated into the formula apportionments.
The issue faced by many such operators is that their system and operating characteristics are more similar to those of small urbanized areas than they are to those of large urbanized areas. The formula apportionments that they receive, however, are based on and follow the restrictions of the large urbanized area formula program (e.g., the prohibition on using formula funds for operations). These small operators may also be disadvantaged by their size relative to other operators in the urbanized area when local decisions are made on the disbursement and uses of urbanized area formula funds. It should be noted, however, that the local decision-making process is strictly the province of state and local governments.
7.5 Large Operators in Nonurbanized areas
The issues faced by small transit intensive cities may also apply to some systems in non-urbanized areas. Such systems are typically found in resort areas with small year-round populations but substantial seasonal populations and transit usage. Such systems carry far more passengers and provide much more service than is typical for nonurbanized areas, but this is not captured by the strictly population-based allocation of Section 5311 funds. The seasonal population variation also means that potential needs for such areas might not be well captured by census population statistics alone.
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14 A search of the Catalog of Domestic Federal Assistance found that the Section 5307 program is the only federal grant program apportioning funds to specific urbanized areas. Formula funding programs in other agencies, such as the Federal Highway Administration, Environmental Protection Agency, and the Department of Health and Human Services, allocate funds to states based on their urbanized area populations.
15 While FTA uses the urbanized area definitions created by the Census Bureau, it is not strictly bound to do so. In 49 U.S.C. 5302(a)(17), an urbanized area is defined as "(A) encompassing at least an urbanized area within a State that the Secretary of Commerce designates; and (B) designated as an urbanized area within boundaries fixed by State and local officials and approved by the Secretary [of Transportation]." Thus, for purposes of the formula programs, an urbanized area could be defined to encompass a larger area (and thus more population, but a lower overall population density) than the corresponding Census-defined urbanized area (but not a smaller area, per the statute). Such adjustments in urbanized area definitions are in fact made by the Federal Highway Administration, which uses its own "Federal Aid Urbanized Area" definitions rather than those designated by the Census Bureau.
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